In this work, we study the use of modern portfolio theory in a cost-risk analysis of the Electric Reliability Council of Texas (ERCOT). Based upon the risk-return concepts of modern portfolio theory, we develop an n-asset minimization problem to create a risk-cost frontier of portfolios of technologies within the ERCOT electricity region. The levelized cost of electricity for each technology in the region is a step in evaluating the expected cost of the portfolio, and the historical data of cost factors estimate the variance of cost for each technology. In addition, there are several constraints in our minimization problem to account for real-world limitations. Using certain scenario data given by the National Renewable Energy Laboratory (NREL) and ERCOT, we analyze the efficient frontier of technology mixes for risk reduction of cost.
","abstract_html":"<p>In this work, we study the use of modern portfolio theory in a cost-risk analysis of the Electric Reliability Council of Texas (ERCOT). Based upon the risk-return concepts of modern portfolio theory, we develop an n-asset minimization problem to create a risk-cost frontier of portfolios of technologies within the ERCOT electricity region. The levelized cost of electricity for each technology in the region is a step in evaluating the expected cost of the portfolio, and the historical data of cost factors estimate the variance of cost for each technology. In addition, there are several constraints in our minimization problem to account for real-world limitations. Using certain scenario data given by the National Renewable Energy Laboratory (NREL) and ERCOT, we analyze the efficient frontier of technology mixes for risk reduction of cost.</p>","abstract_has_math":false,"creators":["Sickinger, Megan"],"institution":null,"degree_name":"Master of Science (MS)","degree_level":"Masters Thesis","degree_discipline":null,"degree_department":null,"school":null,"contributors":["Haiyan Tian","Huiqing Zhu","John Harris"],"advisors":[],"committee_chairs":[],"committee_members":[],"year":2024,"date_issued":"2024-05-01T07:00:00Z","date_published":"2024-05-01T07:00:00Z","updated_at":"2026-07-24T05:45:47Z","subjects":["modern portfolio theory","cost-risk analysis","optimization","electricity grids","Texas","markowitz model","Applied Mathematics","Applied Statistics","Operational Research","Risk Analysis","Statistical Models"],"languages":[],"rights":[],"rights_urls":[],"identifier_entries":[]},"links":{"outbound_url":"https://aquila.usm.edu/masters_theses/1023","outbound_label":"Repository record","outbound_source":"dc:identifier"},"metadata_groups":[{"id":"people","label":"People","entries":[{"key":"dc:contributor","label":"Contributor","values":["Haiyan Tian","Huiqing Zhu","John Harris"]},{"key":"dc:creator","label":"Author","values":["Sickinger, Megan"]}]},{"id":"academic_context","label":"Academic Context","entries":[{"key":"dc:date.available","label":"Dc Date Available","values":["2024-05-09T07:00:00Z"]},{"key":"thesis:degree_level","label":"Degree Level","values":["Masters Thesis"]},{"key":"thesis:degree_name","label":"Degree Name","values":["Master of Science (MS)"]}]},{"id":"subjects_keywords","label":"Subjects and Keywords","entries":[{"key":"dc:subject","label":"Dc Subject","values":["modern portfolio theory","cost-risk analysis","optimization","electricity grids","Texas","markowitz model","Applied Mathematics","Applied Statistics","Operational Research","Risk Analysis","Statistical Models"]}]},{"id":"identifiers","label":"Identifiers","entries":[{"key":"dc:identifier","label":"Identifier","values":["https://aquila.usm.edu/masters_theses/1023"]}]},{"id":"additional","label":"Additional Metadata","entries":[{"key":"dc:description.abstract","label":"Abstract","values":["In this work, we study the use of modern portfolio theory in a cost-risk analysis of the Electric Reliability Council of Texas (ERCOT). Based upon the risk-return concepts of modern portfolio theory, we develop an n-asset minimization problem to create a risk-cost frontier of portfolios of technologies within the ERCOT electricity region. The levelized cost of electricity for each technology in the region is a step in evaluating the expected cost of the portfolio, and the historical data of cost factors estimate the variance of cost for each technology. In addition, there are several constraints in our minimization problem to account for real-world limitations. Using certain scenario data given by the National Renewable Energy Laboratory (NREL) and ERCOT, we analyze the efficient frontier of technology mixes for risk reduction of cost.
"]},{"key":"dc:title","label":"Title","values":["Cost-Risk Analysis of the ERCOT Region Using Modern Portfolio Theory"]}]}],"canonical_facts":{"dc:contributor":["Haiyan Tian","Huiqing Zhu","John Harris"],"dc:creator":["Sickinger, Megan"],"dc:date.available":["2024-05-09T07:00:00Z"],"dc:description.abstract":["In this work, we study the use of modern portfolio theory in a cost-risk analysis of the Electric Reliability Council of Texas (ERCOT). Based upon the risk-return concepts of modern portfolio theory, we develop an n-asset minimization problem to create a risk-cost frontier of portfolios of technologies within the ERCOT electricity region. The levelized cost of electricity for each technology in the region is a step in evaluating the expected cost of the portfolio, and the historical data of cost factors estimate the variance of cost for each technology. In addition, there are several constraints in our minimization problem to account for real-world limitations. Using certain scenario data given by the National Renewable Energy Laboratory (NREL) and ERCOT, we analyze the efficient frontier of technology mixes for risk reduction of cost.
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