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An Optimal Asset Allocation Strategy for Suppliers Paying Carbon Tax in the Competitive Electricity Market

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Abstract

The escalating energy demand across the globe has intensified the electricity production. Owing to the unavailability of the reliable techniques for electricity storage for a long duration, it is consumed immediately after its production. Therefore, electricity markets can’t be handled like the conventional stock markets. Power companies are facing immense price and delivery risks owing to the increasing competition in the electricity markets. As a result, risk management is the fundamental concern to be addressed in order to achieve the optimum profit targets. Consequently, the power generation organizations need to allocate their generation in bilateral contracts and spot market. For this purpose, an optimal theory of portfolio selection is proposed in this study for electricity generation by forming a reliable prototype and applying the proposed scheme to obtain the suitable outcomes. The Paris Accord on environmental safety from carbon dioxide and NOx gases is especially considered during the modeling of the proposed technique. The credibility of the proposed scheme is validated by using the real-time market data from the PJM market. Various risk-return tradeoffs are implemented, and their corresponding solutions are acquired for portfolio optimization as corroborated by the results. The suggested technique is found reliable and adequate for the carbon tax paying suppliers around the world for allocating their respective generation based on the demand of the consumers.

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Authors and Affiliations

  1. Department of Electrical and Computer Engineering, COMSATS University Islamabad, Sahiwal Campus, Sahiwal, Pakistan

    Waqas Ahmad Wattoo, Jehangir Arshad, Ghulam Farid, Talha Younas & Sohaib Tahir

  2. Department of Electrical Engineering, Quaid-e-Awam University of Engineering, Science and Technology, Larkana Campus, Larkana, Pakistan

    Ghulam Sarwar Kaloi

  3. US-Pakistan Center for Advanced Studies in Energy, National University of Sciences and Technology (NUST), Islamabad, 44000, Pakistan

    Muhammad Yousif

  4. Department of Electrical Engineering, Mehran University of Engineering and Technology, Khairpur Campus, Sindh, Pakistan

    Mazhar Hussain Baloch

  5. Department of Information Technology, Quaid-e-Awam University of Engineering, Science and Technology, Nawabshah, Pakistan

    Baqar Ali Zardari

Authors
  1. Waqas Ahmad Wattoo
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  2. Ghulam Sarwar Kaloi
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  3. Muhammad Yousif
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  4. Mazhar Hussain Baloch
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  7. Ghulam Farid
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  9. Sohaib Tahir
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Correspondence to Waqas Ahmad Wattoo.

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Wattoo, W.A., Kaloi, G.S., Yousif, M. et al. An Optimal Asset Allocation Strategy for Suppliers Paying Carbon Tax in the Competitive Electricity Market. J. Electr. Eng. Technol. 15, 193–203 (2020). https://doi.org/10.1007/s42835-019-00318-3

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  • DOI: https://doi.org/10.1007/s42835-019-00318-3

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