Optimizing plant size in the planning of renewable energy portfolios

Development of domestic energy sources is a central pillar of national policies for energy independence. In Italy, renewable-energy plants have attained important profit margins under incentivizing policies. The yields and risks for the various sources of biomass, wind, photovoltaic and hydro vary according to the size of the specific plant. The use of mean variance portfolio (MVP) methodology to define efficient portfolios of such energy sources has been established in previous studies. Such methodology defines and quantifies the benefits associated with diversification. In this paper we apply MVP, using net present value and Sharpe ratio criteria, to identify not only the source selection but also its optimal dimensioning, which will achieve the objectives set by decision-makers. The study considers plant capacities from 10 kW up to 100 MW.