Work

Power system planning in the North Sea area under demand uncertainty and risk aversion

Year: 2025

Type: article

Abstract: Electricity demand is increasingly difficult to predict due the uncertain timing and scale of future electrification, data center consumption, and electrolytic hydrogen adoption. This poses a new source of risk for power system planning. Though planners are often risk-averse, energy system modeling commonly takes a risk-neutral perspective. Here, we consider the implications of risk aversion concerning demand uncertainty for the optimal planning of power systems surrounding the North Sea. This region is both facing considerable demand uncertainty and expected to see substantial new investment in electricity generation capacity. In our exploratory experiments, optimal risk-averse planning under demand uncertainty features a higher share of renewable and storage investment by 2040, our planning horizon, compared to risk-neutral planning. As a result, risk-averse planning also leads to lower expected CO 2 emissions in our case study. Overall, our results suggest that renewables and storage can provide a hedge against demand uncertainty. • This study compares optimal risk-averse planning to risk-neutral planning. • Aversion to demand risk calls for more renewable and storage investment. • Renewables and storage hedge against costs caused by unexpected demand growth. • Risk-averse planning under demand uncertainty may entail lower emissions.

Source: Energy Strategy Reviews

DOI: 10.1016/j.esr.2025.101664

Authors: Lars Skjelbred Nygaard, Emil Dimanchev, Magnus Korpås

Institution: Norwegian University of Science and Technology

Language: English

Topic: Integrated Energy Systems Optimization

Subfield: Electrical and Electronic Engineering

Field: Engineering

Domain: Physical Sciences

SDGs: Climate action, Affordable and clean energy, Industry, innovation and infrastructure

Open Access status: gold

Estimated APC paid: $4,180