Diversification criteria for power systems

Growing power demand, fuel availability and prices, technology changes, the environmental impacts of energy consumption, the changing regulatory environments and the uncertainties around such elements make the planning for optimal power mix a challenging task. The diversity approach is advocated as a most appropriate planning methodology for the optimal energy mix (Hickey et al., 2010). Shannon Wiener Index (SWI), which is the most cited diversity metric has been used to assess power systems diversity mainly from an energy perspective. To our best knowledge, there is no rigorous justification why energy has been the main variable used in diversification exercises rather than other variables such as capacity. We use a stylized power generation framework to show that diversity based on energy or capacity could lead to different outcomes in terms of vulnerability to fuel exposure, among others. We also introduce a Shannon Wiener Index ratio (SWIR) that we believe captures better the diversity of a power system compared to the standard SWI.