The value of diversity

Although the adoption of a range of fuels employing different technologies incurs extra cost, diversity can provide a measure of security against supply disruption, fuel price escalation and environmental regulatory changes. Attempts to set a value to diversity in the United Kingdom are reviewed. Most of these have explored the economic impact of different mixes of fuels and/or technologies against a series of postulated fuel price and energy demand scenarios. They depend on the reliability of the cost and technical performance inputs, and subjective judgements about future price and demand developments; these factors undermine confidence in quantitative outputs of such methods. The novel approach of Stirling is presented. This seeks to derive an optimum plant/fuel mix using generation costs for a wide range of options and a marginal value for incremental changes in diversity, based on a specified diversity index. Stirling's approach could be argued to support the maintenance or expansion of the existing nuclear component of United Kingdom power supplies and an increase in the contribution from renewables. However, problems within the method which is still under development limits the weight that can be attached to its findings at present. Given the closely comparable financial costs, a reasonable balance at this time would seem to consist of the available level of low cost renewables and roughly equal tranches of gas, nuclear and coal. A smaller coal-fired component would be appropriate if environmental costs are taken into account. (19 references). (UK)