Samuli Honkapuro

Enhancement of equity portfolio performance using data envelopment analysis

This paper examines the applicability of data envelopment analysis (DEA) as a basis of selection criteria for equity portfolios. It is the first DEA application for constructing a combined equity investment strategy that aims to integrate the benefits of both value investing and momentum investing. The 3-quantile portfolios are composed of a comprehensive sample of Finnish non-financial stocks based on their DEA efficiency scores that are calculated using three variants of DEA models (the constant returns-to-scale, the super-efficiency, and the cross-efficiency models). The performance of portfolios is evaluated on the basis of the average return and several risk-adjusted performance metrics throughout the 1994–2010 sample period.

Economic analysis of outage costs parameters and their implications on investment decisions

In this paper economic analysis of investment decisions and outage costs is given. The methods to determine outage costs in distribution companys viewpoint are presented. The effects of regulation are taken into account in cost valuating process. The paper also present methods to compose interruption costs using actual interruption data and customer interruption costs (CIC) of Finnish distribution business. The methods make it possible to define outage costs even if there is no customer-specific interruption statistics available. Examples from actual network are presented when outage costs are modeled using secondary substation-specific, company-specific or nationwide cost parameters.

Applying reliability analysis in evaluation of life‐cycle costs of alternative network solutions

Electric utilities are enforced to control trustworthily total lifetime costs caused by their network components without jeopardizing the reliability and security of the network. New distribution planning methods and procedures are needed in order to meet the expectations and performance targets of regulators, company owners and customers in the re-regulated environment. One of the most challenging tasks for electrical utilities is the consideration of reliability as a part of long term planning of the network. In order to respond to these requirements, an advanced IT-solution has been created, which provides reliability analysis as a part of the network planning process. The software implementation and the developed models for reliability analysis are presented briefly in the paper. The focus of the proposed paper deals with studies in which alternative network solutions are evaluated using the developed application. For each alternative the total lifetime costs are calculated, including reliability costs. The optimal plan depends on the selection of reliability optimization criteria: the reliability costs may consist only of direct utility costs, but they can also include customer interruption costs and even the costs of voltage dips. The paper presents and evaluates results of example studies and discusses the correlation between the utility strategy and optimal network structure

Investments in the benchmarking of the distribution network companies

This paper introduces a method by which investments can be taken into account in the efficiency benchmarking of the electricity distribution companies in Finland. It is studied whether distributed energy, network length, number of customers, present technical value and replacement value of the distribution network are suitable output factors when investments are included in the DEA-model. At the same time the suitability of DEA-method for efficiency benchmarking has been studied.

The role of investments in the regulated electricity distribution business in Finland

This paper focuses on the role of investments in the regulated electricity distribution business in Finland. It introduces a method to handle investments in regulation so that sufficient network investments are encouraged but overinvestments are limited. This means that electricity distribution companies are enabled to keep their networks in proper technical shape whereas the possibility of over charge investments on end-customers is limited.

Power-based distribution tariff structure: DSO's perspective

Numerous changes will take place in the electricity distribution system and business in the near future. Especially, electricity end-use may significantly alter the electricity distribution network loads. The main technologies that will have effects on electricity end-use may be microgeneration, heat pumps, electric vehicles, demand response, and energy storages. Moreover, rising reliability demands and network costs will increase pressure to raise the prices of distribution tariffs. These changes pose challenges for electricity distribution business. The present tariff structures are not optimal anymore from the distribution systems perspective. At the same time, new metering infrastructures may provide opportunities to develop more intelligent tariff schemes. From the DSOs point of view, a power-based distribution tariff structure would be the most advisable option, because it could have positive impacts on the network loads. This paper studies how the tariff scheme would affect the distribution network loads, if customers had motivation to decrease their peak powers.

DSO tariff structures: development options from stakeholders’ viewpoint

Purpose – The purpose of the paper is to analyze the development needs and opportunities in the distribution system operators’ (DSO) tariff structures in the smart-grid environment. Design/methodology/approach – The impacts of the distribution pricing schemes for the stakeholders and their requirements for the tariff structures are evaluated by qualitative analyses. Furthermore, there is a case analysis concerning the practical development possibilities of the DSO tariff structures in Finland. Findings – Major finding of the paper is that the demand-based power band tariff is the optimal solution for the DSO pricing structure, when taking into account the real-life limitations and the requirements of the stakeholders. Practical implications – Outcomes of the paper can be applied in practice in design of the pricing schemes in the electricity distribution. Incentive provision impacts and cost reflectivity of the DSO tariffs can be improved by implementing the suggested pricing structure. Originality/value ...

Applying reliability analysis in evaluation of life-cycle costs of alternative network solutions

Electric utilities are enforced to control trustworthily total lifetime costs caused by their network components without jeopardizing the reliability and security of the network. New distribution planning methods and procedures are needed in order to meet the expectations and performance targets of regulators, company owners and customers in the re-regulated environment. One of the most challenging tasks for electrical utilities is the consideration of reliability as a part of long term planning of the network. In order to respond to these requirements, an advanced IT-solution has been created, which provides reliability analysis as a part of the network planning process. The software implementation and the developed models for reliability analysis are presented briefly in the paper. The focus of the proposed paper deals with studies in which alternative network solutions are evaluated using the developed application. For each alternative the total lifetime costs are calculated, including reliability costs. The optimal plan depends on the selection of reliability optimization criteria: the reliability costs may consist only of direct utility costs, but they can also include customer interruption costs and even the costs of voltage dips. The paper presents and evaluates results of example studies and discusses the correlation between the utility strategy and optimal network structure

Development options for distribution tariff structures in Finland

In this paper, we study the development options of tariff structures in electricity distribution in Finland. We compare the impacts of three different tariffs from the viewpoints of customers, distribution system operator (DSO), electricity supplier, and society. Analyzed tariffs are (1) energy oriented tariff, which is currently in use, (2) power limit tariff, and (3) power tariff. Based on the analyses, it seems that it is justified to include power based price component in distribution tariff. Generally, the impacts of both analyzed power based tariffs are quite similar. However, it seems that power tariff is a bit stronger candidate. Nevertheless, it should be noted that the benefits of the power-oriented pricing, illustrated in the paper, could be achieved only by well-designed tariff system. Although analyses are based on Finnish case, most of the results are generalizable to other countries also.

100 % renewable energy system - challenges and opportunities for electricity market design

How energy is produced and consumed affects the whole society and cannot be dealt with as solely technical or economical issue. In this paper we look at the renewable energy systems in year 2050 through society scenario descriptions. We describe a framework for electricity market design in four transformative, qualitative scenarios and assess of possible market design outcomes. In the process, we highlight the key issues in determining applicable market designs.