Fuzzy Portfolio Optimization of Onshore Wind Power Plants

FCN Working Paper No. 10/2011 (revised July 2014)

42 Pages Posted: 14 Nov 2013 Last revised: 23 Jul 2014

See all articles by Reinhard Madlener

Reinhard Madlener

RWTH Aachen University

Barbara Glensk

RWTH Aachen University

Veronika Weber

RWTH Aachen University

Date Written: July 2014

Abstract

In this paper we apply fuzzy set theory to the portfolio optimization of power generation assets, using a semi-mean absolute deviation (SMAD) model as a benchmark and a fuzzy semi-mean absolute deviation (FSMAD) model for comparison. The two models are applied to five onshore wind power plants in Germany considered for the portfolio analysis. The results show that the combinations of favorable assets for efficient portfolios are very similar, although the portfolio shares are markedly different. Also, the return and risk span of the SMAD model are much broader than those of the FSMAD model. The highest returns are generated by portfolios based on the latter model. Offering less portfolio choices, the FSMAD model thus facilitates decision-making. This is in compliance with the notion that portfolio optimization by fuzzy set theory is able to better account for the decision-maker’s preferences under real-world conditions.

Keywords: Monte Carlo simulation, Mean-variance portfolio analysis, Fuzzy set theory, Wind power

Suggested Citation

Madlener, Reinhard and Glensk, Barbara and Weber, Veronika, Fuzzy Portfolio Optimization of Onshore Wind Power Plants (July 2014). FCN Working Paper No. 10/2011 (revised July 2014). Available at SSRN: https://ssrn.com/abstract=2353944 or http://dx.doi.org/10.2139/ssrn.2353944

Reinhard Madlener (Contact Author)

RWTH Aachen University ( email )

School of Business and Economics / E.ON ERC
Mathieustraße 10
Aachen, 52074
Germany
+49 241 80 49 820 (Phone)
+49 241 80 49 829 (Fax)

HOME PAGE: http://www.eonerc.rwth-aachen.de/fcn

Barbara Glensk

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

Veronika Weber

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

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