Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Modeling of Risk Aversion Linked to Renewable Energy Policy and Decision-Maker Behavior

Version 1 : Received: 4 January 2022 / Approved: 6 January 2022 / Online: 6 January 2022 (11:55:01 CET)

How to cite: Ecike Ewanga, D.D. Modeling of Risk Aversion Linked to Renewable Energy Policy and Decision-Maker Behavior. Preprints 2022, 2022010083 (doi: 10.20944/preprints202201.0083.v1). Ecike Ewanga, D.D. Modeling of Risk Aversion Linked to Renewable Energy Policy and Decision-Maker Behavior. Preprints 2022, 2022010083 (doi: 10.20944/preprints202201.0083.v1).

Abstract

This paper presents the behavior of decision makers, the possible choices and the strategies 1 resulting from the uncertainties related to the integration of renewable energies. Its uncertainties 2 are the risks associated with the volatility of renewable sources, the dynamics of energy production 3 as well as the planning and operation of the electricity grid. The goal is to model the risk-averse 4 decision-maker’s behavior and the choice of integrating renewable energies into the electrical system. 5 Following a bibliographic approach, we expose a methodology to model the decision-maker’s 6 behavior(risk aversion and predilection for risk) to risk taking. The risk-averse decision maker may 7 adopt nonlinear utility functions. Risk aversion is a behavior that reflects the desire to avoid risk 8 decisions and thus reduces the risk of adverse consequences. A decision support tool is provided to 9 the decision-maker to choose a best-fit strategy based on his preferences. The rational and risk-averse 10 decision-maker would seek to maximize a concave utility function instead of seeking to minimize its 11 cost. Taste or aversion to risk can be modeled by a thematic function of utility.

Keywords

Modeling; risk averse; decision maker; choice; strategy; utility

Subject

ENGINEERING, General Engineering

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