Optimization models for renewable generating technologies portfolio

Renewable generating technologies offer an effective means for climate change mitigation and guaranteeing energy security. As we all known that, the widespread perception that these renewable generating technologies have more risk than conventional alternatives. So, it is an investment-decision problem. Investors commonly evaluate such problems using portfolio theory to manage risk and maximize portfolio performance under a variety of unpredictable economic outcomes. Absolute deviation is utilized as a measure of risk and a new function is provided for it to manage the portfolio of energy market which including renewable generating technologies. We consider the Mean-Absolute Deviation (MAD) portfolio optimization problem in a frictional market with additional constraints representing so-called short sales. An algorithm for solving the optimization problem is thus presented, which uses the special structure of the original problem to reduce to a linear programming. The numerical test shows the validity of the method.