An E ¢ cient Energy Portfolio for Switzerland

Abstract: Using \u85nancial portfolio theory, this paper investigates energy mixes of Switzerland that e ¢ ciently satisfy two constitutional objectives, viz. secure provision and low cost to the economy. The e ¢ cient frontier in terms of \u85nal consumption is constructed esti-mating time-varying variances and covariances in energy prices us-ing GARCH (Generalized Autoregressive Conditional Heteroscedas-tic) models. Additionally, the TGARCH variant serves to control for excess kurtosis. The results suggest that at observed market prices, a shift towards nuclear power and away from natural gas and gasoline would reduce both expected increase in the Swiss energy bill and its price volatility