Magnifying uncertainty: the impact of a shift to gas under a carbon price
AbstractWe seek to evaluate the projection that a carbon price will reduce emissions at least cost by inducing a shift of generation from coal-fired to gas-fired plants. Modelling of Australia’s National Electricity Market in 2035 is undertaken using Australian Energy Market Operator assumptions for fuel costs, capital costs and demand forecasts and an electricity market simulation package which uses deterministic linear programming techniques, and transmission and generating plant data, to optimise the power system and determine the least cost dispatch of generating resources to meet a given demand. We find that wholesale market prices increase substantially due to the increased costs of gas over goal as an input fuel and carbon price but also as a result of infra-marginal rents and strategic behaviour by generators to maintain margin as well as pass through additional costs.
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Bibliographic InfoPaper provided by School of Economics, University of Queensland, Australia in its series Energy Economics and Management Group Working Papers with number 11-2012.
Date of creation: Dec 2012
Date of revision:
Natural Gas; Electricity Markets;
Find related papers by JEL classification:
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
- NEP-ENE-2013-01-07 (Energy Economics)
- NEP-ENV-2013-01-07 (Environmental Economics)
- NEP-REG-2013-01-07 (Regulation)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Denny, Eleanor & O'Malley, Mark, 2009. "The impact of carbon prices on generation-cycling costs," Energy Policy, Elsevier, vol. 37(4), pages 1204-1212, April.
- Cruciani, Michel & Keppler, Jan Horst, 2010. "Rents in the European Power Sector due to Carbon Trading," Economics Papers from University Paris Dauphine 123456789/2570, Paris Dauphine University.
- Zhang, Yue-Jun & Wei, Yi-Ming, 2010. "An overview of current research on EU ETS: Evidence from its operating mechanism and economic effect," Applied Energy, Elsevier, vol. 87(6), pages 1804-1814, June.
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