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An impact assessment of electricity and emission allowances pricing in optimised expansion planning of power sector portfolios

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  • Tolis, Athanasios I.
  • Rentizelas, Athanasios A.

Abstract

The present work concerns a systematic investigation of power sector portfolios through discrete scenarios of electricity and CO2 allowance prices. The analysis is performed for different prices, from regulated to completely deregulated markets, thus representing different electricity market policies. The modelling approach is based on a stochastic programming algorithm without recourse, used for the optimisation of power sector economics under multiple uncertainties. A sequential quadratic programming routine is applied for the entire investigation period whilst the time-dependent objective function is subject to various social and production constraints, usually confronted in power sectors. The analysis indicated the optimal capacity additions that should be annually ordered from each competitive technology in order to substantially improve both the economy and the sustainability of the system. It is confirmed that higher electricity prices lead to higher financial yields of power production, irrespective of the CO2 allowance price level. Moreover, by following the proposed licensing planning, a medium-term reduction of CO2 emissions per MWh by 30% might be possible. Interestingly, the combination of electricity prices subsidisation with high CO2 allowance prices may provide favourable conditions for investors willing to engage on renewable energy markets.

Suggested Citation

  • Tolis, Athanasios I. & Rentizelas, Athanasios A., 2011. "An impact assessment of electricity and emission allowances pricing in optimised expansion planning of power sector portfolios," Applied Energy, Elsevier, vol. 88(11), pages 3791-3806.
  • Handle: RePEc:eee:appene:v:88:y:2011:i:11:p:3791-3806
    DOI: 10.1016/j.apenergy.2011.04.054
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    10. García-Martos, Carolina & Rodríguez, Julio & Sánchez, María Jesús, 2013. "Modelling and forecasting fossil fuels, CO2 and electricity prices and their volatilities," Applied Energy, Elsevier, vol. 101(C), pages 363-375.
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    13. Moreno, Blanca & García-Álvarez, María Teresa & Ramos, Carmen & Fernández-Vázquez, Esteban, 2014. "A General Maximum Entropy Econometric approach to model industrial electricity prices in Spain: A challenge for the competitiveness," Applied Energy, Elsevier, vol. 135(C), pages 815-824.
    14. Ribeiro, Fernando & Ferreira, Paula & Araújo, Madalena, 2013. "Sustainability assessment of electricity production using a logic models approach," Renewable and Sustainable Energy Reviews, Elsevier, vol. 28(C), pages 215-223.
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    16. Vithayasrichareon, Peerapat & MacGill, Iain F., 2014. "Incorporating short-term operational plant constraints into assessments of future electricity generation portfolios," Applied Energy, Elsevier, vol. 128(C), pages 144-155.
    17. Liu, Liwei & Sun, Xiaoru & Chen, Chuxiang & Zhao, Erdong, 2016. "How will auctioning impact on the carbon emission abatement cost of electric power generation sector in China?," Applied Energy, Elsevier, vol. 168(C), pages 594-609.
    18. Lucheroni, Carlo & Mari, Carlo, 2017. "CO2 volatility impact on energy portfolio choice: A fully stochastic LCOE theory analysis," Applied Energy, Elsevier, vol. 190(C), pages 278-290.
    19. Tanaka, Makoto & Chen, Yihsu, 2012. "Market power in emissions trading: Strategically manipulating permit price through fringe firms," Applied Energy, Elsevier, vol. 96(C), pages 203-211.

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