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The impact of carbon prices on generation-cycling costs

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  • Denny, Eleanor
  • O'Malley, Mark

Abstract

The introduction of mechanisms aimed at reducing greenhouse gas emissions can have a serious impact on electricity system costs. A carbon mechanism that forces generators to internalise their emissions costs may alter the merit order in which generators are dispatched in the market. Heavy carbon dioxide polluters may switch from operating continuously to having to operate on the margin more often. This results in these units being required to switch on and off and vary their output more frequently, which has a significant impact on their costs. In this paper, the impact of carbon prices on the operating profiles of generators in a real electricity system is investigated. A large number of potential scenarios are considered and it is found that carbon prices significantly increase the cycling costs. These increased cycling costs significantly offset the carbon dioxide reduction benefits of the carbon price.

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  • 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.
  • Handle: RePEc:eee:enepol:v:37:y:2009:i:4:p:1204-1212
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    Cited by:

    1. Di Cosmo, Valeria & Malaguzzi Valeri, Laura, 2014. "The incentive to invest in thermal plants in the presence of wind generation," Energy Economics, Elsevier, vol. 43(C), pages 306-315.
    2. Creti, Anna & Jouvet, Pierre-André & Mignon, Valérie, 2012. "Carbon price drivers: Phase I versus Phase II equilibrium?," Energy Economics, Elsevier, vol. 34(1), pages 327-334.
    3. Thure Traber & Claudia Kemfert, 2012. "Vom Winde verweht? Strommarktpreise und Anreize zur Investition in thermische Kraftwerke bei erhöhtem Angebot an Windenergie," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 81(1), pages 91-110.
    4. O'Mahoney, Amy & Denny, Eleanor, 2013. "Electricity prices and generator behaviour in gross pool electricity markets," Energy Policy, Elsevier, vol. 63(C), pages 628-637.
    5. Karagiannis, Ioannis C. & Soldatos, Peter G., 2010. "Estimation of critical CO2 values when planning the power source in water desalination: The case of the small Aegean islands," Energy Policy, Elsevier, vol. 38(8), pages 3891-3897, August.
    6. Arias, B. & Criado, Y.A. & Sanchez-Biezma, A. & Abanades, J.C., 2014. "Oxy-fired fluidized bed combustors with a flexible power output using circulating solids for thermal energy storage," Applied Energy, Elsevier, vol. 132(C), pages 127-136.
    7. Pahle, Michael & Fan, Lin & Schill, Wolf-Peter, 2011. "How Emission Certificate Allocations Distort Fossil Investments: The German Example," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 1975-1987.
    8. John Curtis, Valeria Di Cosmo, and Paul Deane, 2014. "Climate policy, interconnection and carbon leakage: The effect of unilateral UK policy on electricity and GHG emissions in Ireland," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    9. 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.
    10. Traber, Thure & Kemfert, Claudia, 2011. "Gone with the wind? -- Electricity market prices and incentives to invest in thermal power plants under increasing wind energy supply," Energy Economics, Elsevier, vol. 33(2), pages 249-256, March.
    11. Liam Wagner & Lynette Molyneaux & John Foster, 2012. "Magnifying uncertainty: the impact of a shift to gas under a carbon price," Energy Economics and Management Group Working Papers 11-2012, School of Economics, University of Queensland, Australia.
    12. Francesco Gullì, 2011. "The interaction between emissions trading and energy and competition policies," RSCAS Working Papers 2011/20, European University Institute.
    13. Foster, John & Wagner, Liam & Liebman, Ariel, 2015. "Modelling the Electricity and Natural Gas Sectors for the Future Grid: Developing Co-Optimisation Platforms for Market Redesign," MPRA Paper 70114, University Library of Munich, Germany.
    14. Denny, Eleanor & O'Mahoney, Amy & Lannoye, Eamonn, 2017. "Modelling the impact of wind generation on electricity market prices in Ireland: An econometric versus unit commitment approach," Renewable Energy, Elsevier, vol. 104(C), pages 109-119.
    15. Wagner, Liam & Molyneaux, Lynette & Foster, John, 2014. "The magnitude of the impact of a shift from coal to gas under a Carbon Price," Energy Policy, Elsevier, vol. 66(C), pages 280-291.
    16. Troy, Niamh & Denny, Eleanor & O'Malley, Mark, 2010. "Base-load cycling on a system with significant wind penetration," MPRA Paper 34848, University Library of Munich, Germany.
    17. Fogelberg, Sara & Lazarczyk, Ewa, 2015. "The Wind Power Volatility and the Impact on Failure Rates in the Nordic Electricity Market," Working Paper Series 1065, Research Institute of Industrial Economics.
    18. Imran, Kashif & Hassan, Tehzeebul & Aslam, Muhammad Farooq & Ngan, Hon-Wing & Ahmad, Intesar, 2009. "Simulation analysis of emissions trading impact on a non-utility power plant," Energy Policy, Elsevier, vol. 37(12), pages 5694-5703, December.

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