Comparison of the centralized and decentralized environmentally constrained economic dispatch methods of coal-fired generators: A case study for South Korea

Since the climate crisis, global concern about greenhouse gas emissions has increased. Many countries have set nationally determined contributions to limit global temperature rise. In the electricity market, the need for environmentally constrained economic dispatch has emerged to directly reduce greenhouse gas. Environmental shutdown is one method of addressing annual environmentally constrained economic dispatch by scheduling shutdowns for coal-fired generators. Environmental shutdown can be categorized into two methods by decision-makers. In the centralized method, the system operator sets the shutdown schedules for all coal-fired generators. In the decentralized method, each generation company makes the shutdown schedules for its coal-fired generators to maximize profit. The decentralized method is modeled as bi-level optimization because the market price is related to profit and depends on the shutdown schedule. In this study, the bi-level profit-maximizing model is replaced by linear single-level optimization using a primal-dual approach. Furthermore, in the competitive market, the shutdown schedule of one company mutually affects that of competitors, so the Nash equilibrium is found as the final solution. These methods are applied in the Korean electricity market. Consequently, the decentralized method for greenhouse gas reduction increases the market price and decreases the system reliability compared to the centralized method.