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Carbon emissions cost pass-through effect in the reserve ancillary services market

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  • Wang, Yiqi
  • Lu, Huiyu
  • Yang, Yang
  • Ji, Junping
  • He, Daojing
  • Huang, Qisheng

Abstract

Reserve ancillary services play a crucial role in maintaining the stability and flexibility of the power system. In this study, a multi-agent model was constructed using the experience-weighted attraction (EWA) algorithm to simulate the bidding behaviors of coal-fired, green, and energy storage reserve units. Under this microperspective-driven framework, the pass-through effects of carbon costs in the reserve ancillary services market under various parameters related to market structure and bidding behavior were investigated. The findings revealed that the pass-through effects of carbon costs on reserve ancillary service prices are complex games with a process of volatility convergence, with convergence occurring between 10th and 11th terms. Owing to the accumulative chain reaction in updating ask prices, the carbon cost pass-through rates are higher than the bidding multipliers, which increases the additional financial gains for the reserve units. This study identifies multiple variables that influence carbon cost pass-through rates and proposes formulas to account for the shifts in pass-through rates as the values of certain key variables vary. Fierce competition on the supply side of reserve ancillary services can increase the carbon cost pass-through rates. Moreover, sensitivity analysis results supported the robustness of our simulation results and enriched the conclusions.

Suggested Citation

  • Wang, Yiqi & Lu, Huiyu & Yang, Yang & Ji, Junping & He, Daojing & Huang, Qisheng, 2025. "Carbon emissions cost pass-through effect in the reserve ancillary services market," Renewable Energy, Elsevier, vol. 243(C).
    • Handle: RePEc:eee:renene:v:243:y:2025:i:c:s0960148125002629
    DOI: 10.1016/j.renene.2025.122600
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