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Magnifying uncertainty: the impact of a shift to gas under a carbon price

Author

Listed:
  • Liam Wagner

    (Department of Economics, University of Queensland)

  • Lynette Molyneaux

    (Department of Economics, University of Queensland)

  • John Foster

    (Department of Economics, University of Queensland)

Abstract

We 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.

Suggested Citation

  • 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.
    • Handle: RePEc:qld:uqeemg:11-2012
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    File URL: http://www.uq.edu.au/eemg/docs/workingpapers/2012-11.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Foster, John & Wagner, Liam & Liebman, Ariel, 2017. "Economic and investment models for future grids: Final Report Project 3," MPRA Paper 78866, University Library of Munich, Germany.

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    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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