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The Impact of Carbon Pricing on Wholesale Electricity Prices, Carbon Pass-Through Rates and Retail Electricity Tariffs in Australia

Author

Listed:
  • Phil Wild

    () (Department of Economics, University of Queensland)

  • William Paul Bell

    () (Department of Economics, University of Queensland)

  • John Foster

    () (Department of Economics, University of Queensland)

Abstract

The purpose of this article is to investigate the impact that the introduction of a carbon price signal will have on wholesale electricity prices, carbon-pass-through rates and retail electricity rates in the states making up the Australian National Electricity Market (NEM). In order to assess this, we employ an agent based model of the NEM called the ANEM model which contains many of the salient features of the NEM: intra-state and inter-state transmission branches, regional location of generators and load centres and accommodation of unit commitment features. A DC OPF algorithm is used to determine optimal dispatch of generation plant and wholesale prices within the ANEM model. We utilise ANEM model scenario runs to examine the impact of carbon prices on wholesale prices and carbon passthrough rates. This information is then used to assess the impact on retail electricity tariff rates and shares of cost components making up residential retail tariff rate structures for different states in the NEM.

Suggested Citation

  • Phil Wild & William Paul Bell & John Foster, 2012. "The Impact of Carbon Pricing on Wholesale Electricity Prices, Carbon Pass-Through Rates and Retail Electricity Tariffs in Australia," Energy Economics and Management Group Working Papers 5-2012, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uqeemg:5-2012
    as

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    File URL: http://www.uq.edu.au/eemg/docs/workingpapers/2012-5.pdf
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    References listed on IDEAS

    as
    1. Chernyavs'ka, Liliya & Gullì, Francesco, 2008. "Marginal CO2 cost pass-through under imperfect competition in power markets," Ecological Economics, Elsevier, vol. 68(1-2), pages 408-421, December.
    2. Phil Wild & William Paul Bell & John Foster, 2012. "An Assessment of the Impact of the Introduction of Carbon Price Signals on Prices, Production Trends, Carbon Emissions and Power Flows in the NEM for the period 2007-2009," Energy Economics and Management Group Working Papers 4-2012, School of Economics, University of Queensland, Australia.
    3. Yihsu Chen & Jos Sijm & Benjamin Hobbs & Wietze Lise, 2008. "Implications of CO 2 emissions trading for short-run electricity market outcomes in northwest Europe," Journal of Regulatory Economics, Springer, vol. 34(3), pages 251-281, December.
    4. Flavio Menezes & John Quiggin & Liam Wagner, 2009. "Grandfathering and Greenhouse: The Role of Compensation and Adjustment Assistance in the Introduction of a Carbon Emissions Trading Scheme for Australia," Economic Papers, The Economic Society of Australia, vol. 28(2), pages 82-92, June.
    5. Jos Sijm & Karsten Neuhoff & Yihsu Chen, 2006. "CO 2 cost pass-through and windfall profits in the power sector," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 49-72, January.
    6. Lambie, Neil Ross, 2010. "Understanding the effect of an emissions trading scheme on electricity generator investment and retirement behaviour: the proposed Carbon Pollution Reduction Scheme," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(2), June.
    7. Simshauser, Paul & Nelson, Tim & Doan, Thao, 0. "The Boomerang Paradox, Part I: How a Nation's Wealth Is Creating Fuel Poverty," The Electricity Journal, Elsevier, vol. 24(1), pages 72-91, January.
    8. Paul Simshauser & Thao Doan, 2009. "Emissions Trading, Wealth Transfers and the Wounded Bull Scenario in Power Generation," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(1), pages 64-83, March.
    9. Kim, Wook & Chattopadhyay, Deb & Park, Jong-bae, 2010. "Impact of carbon cost on wholesale electricity price: A note on price pass-through issues," Energy, Elsevier, vol. 35(8), pages 3441-3448.
    10. Simshauser, Paul, 2008. "On Emission Permit Auction vs. Allocation and the Structural Adjustment of Incumbent Power Generators in Australia," The Electricity Journal, Elsevier, vol. 21(10), pages 30-41, December.
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    Cited by:

    1. Bell, William & Foster, John, 2012. "Feed-in tariffs for promoting solar PV: progressing from dynamic to allocative efficiency," MPRA Paper 38861, University Library of Munich, Germany, revised 28 Apr 2012.
    2. Heo, Deung-Yong Yong, 2015. "Studies on electric power markets: preparing for the penetration of renewable resources," ISU General Staff Papers 201501010800005377, Iowa State University, Department of Economics.
    3. Bell, William Paul & Wild, Phillip & Foster, John, 2014. "Collinsville solar thermal project: Energy economics and dispatch forecasting - Final report," MPRA Paper 59648, University Library of Munich, Germany.

    More about this item

    Keywords

    Electricity Markets; Carbon Trading;

    JEL classification:

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

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