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Simulation of the European Electricity Market and CCS Development with the HECTOR Model

Listed author(s):
  • Lohwasser, Richard


    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

  • Madlener, Reinhard


    (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))

In this paper we introduce HECTOR, a new and advanced long-term electricity market model that simulates market behavior bottom-up through opportunistic, variable cost-based bidding of individual power plants into auction-based national markets with international interconnection capacities. Unlike most other approaches, we implement the objective function on an hourly level. This allows for a reduction of the solution space, and enables a higher modeling resolution, including opportunistic bidding behavior of power plants based on expected supply scarcity, and ex-post investment decisions based on NPV considerations. The model simulates the electricity markets of 19 European countries, with over 400 groups of power plants, and is able to closely approximate historic electricity prices. The average base load price computed by the model for 2006-2008 and across the largest regions in Europe is 54.5 €/MWh, compared to 54.8 €/MWh in reality, using 2005 as training period. In a projection until 2040, we find that conventional fossil fuel-fired power plants are replaced both by renewable energy technologies and large quantities of CCS, the latter of which almost fully utilize available CO2 storage capacities in some of the regions studied.

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Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 6/2009.

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Length: 29 pages
Date of creation: Nov 2009
Handle: RePEc:ris:fcnwpa:2009_006
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