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Title: The long-term impacts of carbon and variable renewable energy policies on electricity markets

Abstract

We present a computationally-efficient optimization model that finds the least-cost generation unit expansion, commitment, and dispatch plan to serve hourly electricity demand and ancillary service requirements. We apply the model to a case study based on data from the electricity market in Texas (ERCOT) to analyze the market and investment impacts of several incentive mechanisms that support variable renewable energy (VRE) investments and carbon emission reductions. In contrast to many previous studies, the model determines least-cost VRE investments under different cost and incentive assumptions rather than analyzing scenarios where VRE expansion is pre-determined. We find that electricity prices can vary significantly under different incentive mechanisms, even when comparable generation portfolios result. Therefore, the preferred incentive mechanism depends on stakeholder objectives as well as the prevailing electricity market framework. Our results indicate that a carbon tax is more system cost-efficient for reducing emissions, while production and investment tax credits are more system cost-efficient for increasing VRE investments. Similarly, incentive mechanisms that reduce electricity prices may increase the need for separate revenue sufficiency mechanisms (e.g. a capacity market) more than a policy that increases electricity prices. Moreover, the impacts on consumer payments are not always aligned with changes in system costs. Overall,more » the analysis illustrates the importance of considering electricity market impacts in assessing the economic efficiency of VRE and carbon incentive mechanisms.« less

Authors:
 [1];  [1];  [2]
  1. Argonne National Lab. (ANL), Argonne, IL (United States). Center for Energy, Environmental, and Economic Systems Analysis, Energy Systems Division
  2. Argonne National Lab. (ANL), Argonne, IL (United States). Center for Energy, Environmental, and Economic Systems Analysis, Energy Systems Division; Massachusetts Inst. of Technology (MIT), Cambridge, MA (United States). Lab. for Information and Decision Systems, Institute for Data, Systems, and Society
Publication Date:
Research Org.:
Argonne National Lab. (ANL), Argonne, IL (United States)
Sponsoring Org.:
USDOE Office of Energy Efficiency and Renewable Energy (EERE), Renewable Power Office. Wind Energy Technologies Office
OSTI Identifier:
1558786
Alternate Identifier(s):
OSTI ID: 1693772
Grant/Contract Number:  
AC02-06CH11357; DE AC02-06CH11357
Resource Type:
Journal Article: Accepted Manuscript
Journal Name:
Energy Policy
Additional Journal Information:
Journal Volume: 131; Journal Issue: C; Journal ID: ISSN 0301-4215
Publisher:
Elsevier
Country of Publication:
United States
Language:
English
Subject:
29 ENERGY PLANNING, POLICY, AND ECONOMY; Carbon policy; Electricity markets; Generation expansion planning; Production cost modeling; Renewable energy policy; Variable renewable energy

Citation Formats

Levin, Todd, Kwon, Jonghwan, and Botterud, Audun. The long-term impacts of carbon and variable renewable energy policies on electricity markets. United States: N. p., 2019. Web. doi:10.1016/j.enpol.2019.02.070.
Levin, Todd, Kwon, Jonghwan, & Botterud, Audun. The long-term impacts of carbon and variable renewable energy policies on electricity markets. United States. https://doi.org/10.1016/j.enpol.2019.02.070
Levin, Todd, Kwon, Jonghwan, and Botterud, Audun. 2019. "The long-term impacts of carbon and variable renewable energy policies on electricity markets". United States. https://doi.org/10.1016/j.enpol.2019.02.070. https://www.osti.gov/servlets/purl/1558786.
@article{osti_1558786,
title = {The long-term impacts of carbon and variable renewable energy policies on electricity markets},
author = {Levin, Todd and Kwon, Jonghwan and Botterud, Audun},
abstractNote = {We present a computationally-efficient optimization model that finds the least-cost generation unit expansion, commitment, and dispatch plan to serve hourly electricity demand and ancillary service requirements. We apply the model to a case study based on data from the electricity market in Texas (ERCOT) to analyze the market and investment impacts of several incentive mechanisms that support variable renewable energy (VRE) investments and carbon emission reductions. In contrast to many previous studies, the model determines least-cost VRE investments under different cost and incentive assumptions rather than analyzing scenarios where VRE expansion is pre-determined. We find that electricity prices can vary significantly under different incentive mechanisms, even when comparable generation portfolios result. Therefore, the preferred incentive mechanism depends on stakeholder objectives as well as the prevailing electricity market framework. Our results indicate that a carbon tax is more system cost-efficient for reducing emissions, while production and investment tax credits are more system cost-efficient for increasing VRE investments. Similarly, incentive mechanisms that reduce electricity prices may increase the need for separate revenue sufficiency mechanisms (e.g. a capacity market) more than a policy that increases electricity prices. Moreover, the impacts on consumer payments are not always aligned with changes in system costs. Overall, the analysis illustrates the importance of considering electricity market impacts in assessing the economic efficiency of VRE and carbon incentive mechanisms.},
doi = {10.1016/j.enpol.2019.02.070},
url = {https://www.osti.gov/biblio/1558786}, journal = {Energy Policy},
issn = {0301-4215},
number = C,
volume = 131,
place = {United States},
year = {Fri May 03 00:00:00 EDT 2019},
month = {Fri May 03 00:00:00 EDT 2019}
}

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Cited by: 25 works
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Works referencing / citing this record: