Journal Article

The impact of electricity-carbon market coupling on system marginal clearing price and power supply cost

Zhang, Weirong, Yuan, Jiahai, Zhou, Yiou, Zhao, Changhong, Yang, Jin, Zhang, Jian, Shen, Qixia, Zhang, Lilin

2023

Overview

In this study, we assessed the impacts of the benchmark designs of emissions allowance allocation in China’s national carbon emissions trading system with plant-level data and further estimated the marginal clearing price and power supply cost in Guangdong power market under electricity-carbon market coupling with unit commitment and economic dispatch model. We find that the existing allowances benchmark would result in a considerable surplus of allowances at about 222 Mt. But the benchmarking and exemplary levels on the heat rate of power supply would motivate thermal power units to reduce CO 2 emissions. Under a tight balance of supply and demand in Guangdong, peaking thermal power plants will become the marginal clearing units and higher clearing prices will add to the revenue of lower cost inframarginal renewable energy power units. However, the combined impact of electricity-carbon market coupling would cause the marginal clearing price fluctuates obviously from 0 to 1159 CNY/MWh. Compared to the baseline scenario with free CO2 allowances allocation, the efficiency of thermal power utilization would decrease by 23%-59% and the net revenue per MWh power supply of coal-fired power units would decrease by 275%-325% under the stress scenario. Our study suggests that setting a more stringent allowances allocation benchmark for carbon price discovery is necessary. As electricity-carbon market coupling changes the role of coal-fired power plants to provide flexibility service and decrease their revenues, it calls for further market designs on proper reimbursement of flexible resources, under which the electricity market can effectively achieve the synergy among accommodating new energy, ensuring resource adequacy, and delivering cost efficiency. In addition, the synergy can be enhanced by formulating a tax program, which can promote renewable energy investment.

• Publisher: Springer Berlin Heidelberg,Springer Nature B.V
• Subject: Adequacy / Allowances / Aquatic Pollution / Atmospheric Protection/Air Quality Control/Air Pollution / Benchmarks / Carbon / Carbon - analysis / Carbon dioxide / Carbon Dioxide - analysis / Carbon dioxide emissions / carbon markets / China / Clearing / Coal / Coal-fired power plants / cost effectiveness / Earth and Environmental Science / economic dispatch / Economic models / Ecotoxicology / Electric power generation / Electric Power Supplies / Electricity / Emissions control / Emissions trading / energy / Environment / Environmental Chemistry / Environmental Health / Environmental science / heat / income / Industrial plant emissions / Power dispatch / Power Plants / Power supply / prices / Renewable energy / renewable energy sources / Renewable resources / Research Article / Revenue / Supply & demand / supply balance / Taxation / Thermal power / Thermal power plants / Thermal utilization / Thermoelectricity / Unit commitment / Waste Water Technology / Water Management / Water Pollution Control