This paper analyzes the impact of two treatment factors for CO2 reduction options,
a wind power penetration and a carbon tax imposition, on CO2 emissions and other
electricity market key outcomes using the Midcontinent Independent System Operator (MISO) data. The analysis is implemented based on the agent-based electricity market
platform called the AMES Wholesale Power Market Test Bed. Specifically, the MISO
Midwest 7-zone test bed developed in Chapter 4 is used to study the effects of CO2 re-
duction options on electricity market outcomes. This test bed captures the core features of MISO, such as MISO operations, physical attributes of MISO generation technology and capacity by fuel type, and MISO transmission constraints during 2013. Also, simu- lated scenarios are established based on practical grounds of carbon tax imposition and wind power policies: carbon tax scenarios are based on a proposal in the U.S. Congres- sional Budget Office Report [17] and wind power penetration rate scenarios are based on the current MISO wind power penetration rate and the 2025 MISO projection [43]. So, this model is not purely hypothetical but an empirically-based test bed. Thus this test bed can be useful to obtain meaningful results and implications for real-world electricity markets through sensitivity studies.
Based on these scenarios, various sensitivity studies are implemented to investigate the effects of CO2 reduction options on CO2 emissions, net load and its volatility, average LMP and its volatility, outcomes of thermal generators such as dispatch level and profit relative to base case, electricity markets without the wind power penetration and the
carbon tax imposition. The effects of CO2 reduction options on profit of wind power
generator and government carbon tax revenues is also investigated in the simulated electricity market. Below a concise summary and implications are provided.
(i) Joint CO2 emission reduction options can substantially reduce total CO2 emissions.
It is shown that CO2 emissions are decrease by 6.17% under 17.7% of wind penetration
rate and $20/tCO2 of carbon tax imposition relative to base case.
(ii) The effects of CO2 reduction options on CO2 emissions can differ by fuel type
CO2emissions from coal, gas, and oil generation are decreased under wind power pen-
etration relative to base case. CO2 emissions from coal and oil generation are decreased
under carbon tax imposition but CO2 emissions from gas generation are increased under
nuclear generation are not changed under these two CO2 reduction options because it does not emit CO2 at all.
(iii) CO2 reduction options can affect net load and its volatility
Net load decreases but its volatility increases as wind penetration rate increases relative to base case.
(iv) CO2 reduction options can affect average LMP and its volatility
Average LMP decreases but its volatility increases as wind penetration rate increases relative to base case. On the other hand, average LMP increases but its volatility de- creases as carbon tax rate increases relative to base case.
(v) The effects of CO2 reduction options on generation dispatch can differ by fuel type
Generation dispatch of coal, gas, and oil generation is decreased but generation dis- patch of nuclear generation is increased under wind power penetration relative to base case. Generation dispatch of coal and oil generation is decreased but generation dispatch of nuclear and gas generation is increased under carbon tax imposition relative to base case.
(vi) CO2 reduction options can affect total profit of thermal generator
Total profit of thermal generator is decreased under wind power penetration or carbon tax imposition relative to base case.
(vii) The effects of CO2 reduction options on profit can differ by fuel type
Profit of nuclear, coal, and oil generator is decreased under wind power penetration relative to base case. Profit of gas generator is decreased under 9.66% of wind power penetration rate but it is increased under 17.7% of wind power penetration rate relative to base case. Profit of coal and oil generation is decreased but profit of nuclear and gas generation is increased under the carbon tax imposition relative to base case.
Thus governments need to investigate the effects of the decrease in profit of thermal
ing appropriate profit is important to attain resource adequacy by providing proper incentives for generator to invest in electric power utilities. Thus appropriate profit is inevitable factor to obtain electric power market reliability and security.
Under this circumstance, governments should consider plans to attain appropriate
profit when they introduce CO2 emission reduction options. For example, guaranteeing
appropriate coal generator profit is important because coal generator faces the decrease in profit under any simulated scenarios. If not, coal generator retires or do not invest on its infrastructure. This will reduce capacity of coal generation which plays an important role as base generation and electricity markets can suffer from insufficient capacity.
(viii) The effects of CO2 reduction options on profit of wind power generator and carbon
tax revenue
The profit of wind power generator increases as wind power penetration rate de- creases and carbon tax rate increases. The carbon tax revenue increases as wind power penetration rate decreases and carbon tax imposition rate increases.
Although wind power generator faces loss in the simulation results, carbon tax revenue is greater than the loss of wind power generator whenever the wind penetration and the carbon tax imposition coexist in electricity markets. Thus carbon tax revenue can be sufficient source of subsidies for the loss of wind power generator when these two options. In addition to this study, we can consider investment decisions for wind power gen- eration. The decision making process for wind power generation investment can be incorporated into the test bed for future work. Also, future work will permit learning capabilities for electric power traders to analyze strategic behaviors and their effects
on CO2 emissions and other market key outcomes given CO2 reduction options. More-
over, price-responsive demands can be included, which is an important aspect of the envisioned future smart grid. Future work can also consider incorporation of electricity
market models into Macroeconomic models to investigate the effects of CO2 emission