A hybrid system dynamics model for power mix trajectory simulation in liberalized electricity markets considering carbon and capacity policy

Abstract

Policy design during the energy system transition requires systematic thinking to navigate its complexity and mitigate potential side effects that policies may induce. Policy design based on System Dynamics (SD) simulations offers a tool to analyze real-world complexities. Given the difficulty of strictly simulating grid dispatch through causal loops, the Screening Curve (SC) method is widely employed in SD policy simulation models within closed commercial software platforms. Nevertheless, as Variable Renewable Energy (VRE) rises, the SC method faces challenges in accurately simulating grid dispatch operation due to its oversight of the power plants' limited output adjustment capabilities. This study developed a hybrid SD model as an alternative to the typical SD-SC combined method, allowing the SD model to simulate the power mix trajectory change incorporating high VRE penetration. After examining the simulation results with Hokkaido as a case study, the SC method may overestimate the abatement outcomes of the carbon pricing, and underestimate the support from capacity mechanism for the coal power plants. The difference between the two model increases along with the VRE share rising, when the VRE share exceeds about 40 % the results of the hybrid model will be more reliable.