A study on carbon cap and trade effect to cost of electricity in accordance with the Merit Order of 300-400 MW coal power plants

Abstract

Electricity is the basis of national development in a country. Power plants in Indonesia produces up to 283.8 TWh and are dominated by coal power plants which increase the amount of the greenhouse gases (GHG). In order to prevent more environmental problems, Indonesia ratified Paris Agreement by publishing the roadmap of Nationally Determined Contribution (NDC) that committed in reducing 29% of GHG emissions in 2030, which 11% of them are from the energy sector contributions. This research focuses on the implementation of the carbon cap and trade (CAT) between coal power plants having 300-400 MW capacity, which can affect their cost of electricity (Rp/kWh). It is well known that cap and trade (CAT) is a method used for reducing the mitigation cost of emission reduction in an effective way. From this research, it is found that the highest rise of incremental cost belongs to the 300 MW power plant in scenario 9 and the increase is from Rp.431.00/kWh to Rp.462.77/kWh, or approximately 7.37%. This research also shows that the most optimal carbon price is in the range of Rp. 130,165 to Rp.130,183 because the rank of the 330 MW and 400 MW power plant in merit order changes over in this condition. In the future, this research can be used as a comparison with the higher coal power plant capacity, so that an alternative way is obtained to determine the more optimal merit order.