An Optimal CO<sub>2</sub> Saving Dispatch Model for Wholesale Electricity Market Concerning Emissions Trade

Abstract

Deep CO₂ mitigation provides a challenge to fossil fuel-fired power industry in liberalized electricity market process. To motivate generator to carry out mitigation action, this article proposed a novel dispatch model for wholesale electricity market under consideration of CO₂ emission trade. It couples carbon market with electricity market and utilizes a price-quantity uncorrelated auction way to operate both CO₂ allowances and power energy trade. Specifically, this CO₂ saving dispatch model works as a dynamic process of, (i) electricity and environment regulators coordinately issue regulatory information; (ii) initial CO₂ allowances allocation through carbon market auction; (iii) load demands allocation through wholesale market auction; and (iv) CO₂ allowances submarket transaction. This article builds two stochastic mathematical programmings to explore generator’s auction decision in both carbon market and wholesale market, which provides its optimal price-quantity bid curve for CO₂ allowances and power energy in each market. Through piece-wise adding up individual demand curve (supply curve) and matching with total supplied allowances (load demanded), market equilibrium is reached. Under this dispatch model, price upper-bound of bid allowances of generators is upward ordered and price lower-bound of bid electricity is downward ordered, according to their operational advantage from weak to strong. Meanwhile their bid electricity upper-bound gets respective capacity constraint or market share regulation. These features imply that the proposed model can prompt economic dispatch, improve resources allocation efficiency and bring about CO₂ mitigation effect. Numerical simulations also verified the validity of this CO₂ saving dispatch model.