Self-scheduling of a power generating company: Carbon tax considerations

Abstract

The Carbon Tax Self-Scheduling (CTSS) model for a power generating company (GENCO) is proposed in light of the deregulated electricity market environment. The model analyses the effects of GENCO profits and emissions profiles under different carbon tax scenarios, by valuing the specific part of the cost which affects the environment. The resolution method provides first a Mixed Integer Quadratic Programming (MIQP) formulation of the CTSS problem. Second, using piece-wise linearisation approximation methods, the MIQP formulation is transformed into a Mixed Integer Linear Programming (MILP) system. Simulation results of 10–100 unit systems over 24h show that the MILP formulation is efficient and precise when calculating problems of such a large scale. We conclude that the increase of carbon tax reduces carbon emissions and the reduction effect is more favorable in the case of relatively modest carbon tax. The profit of GENCO is unnecessarily negatively related to the carbon tax, while it is determined by the increased rate of electricity price. The increase of carbon tax may inhibit demand. However, the inhibiting effect may be weakened when considering increases in electricity prices combined with the carbon tax.