Environmental Engineering Reference
In-Depth Information
VOLL. Thus in our model we have implicit rationing costs. The overall unmet load
is computed as:
d s
:
All consumers are assumed to have an identical and constant VOLL per unit,
VOLL, for any level of electricity use. Thus demand-side costs equal the above
difference times VOLL.
Supply
-
side costs
. A major driver of stations
short-term marginal costs is fuel
cost (in addition to emissions cost). We assume that wind, hydro and nuclear
stations bid a price of zero [
37
]; that pumped storage takes electricity from the
network at the bottom of the price range; and that the prices of coal (
C
), natural gas
(
G
), and carbon dioxide (
A
) evolve stochastically over time.
4
In a deregulated electricity market, economic costs include both explicit input
(fuel) and output (emissions) costs, and a margin to get a
'
t for
the generation units. Its size (here assumed constant) crucially depends on the
'
'
reasonable
'
pro
'
technology that sets the electricity price, and the scope for market power
and/or strategic behavior by generators.
Generation costs comprise the (bid-based) costs incurred by all power technologies
f
¼
marginal
. Since wind, hydro, and nuclear generators are assumed to bid a
zero electricity price, these sources will be f
u
lly disp
at
chedw
he
never available as long
as load surpasses their availability:
x
w
¼
x
w
,
x
h
¼
x
h
,
x
n
¼
x
n
. Noting that pumped
storage stations tend to adjust their operation to the time when electricity prices are at
the higher end, even above natural gas turbines, we assume their
f
c
;
g
;
n
;
w
;
h
;
p
g
function is a
multiple of that of gas turbines, in our case, 1.10. Thus total generation costs are:
'
cost
'
C þ
0
34056
A
H
C
:
cðxÞ
¼
x
c
M
m
þ
G þ
20196
A
H
G
20196
A
H
G
0
:
0
:
þ x
g
M
m
þ
þ x
p
1
1
M
m
þ
:
:
Here
H
G
and
H
C
denote the thermal ef
ciency of gas- and coal-
red stations,
respectively.
C
and
G
denote the price (in
€
/MWh) of coal and natural gas,
respectively, while
A
stands for the price (in
/tCO2) of carbon dioxide. In elec-
tricity markets where natural gas-red stations are the usual marginal technology,
the
€
or long-term clean spark spread.
5
When
xed margin
M
m
will be the
'
average
'
coal-
red plants or pumped storage stations are the marginal plants, we assume that
they earn the same margin.
4
When there is a
oor price for carbon in place (as in the UK), the carbon price (
A
) can be
different from the allowance price on the EU ETS.
5
As shown in National Grid [
28
], both peak and baseload electricity prices more or less track
natural gas prices at National Balancing Point (which does not happen with coal or oil, for
instance). This is relevant when we deal with the pro
t margin included in generation costs; see
Chamorro et al. [
11
], Appendix C.
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