Impacts Of Emissions Trading On Investment Strategies And Market Operation Of The Generation Companies

The impact of Greenhouse Gas (GHG) emission, CO₂ in particular, on global climate warming has become a focus of concern of many countries, especially developed ones. Some climate change policies and protocols have been established for limiting the CO₂ emission around the globe,one of which is emissions trading scheme (ETS).As far as the power industry is concerned, coal is still the most popular energy source in most countries. It is well known that coal firing produces a great deal of CO₂. As a result, when CO₂ emissions are strictly restricted, the power industry would inevitably be significantly affected. In the long run, when making future generation investment decisions for generation companies or potential investors, the uncertainty of CO₂ emission prices and the related investment risks caused by climate change policies should be taken into account; in the short run, emissions trading would increase the production costs of the generation companies. Due to the differences of the production technologies, the increased costs would be very different for different generation companies, which may result in the change of the traditional dispatching merit order. In this thesis, the above issues are investigated systematically and some significant results are obtained as detailed below.1. An effort is made for investigating the problem of generation investment decision-making in electricity market environment with uncertainties from the climate change policy for limiting the CO₂ emission. In addition, uncertainties of electricity prices and fuel prices are also taken into account. Under the existing real option approach (ROA) based methodological framework for the generation investment decision-making problem, a mathematical model accommodating multiple kinds of uncertainties and the solving method are developed. Finally, the proposed model and method are illustrated by a numerical example with different scenarios.2. The problem of the investment decision-makings of multiple generation companies over the planning time horizon is proposed based on option-game theory. The important characteristic is that generation companies would face a great number of uncertainties such as fuel prices, electricity prices and CO₂ mitigation policy in the future as well as new capacity investment from other competitors. In choosing investment timings, generation companies would take these uncertainties into account. A new methodological framework of generation investment decision-making is developed for the generation companies by employing the option-game theory. Under the assumption that generation investment from different generation companies will be made sequentially, a solving method is presented based on the well-developed Barraquand-Martineau (B-M) option pricing model.3. The impacts of emissions trading on bidding strategies for generation companies in day-ahead electricity markets have been investigated. The CO₂ emission price in emissions trading market is firstly evaluated by using the stochastic production simulation method based on its change characteristic. Then upon the assumption that the probability distribution functions of rivals'bidding are known, a model for building a risk-constrained optimal bidding strategy for a generation company in the framework of chance-constrained programming and the solving method are developed.4. In order to mitigate GHG emissions, emission trading and renewable energy support schemes have been or are going to be implemented in some developed countries or regions. The implementation of these two schemes would bring some new problems to electricity market operation. Given this background, an agent-based market simulation method is presented for analyzing the gaming behaviors of generation companies in an electricity market environment with the implementation of these two schemes. The replicator dynamics algorithm is utilized to simulate the bidding strategies of agents (generation companies) for profit maximization. The operation processes of a specified electricity market are simulated over the studied time horizon and some indices employed to evaluate the market operation behaviors. Finally, the impacts of the two schemes on the electricity market operation are examined through the comparisons of the indices under different scenarios.Finally, conclusions are made based on the research outcomes, and directions for future research indicated.