The Impact of Carbon Price on Power Plant Dispatch, Production Costs, and Total Emissions

Abstract

Energy dispatch can be formulated economically, with customers’ needs representing demand, and power plants providing supply. As not all power plants are needed to satisfy demand though, it is most efficient to only turn the necessary plants on while minimizing the overall cost, a problem known as unit commitment. Running an optimization problem through the EGRET and Prescient platforms in Python, with a variety of demand, wind, solar, and other power plant generation scenarios, while minimizing the total cost across activated plants, returns the most efficient power plants to activate. Then, based upon the actual data in real-time, economic dispatch is decided as the model re-runs the optimization to account for this data, and corresponding cost associated with each plant can be calculated. This thesis will focus on applying Prescient's unit commitment and economic dispatch optimization to the RTS synthetic power grid. However, currently unaccounted for in the cost of this program is the potential cost of carbon.

In 2013, the California Air Resources Board implemented a Cap-and-Trade program, under which companies must purchase either carbon allowances or offsets to account for their annual emissions under the yearly emissions cap. It sets a statewide limit on emitters responsible for 85% of the state’s carbon emissions and allows them to buy and sell carbon credits from a centralized clearinghouse. The goal initially was to return to 1990 levels of greenhouse gas emissions by 2020 but as this goal was reached, the program is currently increasing stringency to achieve the target of at least 40% below 1990 levels by 2030. The focus of this thesis will be first to determine the total carbon emissions given Prescient's economic dispatch output as well as the associated cost for the carbon. The cost of carbon emission will first be based on a constant price in accordance with recent auction prices determined by California’s Cap-and Trade policy. Then, adding the cost of carbon to the optimization problem as a constant tax per ton of carbon, this thesis will conduct simulations at many different prices and analyze the impact the price of carbon has on economic dispatch. In addition, the effect of the price of carbon on total carbon emissions will be used to determine the most effective carbon policies and best potential prices of carbon.