A generation and transmission expansion planning model for the electricity market with decarbonization policies
Yunfei Du, Xinwei Shen, Daniel M. Kammen, Chaopeng Hong, Jinfeng Nie, Bo Zheng, Shangheng Yao
Abstract
Globally, the power sector must undergo a profound transition to achieve the decarbonization development targets. Various roadmaps are implemented, but only from a macro perspective, lacking the consideration of disciplines for the electricity market. In this paper, we develop and present a market-driven generation and transmission expansion planning (MGTEP) model considering the effectiveness of the electricity market. Specifically, generation and transmission companies incorporate hourly market trading and annual capacity investment into strategic decisions to maximize their profits, with the supply function equilibrium model to analyze the bidding behaviors. An equivalent quadratic programming formulation is deployed to solve the trilevel MGTEP model. Meanwhile, the MGTEP model is coupled with decarbonization policies to support the state and federal government in assessing energy transition strategies. We implement the MGTEP model with carbon emission allowance and carbon tax policies for the southern China electricity market, which is an imperfect competitive market. The case study results show that 50% carbon emission allowance or 400 CNY/t carbon tax is required to achieve carbon peaking by 2030 but with several drawbacks, including unsatisfactory decarbonization effect, excessive economic sacrifice, and instability/unreliability of power systems. Finally, the case study is extended to dual-track policies with different combinations of policies. An optimal combination is 70% carbon emission allowance and 160 CNY/t carbon tax. In this case, the power sector's carbon dioxide emissions and electricity prices in the southern China electricity market would increase to 554.6 Mt and 864.34 CNY/MWh in 2030, respectively, along with a carbon price of 850 CNY/t.