Potential impacts of emission concerned policies on power system operation with renewable energy sources

Abstract Electricity sector is considered as major source of green house gas emission. A huge opportunity exists within this sector to cut down the emission and contribute significantly to mitigate the climate change. The Emission Trading Schemes (ETSs) and inception of renewable energy sources (RESs) into the generation mix contribute to the reduction of emission and impact electricity market operation. This paper investigates the impact of emission concerned policies, such as: (a) fixed emission quota; (b) cap and trade; and (c) bilateral contract commitments; on the operation of power system. The renewable support mechanisms, such as renewable purchase obligation (RPO) and feed-in-tariff are incorporated so as to account the relative costs of cleaner and renewable generation technologies. Each generator is allocated certain amount of emission allowances, which they can use to cover emission during energy generation. The electricity and emission prices are obtained from the interaction of carbon and energy market. It is observed that, the renewable support mechanisms affect the generating and emission trading schedule of independent power producers (IPPs). They help them meet their emission targets and increase overall welfare. A balance between the emission regulation and renewable support mechanisms is essential, otherwise they make each others effect redundant. The performance of the proposed model is demonstrated by its implementation on a five generators system.