The magnitude of the impact of a shift from coal to gas under a Carbon Price

Wagner, Liam, Lynette Molyneaux and Foster, John (2014) The magnitude of the impact of a shift from coal to gas under a Carbon Price. Energy Policy, 66 280-291. doi:10.1016/j.enpol.2013.11.003


Author Wagner, Liam
Lynette Molyneaux
Foster, John
Title The magnitude of the impact of a shift from coal to gas under a Carbon Price
Journal name Energy Policy   Check publisher's open access policy
ISSN 0301-4215
1873-6777
Publication date 2014-03
Year available 2013
Sub-type Article (original research)
DOI 10.1016/j.enpol.2013.11.003
Open Access Status Not Open Access
Volume 66
Start page 280
End page 291
Total pages 12
Place of publication London, United Kingdom
Publisher Elsevier
Collection year 2014
Language eng
Formatted abstract
We seek to evaluate the extent of the pass through of increased fuel and carbon costs to wholesale prices with a shift of generation from coal-fired to gas-fired plants. Modelling of Australia's National Electricity Market in 2035 is undertaken using Australian Energy Market Operator assumptions for fuel costs, capital costs and demand forecasts. An electricity market simulation package (PLEXOS), which uses deterministic linear programming techniques and transmission and generating plant data, is used to optimize the power system and determine the least cost dispatch of generating resources to meet a given demand. We find that wholesale market prices increase due to the full pass through of the increased costs of gas over coal as an input fuel and the Carbon Price. In addition, we find that wholesale prices increase by more than the pass through of fuel and carbon costs because of the fact that generators can charge infra-marginal rents and engage in strategic behaviour to maximize their profits.
Keyword Electricity
Infra marginal rent
Markets
Q-Index Code C1
Q-Index Status Confirmed Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2014 Collection
School of Economics Publications
 
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Created: Wed, 27 Nov 2013, 22:41:38 EST by Dr Liam Wagner on behalf of School of Economics