Expansion planning model considering an emission-based permits market

Abstract

This paper presents an application of a simplified pollutant emissions trading system to the electricity market. This approach models the expansion planning in electricity markets under imperfect competitive conditions and considering a simplified market for emission-based pollutant permits (EPS). It combines powerful traditional tools related to the detailed system operation with techniques for modeling the economic market equilibrium and a formulation for the resolution of the emissions permit market equilibrium. The emissions permit trading system is modeled as a perfectly competitive market, so the market equilibrium consists in maximizing the return to all participants. This market consists in an auction of permits offered by the regulator and purchased by the companies. The model is formulated as a Linear Complementary Problem (LCP), which allows solving simultaneously the optimization problem of each company considering the electricity market and the emission permits market. The model has been implemented in GAMS. An application to a hypothetic case is also presented.