Optimal self-unit commitment with shared asset ownership under realistic taxation in the current decarbonization framework

Abstract

Energy, greenhouse gas emissions, or water taxes, are present in many power systems as available instruments to implement energy, environmental or climate policies. The goal of these taxes is to change producers’ optimal behavior and hence achieve a cleaner operation. However, these changes in operation are not straightforward to simulate when producers are price makers, or when assets are owned jointly by different agents. State-of-the-art models are unable to consider differentiated income taxes per technology or geographical region, in the case of price makers. In this paper, we present a novel formulation that models the individual market income of each unit using the binary-expansion technique to address the case of a price-maker agent. Unlike existing state-of-the-art formulations, our approach successfully accounts for differentiated income taxes per technology or geographical region and accurate market revenues of shared generators. The proposed model enables evaluating the rational behavior of a generation company confronting a complex yet realistic decision problem, under different types of taxes related to decarbonization or resource conservation policies. The case study incorporates the impact of the installation of carbon sequestration and storage equipment in a fleet of gas-fired power plants, yielding satisfactory numerical results.

Energy, greenhouse gas emissions, or water taxes, are present in many power systems as available instruments to implement energy, environmental or climate policies. The goal of these taxes is to change producers’ optimal behavior and hence achieve a cleaner operation. However, these changes in operation are not straightforward to simulate when producers are price makers, or when assets are owned jointly by different agents. State-of-the-art models are unable to consider differentiated income taxes per technology or geographical region, in the case of price makers. In this paper, we present a novel formulation that models the individual market income of each unit using the binary-expansion technique to address the case of a price-maker agent. Unlike existing state-of-the-art formulations, our approach successfully accounts for differentiated income taxes per technology or geographical region and accurate market revenues of shared generators. The proposed model enables evaluating the rational behavior of a generation company confronting a complex yet realistic decision problem, under different types of taxes related to decarbonization or resource conservation policies. The case study incorporates the impact of the installation of carbon sequestration and storage equipment in a fleet of gas-fired power plants, yielding satisfactory numerical results.