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Evaluating the impact of average cost based contracts on the industrial sector in the European emission trading scheme

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Oggioni, Giorgia [UCL] Smeers, Yves [UCL]

The inception of the Emission Trading System in Europe (EU-ETS) has made power price more expensive. This affects the competitiveness of electricity intensive industrial consumers and may force them to leave Europe. Taking up of a proposal of the industrial sector, we explore the possible application of special contracts, based on the average cost pricing system, which would mitigate the impact of CO2 cost on their electricity price. The model supposes fixed generation capacities. A companion paper treats the case with capacity expansion. We first consider a reference model representing a perfectly competitive market where all consumers (households and industries) are price-takers and buy electricity at the short-run marginal cost. We then change the market design assuming that large industrial consumers pay power either at a single or at a nodal average cost price. The analysis of these problems is conducted with simulation models applied to the Northwestern European market. The equilibrium models developed are implemented in the GAMS environment.

Document type Article de périodique (Journal article) – Article de recherche
Access type Accès restreint
Publication date 2009
Journal information "Central European Journal of Operations Research" - Vol. 17, no. 2, p. 181-217 (Juin 2009)
Peer reviewed yes
Publisher Physica-Verlag GmbH und Co. (Heidelberg, Germany)
issn 1435-246X
e-issn 1613-9178
Publication status Publié
Affiliations UCL - EUEN/CORE - Center for operations research and econometrics
UCL - EUEN/CORE - Center for operations research and econometrics
Keywords Average cost pricing ; Complementarity conditions ; EU-ETS ; Northwestern Europe market
Links
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Bibliographic reference Oggioni, Giorgia ; Smeers, Yves. Evaluating the impact of average cost based contracts on the industrial sector in the European emission trading scheme. In: Central European Journal of Operations Research, Vol. 17, no. 2, p. 181-217 (Juin 2009)
Permanent URL http://hdl.handle.net/2078.1/23200