Internalizing externalities into capacity expansion planning: The case of electricity in Vietnam

This paper examines the impacts of including external costs such as environmental and health damages from power production on power generation expansion planning in Vietnam. Using the MARKAL model and covering a 20-year period to 2025, the study shows that there are substantial changes in the generation structure in favor of renewable energy technologies and other low emitting technologies. These changes lead to a reduction in fossil fuel requirements, and consequently, a reduction of CO₂, NO_x, SO₂, and PM emissions which could be expected to also reduce the associated environmental and human health impacts. The avoided external costs would be equivalent to 4.4 US cent/kWh. However, these gains are not free as the additional electricity production cost would be around 2.6 US cent/kWh higher if the switch to more expensive, but lower emitting technologies were made. The net benefit of internalizing these externalities is thus around 1.8 US cent/kWh.     

Incorporating life cycle external cost in optimization of the electricity generation mix

The present work aims to examine the strategic decision of future electricity generation mix considering, together with all other factors, the effect of the external cost associated with the available power generation technology options, not only during their operation but also during their whole life cycle. The analysis has been performed by integrating the Life Cycle Assessment concept into a linear programming model for the yearly decisions on which option should be used to minimize the electricity generation cost. The model has been applied for the case of Greece for the years 2012–2050 and has led to several interesting results. Firstly, most of the new generating capacity should be renewable (mostly biomass and wind), while natural gas is usually the only conventional fuel technology chosen. If externalities are considered, wind energy increases its share and hydro-power replaces significant amounts of biomass-generated energy. Furthermore, a sensitivity analysis has been performed. One of the most important findings is that natural gas increases its contribution when externalities are increased. Summing-up, external cost has been found to be a significant percentage of the total electricity generation cost for some energy sources, therefore significantly changing the ranking order of cost-competitiveness for the energy sources examined.     

An exploratory game-theoretic analysis of biomass electricity generation supply chain

This study proposes a game-theoretic approach to model and analyze the process of utilizing biomass for power generation considering three players: distributor, facility developer, and participating farmer. We characterize the Nash equilibrium of the sequential game and discuss its features. A special attention is devoted to the analysis of the impact of incentives and initial target on the equilibrium, in which the biomass is part of electricity production.     

An economic assessment of windfarm power generation in Scotland including externalities

This paper uses cost–benefit analysis to assess the economic feasibility of a large scale windfarm project, taking into account positive and negative externalities of generation. The issue of non-use value (i.e. a welfare change among those who will never visit the area and see the windfarm) is addressed with reference to the study by Bergmann et al. [2006. Valuing the attributes of renewable energy investments. Energy Policy 34, 1004–1014], which determined a social cost of £19.40 per household for the non-use disamenity associated with a large scale windfarm in Scotland. This paper demonstrates the extent to which this estimate affects the economic feasibility of the project. We find that for all but one of the 16 scenarios considered, the project returns a positive net present value despite the inclusion of this non-use value, thus suggesting that in these cases the windfarm delivers a net welfare gain to society.     

Cost-effectiveness of renewable electricity policies

We analyze policies to promote renewable sources of electricity. A portfolio standard (RPS) raises electricity prices and primarily reduces gas-fired generation. A knee of the cost curve exists between 15% and 20% goals for 2020 in our central case, and higher natural gas prices lower the cost of greater reliance on renewables. A renewable energy production tax credit lowers electricity price at the expense of taxpayers, which limits its effectiveness in reducing carbon emissions, and it is less cost-effective at increasing renewables than a portfolio standard. Neither policy is as cost-effective as a cap-and-trade policy for achieving carbon emission reductions.     

Historical analysis of U.S. electricity markets: Reassessing carbon lock-in

This paper evaluates whether the U.S. electricity sector is directed away from carbon-intensive technological lock-in, and which factors are contributing, or have potential to contribute, to a possible reorientation of the industry. With the application of a historical analysis of the electricity sector from the late nineteenth century through current day, this analysis finds that, although the industry still relies primarily on carbon-intensive fossil fuel operations, several recent trends indicate that the industry is becoming less carbon intensive, smaller in generation system scale, and more sustainable in operations. Crucial drivers—firm level interactions with technological change, industry leadership and market structure, government intervention and policy momentum, and citizen involvement and behavior patterns—that have traditionally shaped the structure, scale, and environmental footprint of the industry, have also played a prominent role in recent transformations. These results indicate that triggering or extraordinary events may not be necessary to initiate an escape from carbon lock-in in the electricity sector. Complete escape is not yet definitive, however, and it remains to be seen whether the industry is able to transform entirely before any significant climate change disturbances occur.     

Carbon prices,institutions, technology and electricity generation firms in two Australian states

A relationship exists for the liberalised Australian electricity supply industry between institutional structures and technological change. The traditional institutional framework has been based on centralised generation and a regulated vertically integrated monopoly structure. This paper investigates the issues of institutional and technological change using the social cost perspective (including externalities), and focuses on the imperatives of greenhouse gas emission reductions.     

Economical evaluation of electricity generation considering externalities

The economics of renewable energy are the largest barrier to renewable penetration. Nevertheless, the strong desire to reduce environmental emissions is considered a great support for renewable energy sources. In this paper, a full analysis for the cost of the kWh of electricity generated from different systems actually used in Egypt is presented. Also renewable energy systems are proposed and their costs are analyzed. The analysis considers the external cost of emissions from different generating systems. A proposed large scale PV plant of 3.3 MW, and a wind farm 11.25 MW grid connected at different sites are investigated. A life cycle cost analysis for each system was performed using the present value criterion. The comparison results showed that wind energy generation has the lowest cost, followed by a combined cycle–natural gas fired system. A photovoltaic system still uses comparatively expensive technology for electricity generation; even when external costs are considered the capital cost of photovoltaic needs to be reduced by about 60% in order to be economically competitive.     

Temporal CO2 emissions associated with electricity generation: Case study of Singapore

Studying temporal patterns in emissions associated with electricity generation is increasingly important. On the supply side, there is interest in integrating renewable energy sources (solar, wind), which are known to vary daily and hourly. On the demand side, the concept of demand response is driving a need to better understand the impact of peak versus off-peak loading, with the objective of maximizing efficiency. In this study, we examine the case of electric power generation in Singapore, and aim to assess the half-hourly variation in associated average carbon dioxide emissions. Given the country’s serious push for clean energy solutions and a possibility of adopting carbon trading in the future, we feel the need to address the currently existing gap in research on daily CO₂ emissions patterns. By associating representative electricity generation data with the characterized fleet of power plants, half-hourly emissions are found to range between 415 and 455 kg CO₂ per MW h. Marginal emission factors show a fluctuating daily pattern between 390 and 800 kg CO₂/MW h. Policy makers able to work with real generation data can use this approach to understand the carbon footprint of short-term supply and demand interventions.     

Potential for reducing global carbon emissions from electricity production—A benchmarking analysis

We present five performance indicators for electricity generation for 129 countries using the 2005 data. These indicators, measured at the national level, are the aggregate CO₂ intensity of electricity production, the efficiencies of coal, oil and gas generation and the share of electricity produced from non-fossil fuels. We conduct a study on the potential for reducing global energy-related CO₂ emissions from electricity production through simple benchmarking. This is performed based on the last four performance indicators and the construction of a cumulative curve for each of these indicators. It is found that global CO₂ emissions from electricity production would be reduced by 19% if all these indicators are benchmarked at the 50th percentile. Not surprisingly, the emission reduction potential measured in absolute terms is the highest for large countries such as China, India, Russia and the United States. When the potential is expressed as a percentage of a country's own emissions, few of these countries appear in the top-five list.     

Long-term trends of electric efficiencies in electricity generation in developing countries

This analysis provides time-series data on electric efficiencies for 138 countries and regions, covering all fossil fuels for the period 1971–2005, with an emphasis on non-Organization for Economic Cooperation and Development (OECD) countries. Fossil fuel consumption for electricity generation in non-OECD countries now exceeds that in the OECD. The historical performance of the top five non-OECD consumers of each fossil fuel for which reliable data are available is presented and discussed. For each fuel, the countries that lead the world in efficiency are used for benchmarks; bringing the rest of the world up to these standards would result in energy savings of 26 EJ (equivalent to 5% of global energy consumption) and CO₂ emissions reduction of 2.1 Pg (equivalent to 8% of global CO₂ emissions). Coal showed the largest potential margin of improvement for both energy and CO₂, with possible savings equivalent to 3% of current global energy consumption and 5% of global CO₂ emissions. The gap in electric efficiency between OECD and non-OECD countries over the past 35 years has widened for coal-fired generation, stayed relatively constant for natural gas, but has shrunk for petroleum. The results show the very gradual nature of overall efficiency improvements and the significant differences among regions and countries.     

Internalizing carbon costs in electricity markets: Using certificates in a load-based emissions trading scheme

Several western states have considered developing a regulatory approach to reduce greenhouse gas (GHG) emissions from the electric power industry, referred to as a load-based (LB) cap-and-trade scheme. A LB approach differs from the traditional source-based (SB) cap-and-trade approach in that the emission reduction obligation is placed upon Load Serving Entities (LSEs), rather than electric generators. The LB approach can potentially reduce the problem of emissions leakage, relative to a SB system. For any of these proposed LB schemes to be effective, they must be compatible with modern, and increasingly competitive, wholesale electricity markets. LSE's are unlikely to know the emissions associated with their power purchases. Therefore, a key challenge for a LB scheme is how to assign emissions to each LSE. This paper discusses the problems with one model for assigning emissions under a LB scheme and proposes an alternative, using unbundled Generation Emission Attribute Certificates. By providing a mechanism to internalize an emissions price signal at the generator dispatch level, the tradable certificate model addresses both these problems and provides incentives identical to a SB scheme.     

The potential for electricity conservation and carbon dioxide emission reductions in the household sector of Brazil

Pressure is mounting in large Non-Annex 1 countries like Brazil, China, and India to accept binding commitments to reduce their greenhouse gas emissions in the second, post-2012, commitment period. In the case of Brazil, pressure is higher for the country to commit itself to reduce its emissions from land use changes but, because of the country’s recent high economic growth rates, very soon, this pressure will also turn to reducing its greenhouse gas emissions from electricity production and use in the various sectors of the economy. This paper summarizes the methodological approach, and the results, of a study aimed at assessing the potential for electricity conservation and carbon dioxide emissions reductions in the Brazilian household sector. The study splits the household sector into 20 subsectors, considering five different geographical regions and four household electricity consumption levels (a proxy for different household income levels). Technical, economic, and market potentials are determined for electricity conservation in these 20 subsectors for the period 2005–2030, and results are also translated into carbon dioxide emission reductions using the Clean Development Mechanism (CDM) combined margin (build margin plus operating margin) approach for determining the emission’s factor for the power grids. Results show significant electricity and carbon dioxide reduction potentials at negative costs for both household final consumers (market potential) and the economy as a whole (economic potential) in the residential sector of Brazil.

Environmental degradation costs in electricity generation: The case of the Brazilian electrical matrix

The main purpose of this paper is to emphasize the importance of including environmental degradation costs in the long-term planning of the Brazilian electricity sector. To this aim, environmental external costs associated to both hydro-power and thermal-power electricity generation are investigated. Monetary valuation methodologies are applied and environmental degradation costs, expressed in per kWh of generated energy, are obtained for the main types of generation sources of the Brazilian electricity matrix. Both local pollution due to particulate matter emissions and global warming effects are assessed. A classification of the sources from the point of view of their impact on the environment is given. Degradation costs associated to the installed capacity expansion in the Brazilian electricity sector during the time horizon 2007–2016 are estimated. These resulting costs represent lower boundary damage estimates associated only with the energy to be generated during the period. Results indicate that local pollution caused by a small number of plants could be even more costly to society than global warming and, also, show the importance of considering not only unitary damage costs but the participation of each source on the generated energy during the time horizon, as a guide to planning and policy making.     

Data envelopment analysis with uncertain data: An application for Iranian electricity distribution companies

This paper presents Data Envelopment Analysis (DEA) model with uncertain data for performance assessment of electricity distribution companies. During the past two decades, DEA has been widely used for benchmarking the electricity distribution companies. However, there is no study among many existing DEA approaches where the uncertainty in data is allowed and, at the same time, the distribution of the random data is permitted to be unknown. The proposed method of this paper develops a new DEA method with the consideration of uncertainty on output parameters. The method is based on the adaptation of recently developed robust optimization approaches proposed by Ben-Tal and Nemirovski [2000. Robust solutions of linear programming problems contaminated with uncertain data. Mathematical Programming 88, 411–421] and Bertsimas et al. [2004. Robust linear optimization under general norms.     

Emissions from electricity generation in Malaysia

Emissions in the process utilization produce adverse effects on the environment that influence human health, organism growth, climatic changes and so on. The Kyoto protocol, produced by the United Nations Framework Convention on Climate change (UNFCC) in December 1997, prescribed a legally binding greenhouse gas emission target about 5% below their 1990 level. About 160 countries including Malaysia now adopt this protocol. Electricity generation is one of the main contributors to emissions in the country. In order to calculate the potential emissions produced by this activity, the type of fuel use should be identified. Malaysia hopes to gradually change fuel use from 70% gas, 15% coal, 10% hydro, and 5% petroleum in the year 2000 to 40% gas, 30% hydro, 29% coal, and only 1% petroleum by the year 2020. The changes in fuel type have changed the pattern of emission production. This study attempts to predict the pattern of emissions from 2002 to 2020 due to the changes in fuel use. The calculation is based on emissions for unit electricity generated and the percentages of fuel use for electricity generation. The study found that the electricity generation company has produced huge emissions from their power plants in this country.     

Regulatory reforms and productivity: An empirical analysis of the Japanese electricity industry

The Japanese electricity industry has experienced regulatory reforms since the mid-1990s. This article measures productivity in Japan's steam power-generation sector and examines the effect of reforms on the productivity of this industry over the period 1978–2003. We estimate the Luenberger productivity indicator, which is a generalization of the commonly used Malmquist productivity index, using a data envelopment analysis approach. Factors associated with productivity change are investigated through dynamic generalized method of moments (GMM) estimation of panel data. Our empirical analysis shows that the regulatory reforms have contributed to productivity growth in the steam power-generation sector in Japan.     

Incentives of carbon dioxide regulation for investment in low-carbon electricity technologies in Texas

This paper compares the incentives a carbon dioxide emissions price creates for investment in low carbon dioxide-emitting technologies in the electricity sector. We consider the extent to which operational differences across generation technologies – particularly, nuclear, wind and solar photovoltaic – create differences in the incentives for new investment, which is measured by the operating profits of a potential entrant. First, astylized model of an electricity system demonstrates that the composition of the existing generation system may cause electricity prices to increase by different amounts over time when a carbon dioxide price is imposed. Differences in operation across technologies therefore translate to differences in the operating profits of a potential entrant. Then, a detailed simulation model is used to consider a hypothetical carbon dioxide price of $10–$50 per metric ton for the Electric Reliability Council of Texas (ERCOT) market. The simulations show that, for the range of prices considered, the increase in electricity prices is positively correlated with output from a typical wind unit, but the correlation is much weaker for nuclear and photovoltaic. Consequently, a carbon dioxide price creates much stronger investment incentives for wind than for nuclear or photovoltaic technologies in the Texas market.     

Evaluation of negative environmental impacts of electricity generation: Neoclassical and institutional approaches

Neoclassical and institutional economics have developed different theories and methodologies for evaluating environmental and social impacts of electricity generation. The neoclassical approach valuates external costs, and the institutional approach uses social cost valuation and MCDM methods. This paper focuses on three dimensions: theoretical and methodological backgrounds; critical review of specific studies: methodologies, results, and limitations; and discussing their results and implications for environmental policy and further research. The two approaches lead to a common conclusion that fossil fuels and nuclear power show the highest environmental impact. Despite the common conclusion, the conclusion has limited implications for environmental policy because of the weakness of their methodologies.     

Regulatory road maps for the integration of intermittent electricity generation: Methodology development and the case of The Netherlands

The envisaged increase in the share of electricity generation from intermittent renewable energy sources (RES-E) like wind and photovoltaics will pose challenges to the existing electricity system. A successful integration of these sources requires a cost-efficient use of system flexibility. The literature on the options to improve system flexibility, and thus the costs of successfully integrating intermittent electricity generating units, is still growing but what is lacking is an overarching systematic view on when to adopt which option in particular energy systems. This paper aims to bridge this gap in literature. We use existing insights on market and network integration of intermittent electricity sources within a regulatory road map framework. The framework allows policy makers and other electricity system stakeholders to arrive at a consistent strategy in dealing with integration issues over a longer period of time. In this contribution we present and explain the framework and apply it for the case of The Netherlands.