Valuation of water and emissions in energy systems

Luis Fabián Fuentes-Cortés, Yan Ma, Jose María Ponce-Ortega, Gerardo Ruiz-Mercado and Victor M. Zavala

Applied Energy, 2018, vol. 210, issue C, 518-528

Abstract: Price incentives and economic penalties (monetization) are common approaches to control water usage and total direct greenhouse gas emissions (externalities) of industrial systems. We argue that homogenous pricing of externalities provides limited flexibility for mitigating environmental impacts as systems are affected quite differently by externalities. We use trade-off analysis and scalarization techniques to determine marginal prices for water and carbon by taking into account the actual physical and technical limits, stakeholders, and real-time conditions of individual systems. A combined heat and power (CHP) system providing hot water and electricity to a real residential building complex is undertaken as case study to demonstrate and describe these concepts. For this CHP system, we found that carbon prices should be increased by a factor of 14 and water prices by a factor of 217 to achieve an optimal compromise between cost, water use, and emissions. Our results point towards the need to consider alternative pricing schemes such as resource bidding (as is done with electricity) that better capture technology trade-offs and push systems towards their efficiency limits. Therefore, this approach can help stakeholders identifying more effective incentive-based environmental protection instruments.

Keywords: Combined heat and power; Real-time operations; Water and emissions; Trade-offs; Biogas (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (11)

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DOI: 10.1016/j.apenergy.2016.09.030

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