Design and equilibrium analysis of integrated market of ISO-led carbon emissions, green certificates and electricity considering their interplay

Baoning Zheng, Zhejing Bao and Li Yang

Energy Economics, 2023, vol. 126, issue C

Abstract: The integrated market, comprising ISO-led (Independent System Operator) carbon emissions and green certificates, as well as the wholesale electricity market, is designed. In the integrated market, the trading and clearing mechanisms of each market are developed, and the equilibrium model for multiple markets is proposed by considering the clearing rules and trading participants of each market. At the equilibrium, from the perspective of the electricity producer, its objective is to achieve the maximum profit while the other producers' strategies remain fixed. Consequently, according to the Nash equilibrium theory, the equilibrium fitness index for multi-manufacturer and multi-market is proposed, which could reach its maximum value at equilibrium. This index is then used as the optimization objective in the PSO (particle swarm optimization) algorithm to derive the market equilibrium. Numerical studies show the effectiveness of the solution approach, and discover the influences of carbon emission quotas and renewable quotas on the multi-market equilibrium. With the equilibrium, the valuable suggestions could be provided to the regulators of carbon emissions and green certificates markets regarding the allocations of the corresponding quotas.

Keywords: Electricity; Equilibrium; Green certificates; Renewable energy; Integrated market (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:126:y:2023:i:c:s0140988323005200

DOI: 10.1016/j.eneco.2023.107022

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