Magnifying uncertainty: the impact of a shift to gas under a carbon price

Liam Wagner, Lynette Molyneaux and John Foster ()

No 11-2012, Energy Economics and Management Group Working Papers from School of Economics, University of Queensland, Australia

Abstract: We seek to evaluate the projection that a carbon price will reduce emissions at least cost by inducing a shift of generation from coal-fired to gas-fired plants. Modelling of Australia’s National Electricity Market in 2035 is undertaken using Australian Energy Market Operator assumptions for fuel costs, capital costs and demand forecasts and an electricity market simulation package which uses deterministic linear programming techniques, and transmission and generating plant data, to optimise the power system and determine the least cost dispatch of generating resources to meet a given demand. We find that wholesale market prices increase substantially due to the increased costs of gas over goal as an input fuel and carbon price but also as a result of infra-marginal rents and strategic behaviour by generators to maintain margin as well as pass through additional costs.

Keywords: Natural Gas; Electricity Markets (search for similar items in EconPapers)
JEL-codes: Q40 (search for similar items in EconPapers)
Date: 2012-12
New Economics Papers: this item is included in nep-ene, nep-env and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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