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Power trade, welfare, and air quality

Talat Genc () and Abdurrahman Aydemir ()

Energy Economics, 2017, vol. 67, issue C, 423-438

Abstract: We use detailed microdata from all generators in the Ontario wholesale electricity market to investigate cross-border electricity trade and its impact on air emissions and welfare (consumer and producer surpluses) in Ontario. Using the technical characteristics of the generators and financial data we run a competition model every hour. We examine how trade expansion across different parts of the interconnected power grid affects the efficiency in the Ontario market. We show that there is a significant welfare gain from power trade. The air emissions savings are also considerable. For instance, when hourly imports double from current levels CO2 emissions decrease around 13%, and market prices reduce 5.4%. In autarky, CO2, SO2, NOx emissions increase 12%, 22%, 16%, resp., the prices go up 5.8%, and the price volatility rises 12%. However, the impact of negative wholesale prices on market outcomes is small.

Keywords: Electricity trade; Interconnected markets; Imperfect competition; Air emissions; Welfare; Microdata (search for similar items in EconPapers)
JEL-codes: F18 L13 L94 (search for similar items in EconPapers)
Date: 2017
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Working Paper: Power Trade, Welfare, and Air Quality (2014) Downloads
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DOI: 10.1016/j.eneco.2017.08.014

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