Compliance choice analysis for India's thermal power sector in the market-based energy efficiency regime
Nihar R. Sahoo,
Pratap K.J. Mohapatra and
Energy Policy, 2017, vol. 108, issue C, 624-633
India has recently introduced a market-based scheme―Perform, Achieve, and Trade―to realize emission reduction by enhancing energy efficiency. In the case of thermal power plants, investment in energy efficiency projects, using clean coal and buying energy saving certificates are the available compliance options for complying with the scheme. These options are associated with specific forms of cash flows that depend on the uncertain price of energy saving certificates and clean coal premium. This paper uses a Monte Carlo-based decision tree approach to find the optimal compliance options for an efficient and a less efficient thermal power plant. The decision tree evaluates different sequences of compliance options in three consecutive PAT cycles by using the discounted cash flows and their associated probabilities. The study shows that investment in energy efficiency is optimal in the first PAT cycle for the inefficient plant only. The threshold certificate price for the efficient plant is substantially higher than the inefficient plant, implying that the real efficiency improvement is likely to take place in the low-efficiency plants. The study also indicates that the investment in high-efficiency plants is not optimal over a wide range of certificate prices and the incremental cost of clean coal.
Keywords: PAT scheme; Energy efficiency; Decision tree; Investment-decision; Optimal compliance-choice; Indian thermal power plant (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:enepol:v:108:y:2017:i:c:p:624-633
Access Statistics for this article
Energy Policy is currently edited by N. France
More articles in Energy Policy from Elsevier
Series data maintained by Dana Niculescu ().