Carbon emissions cost pass-through effect in the reserve ancillary services market

Yiqi Wang, Huiyu Lu, Yang Yang, Junping Ji, Daojing He and Qisheng Huang

Renewable Energy, 2025, vol. 243, issue C

Abstract: Reserve ancillary services play a crucial role in maintaining the stability and flexibility of the power system. In this study, a multi-agent model was constructed using the experience-weighted attraction (EWA) algorithm to simulate the bidding behaviors of coal-fired, green, and energy storage reserve units. Under this microperspective-driven framework, the pass-through effects of carbon costs in the reserve ancillary services market under various parameters related to market structure and bidding behavior were investigated. The findings revealed that the pass-through effects of carbon costs on reserve ancillary service prices are complex games with a process of volatility convergence, with convergence occurring between 10th and 11th terms. Owing to the accumulative chain reaction in updating ask prices, the carbon cost pass-through rates are higher than the bidding multipliers, which increases the additional financial gains for the reserve units. This study identifies multiple variables that influence carbon cost pass-through rates and proposes formulas to account for the shifts in pass-through rates as the values of certain key variables vary. Fierce competition on the supply side of reserve ancillary services can increase the carbon cost pass-through rates. Moreover, sensitivity analysis results supported the robustness of our simulation results and enriched the conclusions.

Keywords: Multi-agent simulation; Experience-weighted attraction; Carbon cost pass-through; Reserve ancillary services (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:243:y:2025:i:c:s0960148125002629

DOI: 10.1016/j.renene.2025.122600

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