Coal Phase-Out and Carbon Tax Analysis with Long-Term Planning Models: A Case Study for the Chilean Electric Power System

Patricio Castillo (), Matias Aguad, Álvaro Lorca, Samuel Cordova and Matias Negrete-Pincetic
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Patricio Castillo: Department of Electrical Engineering, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago 7820436, Chile
Matias Aguad: Department of Electrical Engineering, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago 7820436, Chile
Álvaro Lorca: Department of Electrical Engineering, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago 7820436, Chile
Samuel Cordova: Department of Electrical Engineering, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago 7820436, Chile
Matias Negrete-Pincetic: Department of Electrical Engineering, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago 7820436, Chile

Energies, 2024, vol. 17, issue 21, 1-31

Abstract: Large CO 2 emissions constitute a significant problem today due to their effect on climate change, and the need to design appropriate energy policies to mitigate their consequences and reduce emissions requires a detailed analysis of one of the main sources of such emissions: the electricity system. Thus, this paper presents a study on the effects of energy policies on decarbonization by comparing the detailed phase-out of coal-fired power plants across a range of cases with the implementation of a carbon tax to meet Nationally Determined Contributions (NDCs). The case study focuses on the Chilean electricity system, using a long-term generation and transmission expansion planning model (GTEP) that incorporates a wide range of generation technologies. The study examines the long-term effects of these policies, including costs, investments, and CO 2 emissions, as well as their impact on consumer prices reflected in the marginal costs of the system. The transmission system modeling covers various regions of Chile and significant projections for renewable energy sources. It evaluates three economic scenarios based on generation technology costs, fuel prices, and electricity demand under four different closure schemes and fourteen different carbon tax levels. The results indicate that implementing a carbon tax can be more cost-effective for the system than the implementation of a phase-out schedule for coal plants, taking the form of reduced CO 2 emission and overall system costs, with an optimal carbon tax value of 37 USD/tCO 2 . Additionally, the study reveals significant effects on consumer prices, showing that a carbon tax as an energy policy leads to lower prices compared to a phase-out scheme.

Keywords: carbon taxes; CO 2 emissions; expansion planning; renewable energy; energy policy; coal phase-out (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2024
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