Impact assessment of greenhouse gas trading on electricity production industry

Tolis, Athanasios and Rentizelas, Athanasios and Tatsiopoulos, Ilias and Avraam, Kleopatra and Varotsis, Nikolaos and Kapetanakis, Eleftherios (2009) Impact assessment of greenhouse gas trading on electricity production industry. In: Proceedings of the 2nd International Conference on Environmental Management, Engineering, Planning and Economics (CEMEPE) and SECOTOX Conference. CEMEPE/SECOTOX, pp. 1613-1618.

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    Abstract

    Electricity markets constitute an important and rapidly developing research field in the area of energy economics. Deregulation and other organizational advances in international level have boosted electricity markets allowing customers to choose their provider and new producers to compete Public Power Companies. Within the frame of electricity market deregulation, energy related enterprises ought to be one step ahead of competition. Furthermore, emerging electricity generation technologies as well as technologies based on renewable energy sources progressively become attractive investment alternatives. CO2 trading and Kyoto protocol’s targets on the other hand impose new standards on the financial aspects of power generation thus altering the environmental planning of private energy-related industry. The experience gathered till now, is not sufficient to derive safe conclusions regarding the efficiency and applicability of electricity production within the frame of the above mentioned advances. A computational tool is presented that models different investment options based on older and new emerging power production technologies. This model investigates important economic aspects as well. Electricity demand and prices of fuels fluctuate in ranges characterized by numerical uncertainty and this is dealt with appropriate stochastic numerical techniques. The same stands for the emissions trading allowance prices which contribute significantly to both cost and revenues through a highly volatile pattern. Finding the contribution of emissions trading to the expenses and revenues of the electricity sector is the primary objective of the model. Additionally, a comparison between the different electricity production technologies in terms of financial efficiency is presented. The different investment options analyzed, lead to interesting conclusions which might affect State policy interventions as well as potential private investment strategies.