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The Effects of aCarbon Charge
on Electricity Generation –Comparing Two Models
Presentation to
Motu Climate EconomicsResearch Workshop
21 March 2012
Adolf Stroombergen
Models
Evans: electricity market model• Forward looking expectations
• Uncertain lake inflows
• Storage options
• Two inputs: gas and hydro (proxy fossil fuel and renewables)
ESSAM• Traditional general equilibrium model
• Four electricity inputs: coal, gas, oil and renewables
• Elasticities of substitution between fuels
• No hydro storage
2020 ScenariosScenario
1Scenario
2
Evans et al MED
% change on BAU
Private Consumption -0.6 -0.6
Exports -1.1 -1.1
Imports -0.6 -0.6
GDP -0.6 -0.6
RGNDI -0.5 -0.5
Terms of trade 0.9 0.9
CO2e emissions -4.5 -5.3
Electricity generation
Coal -4.6 -20.4 -46.3
Gas -2.2 -5.1 0.0
Renewable -3.3 0.1 5.0
Total -3.2 -2.7 -0.1
Evans:
For $25/tonne CO2:
• Gas generation: -10.3%
• Hydro generation: 0%
For $50/tonne CO2:
• Gas generation: -18.6%
• Hydro generation: 0%
Evans: Implicit σ(GC)H≈0.40
ESSAM: Need σGC≈0.85 to get Evans’ result: Scenario 2
MED:
• Electricity price up 9.4%, but no change in demand. ESSAM: -3.0%, Evans: -4.1%
• Change in coal generation by assumption.
Coal-Gas Substitution
• Is an elasticity sensible?
• Short run v long run
• Huntly, old and inefficient (dual fuel, fast switching)
• Choice of new thermal: location, resource consent
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