Topic: Carbon PriceSubscribe | Previous | Next
YUE LIU 6/3/2014
1832 Views Hi Taylor,
In the LEAP, we can input costs for CO2 under the Effects screen which can be used to calculate the externality costs of carbon emissions.
My question is that whether LEAP could simulate "carbon price" as a driver which would impact the energy demand and the marginal costs of electricity generation technologies?
Carbon price would have an effect of varying the net marginal cost of generation technology and hence the merit order of dispatch. Can we use LEAP to capture this effect?
Thanks a lot！
Best Wishes,
Yue
Taylor Binnington 6/4/2014
1831 Views Hi Yue,
That's a good question - the short answer is that LEAP is flexible enough to allow the modeler to add a carbon price, but it does not have any such demand reduction capability built into it.
First, a philosophical point - when you add a carbon price as an externality under LEAP's Effects branches, then by definition you are placing it *outside* of the economy. It would appear in your cost-benefit analysis, but once you involve the carbon price in your calculation of energy demand or plant dispatch, it can no longer be thought of as an externality. Therefore the Effects branch is not the appropriate place to add it to your model.
One of your first steps will be to determine the additional price on each fuel, as a result of it's carbon content. A convenient place to do this in LEAP is in the Resources branch of your tree, where you can enter an expression in the Indigenous Cost variable that captures the added price of carbon in the fuel. For example, the additional fuel price (in dollars per unit of energy) due to its carbon content might look something like this:
(CarbonContent / EnergyContent) * (reference to your carbon price variable, in dollars per mass of carbon)
*note that I've used two different fuel properties here, which you can read about here:
http://www.energycommunity.org/WebHelpPro/Expressions/Fuel_Properties.htm
Determining a method for allowing energy demand to respond to the increased price of energy is left up to the modeler - there is no built-in facility in LEAP. You will need to decide how price drives consumption in each of the different sectors (or subsectors) that are being modeled. You may want to use published price elasticities of energy demand, or determine an alternative method, but either way there is plenty of literature to guide you.
Power plants can be dispatched by cost using two different ways. You can either use OSeMOSYS, the built-in algorithm that selects capacity additions and dispatch to minimize total cost (http://www.energycommunity.org/WebHelpPro/Optimization/OptimizationIntroduction.htm), or instead you may also dispatch your plants using LEAP's 'RunningCost' dispatch rule (http://www.energycommunity.org/WebHelpPro/Transformation/Process_Dispatch_Rules.htm). Either of these methods will allow the fuel cost (which you have already modified to include the carbon price) to affect process dispatch.
Note that this approach is data-intensive. You will need to know the costs of all of your power plants, in order to decide how the carbon price will affect their dispatch.
Good luck,
Taylor
YUE LIU 6/6/2014
1796 Views Hi Taylor,
Your instructions are indeed very helpful!It is very nice to know the way of using the Indigenous Cost variable to internalize carbon price.
I have some follow up questions:
1. For electricity generation technologies like coal technology and coal with CCS technology, although both technologies all use fuel coal, when specify additional fuel prices due to carbon price in Indigenous Cost tab, the additional fuel price for coal with CCS should be different from Coal technology which should reflect less CO2 emitted by coal with CCS. Is it correct?
For differentiating these prices, could we assign different Feedstock Fuels for coal technology and coal with CCS technology in order to be able to input different Indigenous Cost to fuels listed under the Resources/Primary branch?
2. By adding the additional fuel price to Indigenous Cost to incorporate carbon price into generation system, does it mean that in the Results/Summaries, the displayed costs of Electric Generation should already include the carbon pollution costs (Externalities)? We should not double count the external costs by inputting the carbon price to the Effect screen?
Thank you so much for your patience with me!
Cheers,
Yue
Taylor Binnington 6/11/2014
1793 Views Hi Yue,
1. Great idea! What you described is exactly what I could suggest - LEAP will allow you to define a new fuel, which you could call "Coal for CCS". Compared to 'regular' coal, it would have a reduced carbon content (as well as content of other pollutants that are may be captured), and therefore a smaller additional carbon price would be assigned to its fuel cost. This special fuel would be consumed only by your CCS plants, while regular coal would be consumed by regular coal plants.
2. I agree - the cost of carbon will already be rolled into the fuel cost, so adding it as an externality would be double-counting.
Good luck!
Taylor
Agnes Kelemen 5/13/2017
We added a carbon price too using the overall methodology proposed by Taylor to the model we used in a training exercise, i.e. we inserted the formula (CarbonContent / EnergyContent) * (reference to your carbon price variable, in dollars per mass of carbon) in the resources branch, so thanks a lot for this advice. I just wanted to add some thoughts on this for others who may need to insert a carbon price:
1) For fuels where the price is expressed in monetary units per mass unit instead of monetary unit per energy unit, e.g. USD per ton of fuel rather than USD per TJ, for example for coal, there is no need to add the EnergyContent function in the formula, so we used CarbonContent * (reference to your carbon price variable, in dollars per mass of carbon)
2) For carbon prices which are expressed in terms of monetary unit per CO2 rather than monetary unit per C (as for example in the EU emissions trading system) there is a need to insert 44/12 into the formula
3) The price of carbon needs to be added to both indigenous and import fuel costs
Finally, I was wondering how else this could be done. If we add a carbon price to the resources branch, and develop a model for an entire country, then that will mean that the carbon price will be added to all sector branches automatically by LEAP. However, in Europe only about 40% of all emissions are covered by the EU Emissions Trading System, as only large installations are under the EU ETS. Sectors such as buildings and transport are not covered, and not all industry or energy transformation is under the EU ETS as some installations are smaller than the minimum threshold. How would you add a carbon price in such a situation which would not require manual entry of fuel costs in each branch?
Taylor Binnington 5/17/2017
Hi Agnes - thanks very much for chiming in.
One thought would be to create and assign new fuels for different categories of consumers. For example, Large Industry could consume "Large Industry Coal", to which you assign an additional carbon price, but "Small Industry Coal" would be priced only using its commodity price.
Taylor