Research On The Low-carbon Transition Of Electricity Mix Under The Background Of Carbon Market

In order to fulfill the promise of carbon reduction in the Paris climate conference,an in-depth low-carbon transition is urgently required for domestic electricity mix dominated by traditional coal power with significant features of high carbon intensity.For the existing generation units,the upgrade to the decarburization technology as well as the elimination of the backward capacity are the main choice to achieve the goal of low-carbon transition.Additionally,the diffusion of low-carbon generation technology,such as CCS and renewable power,is also important in this process.The micro-level performance of the electricity mix transition is the changes of installation choices,which can be reflected in the evolution of installation structure,and transferred to the transition indicators of generation structure and carbon intensity through power market clearing process.To achieve the goal of carbon reduction,the government of China has completely operated the carbon trading market from the end of 2017.As the biggest carbon emitter,the power sector was involved into the first round of trading list.Due to the lack of trading rules and operating experiences,the effects of China’s carbon trading market to the low-carbon electricity mix transition is not significant,and the acting mechanism is not clear as well.On these bases,there is empirical significance of attributing to the low-carbon transition of electricity mix to study the mechanism and evolution pathways of from the perspective of micro power enterprises.Following the idea of “opening the carbon trading market-changes of installation choices-low-carbon transition of electricity mix”,this study put forward the decision mechanism of power enterprises using the real option method based on the comparison of enterprises values of the potential decisions.A decision model was established including the decisions of choosing the types of new installation capacity,upgrading the existing generation units and existing the market in advance.Based on this decision model,this study reveal the influences and acting mechanisms of the factors including carbon price,free quota rate,life time to the low-carbon installation decision,which contribute to regulate the targeted transition policies.Based on the complex adaptive system theory,a simulation model was established to connect the micro-level installation decision and electricity mix which taking the installation capacity and generation capacity of the enterprises as well as the rules of power market clearing into consideration.The interaction mechanisms among the operation of power market,generation structure,carbon emissions of electricity system are simulated based on this model.According to the simulation results,the dynamic mechanism and evolution pathways of the low-carbon electricity mix transition are revealed.Based on the research contents,the main conclusions are as followed.(1)The rational investors will not make decisions of installing CCS equipment on the existing installation capacity of fossil fuels power in the short term.Apart from the undeveloped carbon trading market,the technological limitation of CCS on cost of investment and generation efficiency are also significant resulting in this situation.Compared with the cost of investment,the extra resource costs by CCS has more significant negative influence on making the upgrade decision.Under the background of the current technological conditions,a high-level subsidy is required for the lowcarbon generation technologies to achieve the dominant position than the tradition fossil fuels generation units in the installation decision.This conclusion still holds in a high-level carbon price of 300 yuan/t.The carbon cost is the main reason of the decision of early retirement for the installation capacity with backward generation technologies.With the increase of estimated carbon cost,all types of coal power units have the possibility to make the early retirement decision.Additionally,the influence of retirement subsidy on this decision is not significant.(2)Transition mechanism,evolution pathways and scenario analysis of lowcarbon transition of electricity mix based on installation decisions of power enterprises.When the subsidy to low-carbon generation technology is missing,the major transition pathway is the structural upgrade of fossil fuels generation capacity under the background of carbon market,which is shown as the increasing ratio of high-efficiency coal power technology such as supercritical unit.Due to the absence of CCS,the influence of this pathway to low-carbon electricity mix transition is not significant.When the powerful subsidy policy is adopted under the same conditions of carbon market,a new transition pathway of using CCS is arising.Additionally,more renewable power is installed in this scenario,which lead to better transition effects.On these bases,a new scenario of high carbon policy was introduced.It is shown that the positive effects of a mature carbon market to low-carbon electricity transition is the most significant,which can be reflected on the influences of increasing the installation capacity of lowcarbon generation technology,accelerating the transition process and attributing to the stable transition.In this scenario,the installation capacity of fossil fuels units without CCS will be eliminated by 2045.At the same time,the peak of carbon emissions in the power system can be achieved over 10 years earlier in the SCS scenario than that in other two scenarios.It is also found that there are double influences of the development of carbon market to the clearing price of power market.The higher carbon price and lower free quota of carbon emission lead to the positive effect,and the low-carbon transformation of clearing point results in the negative effect,which is reflects as the “S” shape of power price trend in the SCS scenario.(3)Some policy implications are proposed based on the conclusions of installation decision of power enterprises and evolution pathways and mechanisms of low-carbon electricity transition: improving the expectation of carbon price to realize the positive effects of carbon market to the low-carbon transition of the electricity mix;flexibly utilizing the free quota rate to manage the transition process based on the effects of keeping the carbon price stable;deepening the marketization process of the power system to promote the positive effect of low-carbon installation decisions by increasing enterprise values;making assembled subsidy plan to contribute to the diffusion of lowcarbon generation technologies in the electricity mix;increasing R&D investment to increase the enterprise values of low-carbon generation units by technological progress.The paper contains 82 Figures,23 Tables and 247 references.