A Power Market Equilibrium Model with Emissions Trading

Emissions trading mechanisms is set up to reduce the emission of greenhouse gases, as well as to promote the development of renewable power. We present a power market equilibrium model with emissions trading to study the impact of emissions trading on the clearing results of electricity market. The model considers network constraints, load elasticity demand, production and emission\|reducing cost of generation companies. We use conjectured supply function to stimulate the game behaviors of generation companies. This equilibrium model is a two\|level optimization problem, which satisfies the mixed linear complementarity conditions. We use the GAMS\|PATH software to solve this optimization problem, in which the numerical result for a three\|bus system verifies the validity of the model, and shows that the emissions trading helps to increase market competitiveness of those generation companies with lower emission rate. In the end, we give some recommendations on emissions trading in China based on the current status of emissions trading abroad.