Greening the Grid: Electricity Market Clearing with Consumer-Based Carbon Cost

TL;DR

This paper introduces a novel electricity market model that internalizes consumer-based carbon costs, enabling consumers to actively participate in decarbonization by assigning costs to their electricity use, influencing market outcomes.

Contribution

It presents a new market clearing framework that incorporates consumer-side carbon costs and emission allocation, enhancing decarbonization efforts in power systems.

Findings

Market outcomes vary with different levels of consumer carbon sensitivity.

Consumer participation in carbon costs influences emission allocation.

The model demonstrates potential for increased decarbonization through consumer engagement.

Abstract

To enhance decarbonization efforts in electric power systems, we propose a novel electricity market clearing model that internalizes the allocation of emissions from generations to loads and allows for consideration of consumer-side carbon costs. Specifically, consumers can not only bid for power but also assign a cost to the carbon emissions incurred by their electricity use. These carbon costs provide consumers, ranging from carbon-agnostic to carbon-sensitive, with a tool to actively manage their roles in carbon emission mitigation. By incorporating carbon allocation and consumer-side carbon costs, the market clearing is influenced not solely by production and demand dynamics but also by the allocation of carbon emission responsibilities. To demonstrate the effect of our proposed model, we conduct a case study comparing market clearing outcomes across various percentages of carbon-sensitive consumers with differing carbon costs.