Equilibrium Methods for Analysis of Environmental Policy in the Power Sector

When: May 28, 2019 | 9 am to 3:15 pm
Where: HEC Montréal, EY Room (1st Floor, Blue Section)
Application close: 1 April 2019
Price: CDN$30 (includes lunch and coffee breaks)

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The seminar will cover game-theoretic approaches to analyzing policies for environmental regulation in the power sector. From the EU ETS to RGGI and WCI in the U.S., power sectors worldwide face measures for mitigating greenhouse gas (GHG) emissions. Given the complex interactions between market participants in these deregulated industries, a systemic approach to assessing the effectiveness of proposed policies is desirable. For example, the physical constraints of power plants and the transmission system should be taken into account along with the treatment of market power in both primary (electricity) and secondary (permits) markets. Toward this end, we will provide an introduction to environmental policy measures and power markets before developing a suite of models tackling both medium-term operations and long-term investments in order to illustrate the consequences of selected policies under specific market conditions. Illustrative examples using GAMS or AMPL will be provided and discussed.


9:00 am | Session 1 : Overview of environmental policy and features of power/permits markets

  • Overview of environmental externalities in the power sector
  • Environmental policies in the power sector
  • Features of power sectors

9:45 am | Coffee break

10:00 am | Session 2 : Operational analysis of carbon policy in power markets with non-dominant firms

  • Analysis of environmental policies, e.g., carbon tax, cap-and-trade system, and renewable portfolio standards, in an equilibrium framework
  • Equilibrium problem resolution as a mixed complementarity problem (MCP)
  • Illustrative examples using representative test networks

11:15 am | Lunch break

12:30 pm | Session 3: Analysis of power system operations with a dominant firm and an oligopolistic industry

  • Analysis of environmental policies in a Nash-Cournot and a Stackelberg leader-follower framework
  • Resolutions of bi-level modeling approach via mathematical programming with equilibrium constraints (MPEC) and mixed-integer quadratic programming (MIQP)
  • Assessment of environmental policies and market power via representative test networks

1:45 pm | Coffee break

2 pm | Session 4: Sustainable transmission expansion in power markets

  • Investment analysis for transmission lines to integrate renewable energy technologies
  • Comparison of decentralized approach with central planning
  • Illustration of environmental policies to align private and social incentives

3:15 pm | End of seminar

For more information, please contact Afzal Siddiqui »


Yihsu Chen is an Associate Professor in Technology Management in Sustainability in the Department of Electrical and Computer Engineering, Baskin School of Engineering at the University of California Santa Cruz, USA.

Makoto Tanaka is a Professor at the National Graduate Institute for Policy Studies (GRIPS) in Japan, which is an interdisciplinary institute of economics, operations research, and other fields.

Afzal S. Siddiqui is Professor of Energy Economics in the Department of Statistical Science at University College London and a Professor in the Department of Computer and Systems Sciences at Stockholm University

Suggested pre-readings

Conejo, A.J., L. Baringo, S.J. Kazempour, and A.S. Siddiqui (2016), Investment in Electricity Generation and Transmission: Decision Making under Uncertainty, Springer International

Limpaitoon, T., Y. Chen, and S.S. Oren (2011), “The Impact of Carbon Cap and Trade Regulation on Congested Electricity Market Equilibrium,” Journal of Regulatory Economics 40(3): 237-260

Maurovich-Horvat, L., T.K. Boomsma, and A.S. Siddiqui (2015), “Transmission and Wind Investment in a Deregulated Electricity Industry,” IEEE Transactions on Power Systems 30(3): 1633-1643

Tanaka, M. and Y. Chen (2012) “Market Power in Emissions Trading: Strategically Manipulating Permit Price through Fringe Firms,” Applied Energy 96: 203-211