Roman Mendelevitch, Pao-Yu Oei
To achieve the three main energy policy priorities of competitiveness, energy security and decarbonization, the UK government has recently undertaken a major “Energy Market Reform” (EMR). This paper presents a modeling framework to analyze how the different policy measures of the EMR will shape the future UK generation mix until 2050. We set up a two sector model where players can invest into various types of generation technologies including renewables, nuclear and Carbon Capture, Transport, and Storage (CCTS). For a detailed representation of CCTS we also include industry players (iron and steel as well as cement), and CO2 transport and CO2 storage including the option for CO2 enhanced oil recovery (CO2-EOR). The players maximize their expected profits based on variable, fix and investment costs as well as the price of electricity, CO2 abatement cost and other incentives, subject to technical and environmental constraints. Demand is inelastic and represented via a selection of type hours. The model framework allows for regional disaggregation and features simplified electricity and CO2 pipeline networks. The model is balanced via a market clearing for the electricity as well as CO2 market. The equilibrium solution is subject to constraints on CO2 emissions and RES-E generation. In this paper we present the model formulation and some preliminary results to illustrate the mechanics of the model.