ABSTRACT
The trends of restructuring electricity markets and regulating carbon prices have great effects on the electricity markets. In this paper, we quantitatively analyze how the market power (i.e., the ability to affect the market price of electricity by withholding the generation capacity) of electricity suppliers and a carbon price together affect the restructured electricity markets on generation capacity expansion, consumption, carbon emissions, and an electricity price. To do so, an equilibrium model is constructed by referring to some literature and implemented in a stylized market setting based on Chinese electricity market data in 2016. We investigate thousands of cases of market power and carbon price and show some results as follows. There is a threshold value of the carbon price below which the generation capacity expansion increases rapidly as the carbon price increases. Besides, strong market power promotes the capacity expansion in gas power, only if the carbon price is relatively low. Besides, the carbon price has a much greater impact on the emissions quantity than the market power. Moreover, the weaker the market power is, the less renewable (the more nuclear) power is in the shares of the capacity expansion and the consumption. Such results can provide insights for both policymakers and market participants.The trends of restructuring electricity markets and regulating carbon prices have great effects on the electricity markets. In this paper, we quantitatively analyze how the market power (i.e., the ability to affect the market price of electricity by withholding the generation capacity) of electricity suppliers and a carbon price together affect the restructured electricity markets on generation capacity expansion, consumption, carbon emissions, and an electricity price. To do so, an equilibrium model is constructed by referring to some literature and implemented in a stylized market setting based on Chinese electricity market data in 2016. We investigate thousands of cases of market power and carbon price and show some results as follows. There is a threshold value of the carbon price below which the generation capacity expansion increases rapidly as the carbon price increases. Besides, strong market power promotes the capacity expansion in gas power, only if the carbon price is relatively low. Besides, the carbon price has a much greater impact on the emissions quantity than the market power. Moreover, the weaker the market power is, the less renewable (the more nuclear) power is in the shares of the capacity expansion and the consumption. Such results can provide insights for both policymakers and market participants.
