Several least-cost planning studies have suggested a significant shift away from coal toward gas, renewables and potentially nuclear in the long term. Using a Cournot gaming model to analyze the ramifications that market power in Australia’s concentrated market may hold for a transition to a low carbon electricity sector suggests that the substantial influence on price outcomes of some players will need to be fixed before we can have faith in the least-cost carbon abatement strategy.
Report extract
Long-term carbon abatement from the electricity sector typically involves transition over time from a fossil fuel-dominated generation mix (more often coal) to a low-carbon mix. Least-cost planning of electricity (Stoll, 1989) that gained prominence in the 1980s and 1980s had taken a backseat during electricity market development of the 1990s.
However, a resurgence of carbon abatement in the past 10–15 years in some countries including Australia has seen a renewed interest in least-cost carbon abatement strategy. Such a strategy essentially performs the same capacity expansion and dispatch optimization as was done in the era of centralized utility planning to minimize total system costs, except there is a more explicit recognition of, and often the central focus on, carbon constraints, or a carbon cost/tax/impost.