Combined Impact of Demand Response Aggregators and Carbon Taxation on Emissions Reduction in Electric Power Systems

An emission rate-based carbon tax is applied to fossil-fueled generators with a demand response approach called Smart Grid resource allocation (SGRA). The former reduces the capacity factors (CFs) of base load serving fossil-fueled units, while the latter reduces the CFs of peak load serving units. The objective is to quantify the integration of the carbon tax and the SGRA approach on CO2 emissions and electricity prices in a multi-area power grid. We illustrate this using the Roy Billinton test system and the results show potential for significant reductions in fossil fuel-based generation and CO2 emissions.