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 CO
₂
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 CO
₂
emissions.