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The cofiring problem of a power plant under policy regulations

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  • Kangas, Hanna-Liisa
  • Lintunen, Jussi
  • Uusivuori, Jussi

Abstract

Cofiring of fossil and renewable fuels can contribute to reaching tightening climate and renewable energy goals. The increase in biomass share in cofiring decreases the use of fossil fuel and increases renewable energy production. We study how energy and climate policies promote that increase. First, we present and solve an electricity producer's profit-maximization problem with detailed technical description of cofiring. We then study the effectiveness of policy instruments (e.g. feed-in laws and emission trading) on biomass utilization in cofiring. The study offers a novel approach to explore the cofiring problem, because of the endogenous fuel choice combined with the policy analysis. We study two different power plants that are located in two different European electricity market areas. Our analysis shows that both feed-in tariff and feed-in premium can have unexpected weaknesses, when they are introduced together with emission trading. Therefore decision-makers should be well informed and cautious when introducing these policies.

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  • Kangas, Hanna-Liisa & Lintunen, Jussi & Uusivuori, Jussi, 2009. "The cofiring problem of a power plant under policy regulations," Energy Policy, Elsevier, vol. 37(5), pages 1898-1904, May.
    • Handle: RePEc:eee:enepol:v:37:y:2009:i:5:p:1898-1904
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    Cited by:

    1. Pohjola, Johanna & Laturi, Jani & Lintunen, Jussi & Uusivuori, Jussi, 2018. "Immediate and long-run impacts of a forest carbon policy—A market-level assessment with heterogeneous forest owners," Journal of Forest Economics, Elsevier, vol. 32(C), pages 94-105.
    2. Caurla, Sylvain & Bertrand, Vincent & Delacote, Philippe & Le Cadre, Elodie, 2018. "Heat or power: How to increase the use of energy wood at the lowest cost?," Energy Economics, Elsevier, vol. 75(C), pages 85-103.
    3. Kangas, Hanna-Liisa & Lintunen, Jussi & Pohjola, Johanna & Hetemäki, Lauri & Uusivuori, Jussi, 2011. "Investments into forest biorefineries under different price and policy structures," Energy Economics, Elsevier, vol. 33(6), pages 1165-1176.
    4. P. Mathiou & Stelios Rozakis & Rafal Pudelko & A. Faber & A. Petsakos, 2014. "Utility maximising supply response: the case of perennial biomass plantations in Poland," Working Papers 2014-3, Agricultural University of Athens, Department Of Agricultural Economics.
    5. Mikael Linden, Matti Makela, and Jussi Uusivuori, 2013. "Fuel Input Substitution under Tradable Carbon Permits System: Evidence from Finnish Energy Plants 2005-2008," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    6. Mäkelä, Matti & Lintunen, Jussi & Kangas, Hanna-Liisa & Uusivuori, Jussi, 2011. "Pellet promotion in the Finnish sawmilling industry: The cost-effectiveness of different policy instruments," Journal of Forest Economics, Elsevier, vol. 17(2), pages 185-196, April.
    7. Pannicke, Nadine & Gawe, Erik & Hagemann, Nina & Purkus, Alexandra & Strunz, Sebastian, 2015. "The Political Economy of Fostering a Wood-based Bioeconomy in Germany," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 64(04), December.
    8. Lintunen, Jussi & Kangas, Hanna-Liisa, 2010. "The case of co-firing: The market level effects of subsidizing biomass co-combustion," Energy Economics, Elsevier, vol. 32(3), pages 694-701, May.

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