LCOE Calculation Method Based on Carbon Cost Transmission in an “Electricity-Carbon” Market Environment

Abstract

The current Chinese electricity market and carbon market are built relatively independently, without coupling and synergy, and the incoherence between the two markets is beginning to emerge. Carbon emissions costs in the carbon trading market will affect the marginal cost of renewable energy and thermal power in the electricity market, limiting market participants’ profitability. In order to simulate and evaluate the changes of LCOE of renewable energy and thermal power in the “electricity-carbon” market environment, this paper presents the calculation method of carbon emission cost of thermal power and CCER benefit of renewable energy based on the relevant regulations in China, and calculates the carbon emission cost transmission rate of thermal power based on Cournot model. In addition, we proposed a method for calculating the LCOE based on the international common calculation method for LCOE, combined with China’s taxation policy and the cost and benefit factors of renewable energy and thermal power in the carbon market, and proposed a method for calculating the LCOE applicable to the “electricity-carbon” market environment in China. The findings indicate that as a result of the influence of the carbon market, the levelized cost of energy (LCOE) cost of thermal power will increase, and the profitability of thermal power in the electricity market will be further reduced. On the other hand, the LCOE cost of renewable energy will further decrease, and its profitability will improve due to the additional CCER benefits in the carbon market.