Combining Lagrangian Relaxation and Rolling Planning in a Large-Scale Electricity Market Model – Analysis of the Impacts of the EU 2030 Targets on the Electricity Sector

CO2 cap and trade systems are considered to be first best instruments to reach CO2 reduction targets. In electricity system models they correspond to intertemporal and integral constraints which have so far not been incorporated in models with rolling planning. In the paper at hand, this is addressed by enhancing such a model by means of Lagrangian relaxation. This model is applied for a detailed investigation of the EU ETS in the year 2030. Particular emphasis is laid on the impact on market outcomes with respect to uncertain parameters like electricity demand or RES deployment. The results show that the system reacts most sensitively to a change in demand due to the direct effect on the scarcity of CO2 certificates. Another finding is that the waterbed effect leads to lower effectiveness of national measures and may even induce an opposite effect. The analyses enable an improved assessment of the effects of uncertainties on the CO2 price and of the impacts on countries with different generation mixes