Volume 1: Energy Innovations: Accelerated Deployment, New Concepts, and Emerging Technologies

Adaptive Recalibration Strategies for Refunded Emissions Payment Schemes Aleksis Xenophon, David Hill,

Abstract

Emissions abatement policies can play a critical role in decarbonising modern power systems, with a scheme’s success often contingent on its initial parameterisation, along with the mechanism by which it is recalibrated – ad hoc adjustments can introduce significant investment risk, potentially stifling the uptake of new technologies. Transparent, practical, and rule-based frameworks are required to clearly exposit operating costs, giving investors greater confidence to pursue the rollout of low-emissions technologies. A Refunded Emissions Payments scheme is one such framework; however, under this mechanism net liabilities faced by individual generators are only known after energy has been delivered. This work considers an alternative formulation of a Refunded Emissions Payment scheme whereby generators have greater certainty with respect to their net liabilities, accomplished by relaxing the requirement of revenue neutrality. Adaptive parameter updating mechanisms are developed to manage fluctuating scheme revenues, with their performance evaluated using an agent-based framework. These mechanisms provide a more nuanced approach to redistributing collected emissions payments, and can assist in accelerating the transition towards lowcarbon power systems.

Keywords emissions abatement, refunded emissions payments, output-based allocation, adaptive updating