Consequences of the UK energy market reform on the development of Carbon Capture, Transport, and Storage

To achieve the three main energy policy priorities of competitiveness, energy security and decarbonization, the UK government has recently undertaken a major “Energy Market Reform” (EMR). This paper presents a modeling framework to analyze how the different policy measures of the EMR will shape the future UK electricity generation mix until 2050. We set up a two-sector model where players can invest in various types of generation technologies including renewables, nuclear, and Carbon Capture, Transport, and Storage (CCTS). For a detailed representation of CCTS we also include industry players (iron/steel as well as cement), CO
₂
transport, and CO
₂
storage including the option for CO
₂
-enhanced oil recovery (CO
₂
-EOR). The players maximize their expected profits based on variable, fix and investment costs, as well as the price of electricity, CO
₂
abatement, and other incentives, subject to technical and environmental constraints. Demand is inelastic and represented via a selection of representative hours. The model framework allows for regional disaggregation and features simplified electricity and CO
₂
pipeline networks. The model uses a mass balance as market clearing for electricity and CO
₂
. The equilibrium solution is subject to constraints on CO
₂
emissions. In this paper we present the model formulation and some preliminary results to illustrate the mechanics of the model. The tentative scenario indicates a diversified technology mix for 2050. The CCTS development is purely triggered by CO
₂
-EOR; the EMR does not incentives any additional CCTS investments.