Design of Time-Varying Rate Considering CO$_2$ Emission

Under fixed retail rates, electricity demands have no incentive to change their usage pattern. In contrast, under time-varying rates, suppliers can reflect the actual supply cost during the peak hours in retail prices enabling end-users to respond to the prices and reduce their loads or shift their loads from the high-price hours to the low-price hours. Load shifting may increase the reliability of the system, but may increase CO
₂
emission if coal-fired generators are the marginal generator used during the low- price hours. CO
₂
emission taxation is one of ISO's options to deal with the CO
₂
emission problem. In this paper, a new time-varying rate design method considering the CO
₂
emission taxation is suggested. In addition, market power problem and non-shifting elastic loads are considered. The suggested method is applied to a test market with critical peak pricing (CPP) and real-time pricing (RTP) and the results are analyzed. Also the suggested method is applied to the Korean power system and the results are analyzed.