SDDP Modelling of Carbon Dioxide Emissions from Electricity Generation
Consultant report prepared by Tom Halliburton for the Ministry for the Environment

The report entitled “SDDP Modelling of Carbon Dioxide Emissions from Electricity Generation” by Dr Tom Halliburton of Energy Modeling Consultants Ltd was commissioned by the Ministry for the Environment for the SEIP TAG Electricity Issues Sub-group. The analysis involved modelling future electricity system performance in New Zealand assuming a range of CO₂ prices. In addition to modelling electricity sector emissions, the effects on short run marginal cost (SRMC) and the extent to which emissions costs pass through into SRMC were also examined.

The SDDP (Stochastic Dual Dynamic Programme) stochastic optimal dispatch model was chosen for the analysis using an optimal plant commissioning programme supplied by the Ministry of Economic Development (MED) using the Electricity Commission’s Generation Expansion Model (GEM). Dr Halliburton noted that a SRMC-based analysis such as using SDDP had consistency in results advantages over long run marginal cost (LRMC) approaches for particular technologies. He also noted situations where market outcomes might differ from least cost dispatch models like SDDP.