Accelerating the Energy Transition through Power Purchase Agreement Design: A Philippines Off-Grid Case Study

As renewable energy (RE) costs decrease, private non-subsidized revenue sources, such as power purchase agreements (PPA), will increase in off-grid areas. This paper’s objective is to improve policymakers’ and utilities’ understanding of PPA’s role in mitigating private investors’ risks in off-grid areas to accelerate the energy transition. The paper built a PPA dataset for the largest off-grid area in the Philippines and developed novel and efficient techniques to evaluate the risk mitigation ability of a PPA. While oil-based technologies are expensive, they are low-capital-intensive, and the fuel, the bulk of the cost, is passed through to consumers and primarily funded by subsidies. In contrast, the most affordable energy source, RE, requires higher upfront capital investments, financed primarily with equity. Investors chose low-capital-intensive technologies (oil), rehabilitated power plants, and utilized old equipment, all investment decisions to mitigate residual PPA risks, i.e., distribution utilities’ low creditworthiness and capital recovery uncertainty. Presenting the investment as a PPA residual mitigation tool is one of the paper’s contributions to the literature. The distribution utility needs to reduce investors’ uncertainty by covering reasonable investors’ costs. Policymakers need to level the playing field between fossil fuels and RE by reducing subsidies and strengthening distribution utility creditworthiness

Portfolio-based decision-support tool for generation investment and planning in uncertain and low-carbon future electricity industries

Growing concerns over high and volatile fossil-fuel prices, energy security and climate change present significant sustainability challenges for electricity industries around the world. They have particular implications for generation investment and planning as decisions to build power plants represent major commitments with regard to future electricity industry costs, fuel dependencies, energy security outcomes, and greenhouse emissions. Increasing uncertainty about future fuel prices, plant construction costs, climate change policies and electricity demand adds to the challenges. In consequence, generation investment decision-making is transitioning from traditional cost minimisation approaches towards more complex assessments incorporating future uncertainties and a range of industry objectives.This thesis presents a novel generation investment and planning decision-support tool for assessing possible future generation portfolios within an electricity industry under uncertainty and multiple policy objectives. The tool extends conventional optimal generation mix concepts by using Monte Carlo simulation and portfolio analysis techniques to determine probability distributions of future expected generation costs and greenhouse emissions for a wide range of generation portfolios. The tool can incorporate complex and correlated probability distributions for future fossil-fuel prices, carbon prices, plant investment costs, and electricity demand including price elasticity impacts. It supports sophisticated risk assessments, including downside economic risks, for any generation portfolio. A post-processing analysis is also implemented to assess the potential operational dispatch constraints and costs associated with different portfolios in meeting time-varying demand.Applications of this tool are demonstrated through case studies of electricity industries with different generation options facing a range of future uncertainties. The results provide high-level insights into issues that will likely be key drivers of future industry performance such as the impact of different sources of uncertainty, the role of future demand changes in response to electricity prices, and the interaction between wind penetration and carbon pricing on the expected costs, cost risks, and emissions of different portfolios. The implications of nuclear power and the value of different technologies within generation portfolios are also explored. These results highlight the potential value of the tool in facilitating utility and policy decision-making in the challenging task of generation investment and planning for increasingly uncertain future electricity industries

Evaluation of potential co-benefits of air pollution control and climate mitigation policies for China's electricity sector

Since the rapid industrialisation, local air pollution has become one of China's most important environmental issues. In consequence, increasingly stringent air pollution control policies have been established by the Chinese government. These policies will inevitably affect China's future electric power investment given the key contribution of this sector to air pollution. This sector is also a key contributor to China’s greenhouse gas emissions and hence climate policy efforts. We present a study exploring what impacts of potential interactions and combinations of different policy efforts for local air pollutant control and carbon mitigation have on China's future electricity generation mix. The study utilises a novel generation portfolio model that explicitly incorporates key uncertainties in future technology costs and different policy approaches including carbon pricing and air emissions control. The findings highlight that China can achieve significant reductions for both greenhouse gas and local air pollutant emissions through a combination of climate change and air pollution control policies. Furthermore, there are potentially significant co-benefits from the perspectives of both air pollutant control and carbon mitigation and, notably, that the co-benefit from a sufficient carbon pricing policy to air pollution emission reductions is much stronger than that from stringent air pollutant control policies to carbon mitigation. Specifically, in order to achieve substantial local air pollution and greenhouse gas mitigation from China's electricity sector, it is necessary to close coal-fired power plants rather than merely seeking to clean their air pollution emissions up