Information gap decision theory-based optimization of joint decision making for power producers participating in carbon and electricity markets

Abstract

Carbon markets have been established in many countries and regions with the goal of promoting global carbon neutrality. The position of power producers as the dominant carbon emitters necessitates that they engage in both electricity and carbon markets. However, most studies have considered only short-term electricity markets and unrealistically static carbon markets, and the speculative behavior of power producers in the carbon market remains poorly considered. The present study addresses these issues by proposing an optimized joint decision model based on information gap decision theory to facilitate the participation of power producers in annual and monthly electricity markets, and monthly carbon markets, where uncertainties in the prices of electricity and carbon quotas, and the speculative behavior of power producers in the carbon market are explicitly considered to ensure that the revenues of market participants do not fall below a predetermined minimum acceptable value. The results of simulations based on the rules and actual market data obtained for electricity and carbon markets in a specific province of China demonstrate that the proposed model provides power producers with trading solutions to meet different expected revenue targets, and thereby assists them as much as possible in counteracting the risks to profit associated with fluctuations in electricity and carbon market prices.