Modelling electric utility's optimal dispatch response to emission tax regime

This paper addresses the policy concerns of a regulatory authority from mitigating emissions from the existing thermal electric utilities over short-run. A utility's optimal dispatch plan under an emission tax regime imposed by the regulator has been modelled as a non-linear formulation. The simple structure of the problem is exploited by applying Lagrangian relaxation to arrive at an implementable solution procedure for the utility. The model is useful for a utility to arrive at an optimal dispatch plan and for the regulator to design a level of emission tax that would induce the utility to select an environmentally desirable dispatch plan. The regulator can also decide on an appropriate increase in power tariff that it can allow the utility to charge from its consumers. The model is illustrated with an example containing data that are characteristic of a typical Indian utility.