Impacts of Low-Carbon Fuel Standards in Transportation on the Electricity Market

Abstract

Electric Vehicles (EVs) are increasing the interdependence of transportation policies and the electricity market dimension. In this paper, an Electricity Market Model with Electric Vehicles (EMMEV) was developed, exploiting an agent-based model that analyzes how carbon reduction policy in transportation may increase the number of Electric Vehicles and how that would influence electricity price. Agents are Energy Service Providers (ESCOs) which can distribute fuels and their objective is to maximize their profit. In this paper, the EMMEV is used to analyze the impacts of the Low-Carbon Fuel Standard (LCFS), a performance-based policy instrument, on electricity prices and EV sales volume. The agents in EMMEV are regulated parties in LCFS should meet a certain Carbon Intensity (CI) target for their distributed fuel. In case they cannot meet the target, they should buy credits to compensate for their shortfall and if they exceed it, they can sell their excess. The results, considering the assumptions and limitations of the model, show that the banking strategy of the agents contributing in the LCFS might have negative impact on penetration of EVs, unless there is a regular Credit Clearance to trade credits. It is also shown that the electricity price, as a result of implementing the LCFS and increasing number of EVs, has increased between 2% and 3% depending on banking strategy.