The Effect of Changing Marginal-Cost to Physical-Order Dispatch in the Power Sector
Open accessAbstract
The analysis of local environmental policies is essential when evaluating the consistency of national public policies vis-à-vis the compliance of global agreements to reduce climate change. This study explores one of these policies; the 2021 Mexican reform to change electric power dispatch from a marginal-cost-based to a command and control physical system prioritizing power generation from the state power company. The new law forces the dispatch of the state company power facilities before private power producers. We use the GENeSYS-MOD techno-economic model to determine the reform’s effect on the power system’s generation mix, cost structure, and anthropogenic emissions. For this, we optimize the model under three distinct scenarios; a business-as-usual scenario with no changes to the merit order, a model with the new physical order dispatch, and an additional case where in addition to the shift to the physical dispatch, we reduce the price of fuel oil below natural gas prices to simulate the current behavior of the power company. It is relevant to note that we optimize the energy system without any assumption regarding renewable targets or climate goals because of political uncertainty and the need of pinpoint the effect of the merit order change while avoiding possible variations in the state-space arising from other constraints. Our results show that by 2050, the new dispatch rule increases the market power of the state company to 99% of total generation and decreases the share of renewable technologies in the generation mix from 72% to 51%. Additionally, cumulative power sector emissions increase by 563 Megatons of CO2, which with the current cost of carbon in the European Emissions Trading System translates to around 36 billion Euros
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Protective energy policies in Mexico's current administration have led to emissions intensity backsliding.
“This can be tenuous in situations such as Mexico, where protective energy policies in the current administration have led to emissions intensity backsliding [92].”
From A National and Regional Greenhouse Gas Breakeven Assessment of EVs across North America (2023) · cites this paper as [92]
The Introduction (p. 7) and Energy Sector results (p. 22) project higher emissions under the proposed dispatch policies than under business as usual. But the Introduction says the reform was suspended; the paper models a possible policy change rather than showing that policies already led to emissions-intensity backsliding. The reported comparisons concern total emissions, not emissions intensity. (LLM, conf=0.87)
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A National and Regional Greenhouse Gas Breakeven Assessment of EVs across North America
Rasbash, D., Dillman, K. J., Heinonen, J., & Ásgeirsson, E. I. (2023) · Sustainability · doi:10.3390/su15032181 · Cited by 17 · see citing works
- Authors
- Gutiérrez-Meave, R., Rosellon, J., & Sarmiento, L.
- Affiliations
- German Institute for Economic Research (DE)
- Corresponding author
- Sarmiento, Luis
- ORCID
- Sarmiento, Luis
- Venue
- SSRN Electronic Journal
- Publisher
- Elsevier BV
- Published
- 2021
- ISSN
- 1556-5068 (ISSN-L)
- OpenAlex
- W3186608324
- Cited by
- 6
- References
- 0
- Citations by year
- 2026: 1 · 2025: 1 · 2023: 1 · 2022: 2 · 2021: 1
- Type
- posted content
- Language
- en
- Open access
- green
- doi.org
- Locations
- SSRN Electronic Journal (acceptedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- Topics
- Physical Sciences › Engineering › Electrical and Electronic Engineering › Electric Power System Optimization
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Renewable energy and sustainable power systems
- Physical Sciences › Engineering › Electrical and Electronic Engineering › Integrated Energy Systems Optimization
- Keywords
- merit order dispatch, electricity market reform, market power, electricity mix, CO2 emissions, renewable energy share, fuel oil prices, energy system optimization, GENeSYS-MOD, Mexican electricity sector, climate policy, emissions trading system
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