A Model for Analyzing the Impact of Production Tax Credit on Renewable Electricity Production

摘要

This paper provides an optimization model that captures the impact of policies, such as the production tax credit (PTC), on the production of renewable electricity. The paper is focused on using biomass for co-firing in coal-fired power plants. Co-firing is a strategy that can be used to reduce greenhouse gas emissions at coal plants. Co-firing is a practice that impacts logistics-related costs, capital investments, plant efficiency, and tax credit collected. The nonlinear optimization model we develop captures the relationship that exists between biomass usage and the corresponding costs and savings due to production of renewable energy. We test the performance of the model proposed on a case study developed using data from the State of Mississippi. Some of the lessons learned from our numerical analyses are: (a) Tax credits are necessary in order to increase the production of the renewable electricity, (b) Tax credit should not be "one size fits all"; instead, tax credits should be a function of the amount of renewable electricity produced, (c) Biomass availability in the USA differs by region; to optimize renewable energy production, the tax rate/production amount should be customized by region.