Influence of possible net transfer capacity expansion on Belgian-French and Belgian-German borders on electricity generation and related greenhouse gas emissions

This paper discusses the influences of possible net transfer capacity (NTC) expansion at the Belgian-French and Belgian-German borders on electricity generation and related greenhouse gas (GHG) emissions in a European liberalized market. The impact of NTC expansions is simulated with the model E-Simulate. This model simulates the power generation in and the electricity trade between eight different zones: the Netherlands, Belgium, France, Germany, Spain, Portugal, Switzerland and Italy. The impact of several expansions in NTC on the Belgian-French and/or Belgian-German borders is investigated. When NTC expansions are modeled for the case where there is no cost linked to GHG emissions, we observe that, in general, if extra NTC becomes available (on the Belgian-French and/or Belgian-German borders), German electricity generation increases in favor of Dutch and Belgian electricity generation. The shifts in electricity generation are due to the great share of coal and lignite fired power stations in Germany and the large share of gas fired power stations in the Netherlands and Belgium. With no cost linked to GHG emissions, coal and lignite fired electricity generation is cheaper than gas fired generation. Changes in GHG emissions per country follow the shifts in electricity generation. In the second case, an environmental tax of 20 E/ton(CO2-eq) is established. This GHG tax is sufficient to make gas fired electricity generation now more favorable than coal fired electricity generation. Shifts in generation between countries due to NTC expansion occur now in a different direction but are less distinct. (c) 2006 Elsevier Ltd. All rights reserved.