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Valuation of Water and Emissions in Energy Systems
Citation:
Fuentes-Cortes, L., Y. Ma, J. Ponce-Ortega, G. Ruiz-Mercado, AND V. Zavala. Valuation of Water and Emissions in Energy Systems. Applied Energy. Elsevier B.V., Amsterdam, Netherlands, 210:518-528, (2018).
Impact/Purpose:
This is another novel application and demonstration of the multi-criteria decision-making framework (CVaR) to analyze the current water and emission valuation and trade-offs in energy production systems. The aim contribution is to evaluate compromise solutions, balance conflicting priorities of multiple stakeholders (e.g., communities, government, private sector, etc.) on multiple objectives (e.g., water-electricity-heating systems, emissions, fuels, technologies, etc.), and identify marginal prices for resources that capture system performance limitations as needed for SHC Decision Science and Support Tools project. In addition, this approach can provide better guidance for incentive-based environmental protection instruments (i.e., policy-making, resource pricing), and identify system designs that minimize resource marginal prices.
Description:
Price incentives and economic penalties (monetization) are common approaches to control water usage and total direct greenhouse gas emissions (externalities) of industrial systems. We argue that homogenous pricing of externalities provides limited flexibility for mitigating environmental impacts as systems are affected quite differently by externalities. We use trade-off analysis and scalarization techniques to determine marginal prices for water and carbon by taking into account the actual physical and technical limits, stakeholders, and real-time conditions of individual systems. A combined heat and power (CHP) system providing hot water and electricity to a real residential building complex is undertaken as case study to demonstrate and describe these concepts. For this CHP system, we found that carbon prices should be increased by a factor of 14 and water prices by a factor of 217 to achieve an optimal compromise between cost, water use, and emissions. Our results point towards the need to consider alternative pricing schemes such as resource bidding (as is done with electricity) that better capture technology trade-offs and push systems towards their efficiency limits. Therefore, this approach can help stakeholders identifying more effective incentive-based environmental protection instruments.
