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The Australian electricity sector is expected to undergo major changes to reduce the current sectoral CO2 emission of 190 million tons to 96 million tons by 2050. This paper summarizes two major modeling studies that have been undertaken since 2006 to understand the full set of investment, price and financial impact on existing generators, especially coal-based generators. We have used a long-term capacity and dispatch optimization model to comprehensively analyze both least-cost and market-led expansion of the system to accommodate alternative emission reduction targets from a shallow cut to a deep cut. The modeling results demonstrate the cost of meeting the target can be over $30 billion in NPV terms. A mix of clean coal technologies, gas and nuclear technologies is expected to displace the existing stock of conventional coal which varies significantly depending on the emission reduction target. The analysis also show that mandatory renewable targets or technology standards are inefficient policies in comparison to a market-based policy such as the proposed emissions trading scheme. [ABSTRACT FROM AUTHOR]

In this paper, a property rights model for electric transmission is proposed and its properties analyzed. The proposed rights, called "border flow rights," support financial hedging of transmission risk and merchant transmission expansion through associated financial rights, called "contracts for differences of differences." These financial rights allow for forward trading of both energy and transmission by a unified exchange, avoiding the bifurcation in current markets between decentralized long-term energy trading and centralized long-term transmission trading. Such long-term trading can help to support the financing of both generation and transmission assets. We consider incentive properties of such a right in the absence of lumpiness, economies of scale, and market power. [ABSTRACT FROM AUTHOR]