Abstract
To analyze the effect of carbon emission quota allocation on the locational marginal price (LMP) of day-ahead electricity markets, this paper proposes a two-stage algorithm. For the first stage of the algorithm, a multi-objective optimization model is established to simultaneously minimize the total costs and carbon emission costs of power systems. Hence, an evenly distributed Pareto optimal solution can be solved effectively by means of the normalized normal constraint method. For the second stage, a tracing model is built with the goal of minimizing the total costs of power systems and satisfying the constraints generated based on the Pareto optimal solution obtained from the first stage. Furthermore, the influence of carbon emission quota allocation on the LMP of electricity markets is analyzed, and different schemes to allocate carbon emission quotas are evaluated on a real 1560-bus and 52-unit system.