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The purpose of this paper is to illustrate how emission constraints imposed by the emission trading scheme (ETS) in the European Union, as well as transmissions capacity, can affect the outcome of the generation scheduling. The aim is to demonstrate the application of the generation scheduling tool which includes both the ETS and transmission constraints, and helps evaluate their effect on emission reduction, costs, and generators' behavior and availability. It can also be used to help generators make strategic decisions regarding utilization and purchases of carbon allowances.

The paper extends the generation scheduling formulation to allow for additional constraints modeling. The formulation is based on the mixed integer programming approach with linearization of generation cost and emission functions, and the possibility to split the system into zones in order to investigate transmission congestion.

The paper presents six case studies that include unconstrained and constrained operation, both from the emission and transmission points of view. It also illustrates the effect of free allocations versus auctioning. The case studies look into the system with wind generation that can be constrained due to transmission limits, and their impact on emission reductions. This is often the case in systems where most of the wind generation is located in the area which does not have sufficiently strong links to the rest of the system where the majority of loads are.

The extension of the work will be inclusion of stochastic nature of emission prices and wind availability. It will also be used for further studies on systems with high wind penetration and insufficient transmission capacity.

The generation scheduling tool and the results from the paper could be useful for generators when making decisions on how to use or purchase their emission allocations, as well as for evaluation of the adverse affect of transmission congestion on carbon emission reductions.