Multi-dimensional market framework for electricity, environment, and security in Thailand’s energy transition

Abstract

Achieving carbon neutrality in the power sector requires market designs that align economic efficiency with environmental sustainability and system reliability. This paper proposes a multi-dimensional electricity market-clearing framework that co-optimises carbon pricing, renewable energy incentives, and ancillary service procurement, advancing beyond fragmented market approaches. Validation on the IEEE 30-bus test system showed the advantages of the proposed market model in both economic and environmental benefits. Applied to a 160-bus equivalent Thai power system, the model reflects Thailand’s distinctive regulatory structure, rapidly growing demand, and national carbon neutrality commitments. The analysis across five market scenarios reveals that while carbon taxation reduces emissions and generates fiscal revenues, it imposes welfare losses, renewable energy certificate (REC) trading enhances producer viability but has limited operational effects, and ancillary service procurement strengthens reliability at added cost. By contrast, the proposed multi-dimensional market mechanism reduces emissions by nearly 5%, achieves a more equitable distribution of welfare among consumers, producers, government, and renewable participants, and mitigates the drawbacks of single-policy instruments. Sensitivity analyses confirm that integration amplifies the environmental signal of carbon pricing and enhances the welfare gains from REC trading. These results provide timely policy insights for Thailand’s decarbonisation roadmap, demonstrating that coordinated market mechanisms can support emission reduction, system adequacy, and fair welfare allocation. More broadly, the study underscores the potential of multi-dimensional electricity markets to guide emerging economies in designing sustainable, reliable, and inclusive pathways toward carbon neutrality.