Supply Curves for Conserved Electricity

In this paper, we introduce a new top-down approach to modeling the effects of publicly financed energy-efficiency programs on electricity consumption and carbon dioxide emissions. The approach draws on a partial-adjustment econometric model of electricity demand and represents the results of a reverse auction for electricity savings from different levels of public investment. The model is calibrated to recent estimates of the cost-effectiveness of rate payer–funded efficiency programs at reducing electricity consumption. The results suggest that supply curves for conserved electricity are upward sloping, convex, and dependent on policy design and electricity prices. Under the scenarios modeled, electricity savings of between 1 and 3 percent are achievable at a marginal cost of $50 per megawatt hour (MWh) and a corresponding average cost of$25–$35/MWh.energy efficiency, climate change

Retail Electricity Price Savings from Compliance Flexibility in GHG Standards for Stationary Sources

The EPA will issue rules regulating greenhouse gas (GHG) emissions from existing steam boilers and refineries in 2012. A crucial issue affecting the scope and cost of emissions reductions will be the potential introduction of flexibility in compliance, including averaging across groups of facilities. This research investigates the role of compliance flexibility for the most important of these source categories—existing coal-fired power plants—that currently account for one-third of national emissions of carbon dioxide, the most important greenhouse gas. We find a flexible standard, calibrated to achieve the same emissions reductions as an inflexible approach, reduces the increase in electricity price by 60 percent and overall costs by two-thirds in 2020. The flexible standard also leads to substantially more investment to improve the operating efficiency of existing facilities, whereas the inflexible standard leads to substantially greater retirement of existing facilities.climate policy, efficiency, EPA, Clean Air Act, coal, compliance flexibility, regulation

Modeling a Clean Energy Standard for Electricity: Policy Design Implications for Emissions, Supply, Prices, and Regions

The electricity sector is responsible for roughly 40 percent of U.S. carbon dioxide (CO2) emissions, and a shift away from conventional coal-fired generation is an important component of the U.S. strategy to reduce greenhouse gas emissions. Toward that goal, several proposals for a clean energy standard (CES) have been put forth, including one espoused by the Obama administration that calls for 80 percent clean electricty by 2035 phased in from current levels of roughly 40 percent. This paper looks at the effects of such a policy on CO2 emissions from the electricity sector, the mix of technologies used to supply electricity, electricity prices, and regional flows of clean energy credits. The CES leads to a 30 percent reduction in cumulative CO2 emissions between 2013 and 2035 and results in dramatic reductions in generation from conventional coal. The policy also results in fairly modest increases on national electricity prices, but this masks a wide variety of effects across regions.renewables, climate, clean energy standard

An Assessment of US Progress towards its Pledge on Climate Change Mitigation. CEPS ECP Report No. 12, 15 October 2012

In 2009, President Obama pledged that, by 2020, the United States would achieve reductions in greenhouse gas emissions of 17% from 2005 levels. With the failure of Congress to adopt comprehensive climate legislation in 2010, the feasibility of the pledge was put in doubt. However, we find that the United States is near to reaching this goal: the country is currently on course to achieve reductions of 16.3% from 2005 levels in 2020. Three factors contribute to this outcome: greenhouse gas regulations under the Clean Air Act, secular trends including changes in relative fuel prices and energy efficiency and sub-national efforts. Perhaps even more surprising, domestic emissions are probably lower than would have been the case if the Waxman-Markey cap-and-trade proposal had become law in 2010. At this point, however, the United States is expected to fail to meet its financing commitments under the Copenhagen Accord for 2020

Discussion Paper State and Fuel-Specific Benchmarks for Greenhouse Gas Performance Standards State and Fuel-Specific Benchmarks for Greenhouse Gas Performance Standards

Abstract The next major aspect of US climate policy will likely be the regulation of existing power plants, and tradable performance standards could form the basis of this framework. Under this framework, emitting sources have a compliance obligation, identified as a benchmark emissions rate, and there is a market where sources can trade emissions based on an emissions rate under/over their benchmark. We examine different approaches to setting benchmark rates across geography and fuel type in a program that enables national trading. We show that, for a given national emissions target, differentiating benchmark rates affects the program's cost-effectiveness. However, these differences also affect the regional distribution of the program's electricity price effects and may reduce the variation in these effects. We observe a "knee in the curve," where modest differentiation in benchmark rates could address some distributional concerns at low cost, but substantial differentiation raises the program's cost precipitously

Technology Flexibility and Stringency for Greenhouse Gas Regulations

The Clean Air Act provides the primary regulatory framework for climate policy in the United States. Tradable performance standards (averaging) emerge as the likely tool to achieve flexibility in the regulation of existing stationary sources. This paper examines the relationship between flexibility and stringency. The metric to compare the stringency of policies is ambiguous. The relevant section of the act is traditionally technology based, suggesting an emissions rate focus. However, a specific emissions rate improvement averaged over a larger set of generators reduces the actual emissions change. A marginal abatement cost criterion to compare policy designs suggests cost-effectiveness across sources. This criterion can quadruple the emissions reductions that are achieved, with net social benefits exceeding $25 billion in 2020, with a 1.3 percent electricity price increase. Under the act, multiple stringency criteria are relevant. EPA should evaluate state implementation plans according to a portfolio of attributes, including effectiveness and cost

Intermittency or Uncertainty? Impacts of Renewable Energy in Electricity Markets

Renewable energy resources possess unique characteristics—intermittency and uncertainty— that pose challenges to electricity grid operations. We study these characteristics and find that uncertainty, represented by wind forecast error, has larger grid impacts than intermittency, or hourly generation changes. Uncertainty yields roughly double the price effects and roughly double the number of conventional generator start-ups, as compared to perfectly forecast wind. While this finding is important given the persistence of wind forecast error over the study period, reducing wind forecast error to the level of demand forecast error would lower costs by a modest half a million dollars per year