Modeling Results for a
Clean Energy Standard
Karen Palmer
RFF Workshop on A Federal Clean Energy Standard
July 27, 2011
What to expect from a CES
• How much does the CES policy reduce CO2
emissions?
• What are the effects on the mix of generation
technologies and fuels?
• How does the policy affect national electricity
price?
• How do selected design parameters affect
these results?
•
•
Treatment of existing nuclear and hydro
Level of the Alternative Compliance Payment (ACP)
Policies Evaluated
• Baseline
• Core CES (Core)
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–
–
–
–
–
–
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Goal of 80% Clean Energy by 2035
Clean energy credit (CEC) trading but no banking
No credits for existing nuclear and hydro
No credits for energy efficiency
Full credit for renewables and incremental nuclear
Natural gas combined cycle awarded 0.5 credits
Partial credits for coal with CCS
All utilities must comply
No Alternate Compliance Payment (ACP)
• Credit Existing Nuclear and Hydro (CreditNH)
• Core CES with varying ACP levels ($15 - $55 per CEC)
Preview of the bottom lines
The Core CES results in
•
a substantial 30% reduction in cumulative CO2 emissions
from the electricity sector.
•
an increase in generation from broad set of clean
generators.
•
an 11% increase in national electricity price by 2035.
• Crediting existing hydro and nukes does not affect
emissions outcomes but leads to higher electricity
price.
• Imposing a positive ACP will lower costs to
consumers, generate government revenue, and
reduce environmental gains.
How much does a CES reduce CO2?
3.0
Billions of Tons
2.5
2.0
1.5
1.0
0.5
0.0
2010
2015
2020
BL
2025
Core
2030
2035
Generation Mix in 2035
5000
4500
Billion kWH
4000
Other
3500
Biomass
3000
Wind
Hydro
2500
Nuclear
2000
Nat Gas
1500
IGCC Coal
Steam Coal
1000
500
0
BL
Core
National Average Electricity Price
120
$ per MWh
100
80
60
40
20
0
2010
2015
2020
2025
BL
Core
2030
2035
Effect of crediting existing hydro and nuclear
• Same cumulative CO2 emissions
reductions.
• Small increase in nuclear generation at
existing units at the expense of natural
gas and wind.
• Larger increase in national electricity
price (15% in 2035).
Clean Energy Credit Prices
80
70
60
50
40
30
20
10
0
2010
2015
ACP15
2020
ACP30
2025
ACP45
ACP55
2030
NoACP
2035
CO2 Reductions vary with ACP levels
3.0
Billions of Tons
2.5
2.0
1.5
1.0
0.5
0.0
2010
2015
BL
ACP15
2020
ACP30
2025
ACP45
2030
ACP55
2035
NoACP
Discounted Value of ACP Revenue
NPV Federal ACP Revenue (B$)
Billion $
80
60
40
20
0
ACP15
ACP30
ACP45
ACP55
ACP and Electricity Price
120
115
$ per MWh
110
105
100
95
90
85
80
2010
2015
BL
ACP15
2020
ACP30
2025
ACP45
2030
ACP55
NoACP
2035
Conclusions
• Cumulative CO2 emissions are reduced by
30% with Core CES; less with binding ACP.
• CES benefits broad mix of clean
technologies.
• National electricity price rises by just over
10 percent in 2035 with Core CES.
• Electricity price effects depend on
treatment of existing nuclear and hydro and
on level of the ACP.
• More analysis is needed to inform tradeoffs
inherent in CES policy design.
For more information see:
Clean Energy Standards for Electricity: Policy
Design Implications for Emissions, Supply, Prices
and Regions
by Anthony Paul, Karen Palmer and Matt Woerman
Available at
www.rff.org/centers/
climate_and_electricity_policy/Pages/
Renewable_and_Clean_Energy_Resource_Library.
aspx