Regional Implications of a
Clean Energy Standard
Anthony Paul
RFF Workshop on A Federal Clean Energy Standard
July 27, 2011
Drivers of Regional Outcomes
• Existing generation fleet
• Renewable resource endowment
• Electricity market regulatory structure
• Competitive vs. Cost-of-Service
• Qualified generators under CES
Electricity Market Regulation
• Suppose a closed market that does not
trade power or credits with other markets.
• Cost-of-Service
– CES will yield higher production costs, so
higher prices. Consumers bear the burden.
• Competitive
– Price effects depend on marginal costs, which
may rise or fall under CES. Producers and
consumers share the burden/benefit.
U.S. Markets Integrated
• The closed market result does not hold in
the U.S. because credits and power are
traded between markets.
• Prices may fall in cost-of-service regions
that export credits or power.
Preview of Results
• Credits flow east, $ flow west.
• Pre-existing regional price differences
will be mitigated.
– Largest price increases tend to occur in the
regions currently facing the lowest prices.
– Smallest price increases, or even
reductions, tend to occur in the regions
currently facing the highest prices.
• Qualifying existing hydro and nuclear
benefits northwest and southeast, at
the expense of others.
Net Credit Revenues
Retail Electricity Prices & Δ from BL
Retail Electricity Prices & Δ from BL
Retail Electricity Prices & Δ from Core
Conclusions
• Credits flow east, $ flow west.
• Pre-existing regional price differences
will be mitigated.
– Largest price increases tend to occur in the
regions currently facing the lowest prices.
– Smallest price increases, or even
reductions, tend to occur in the regions
currently facing the highest prices.
• Qualifying existing hydro and nuclear
benefits northwest and southeast, at
the expense of others.
For more information see:
www.rff.org/centers/
climate_and_electricity_policy
/Pages/Renewable_and_Clean
_Energy_Resource_Library.
aspx