potential effects of proposed climate change legislation · 2017-09-08 · potential effects of...
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![Page 1: Potential Effects of Proposed Climate Change Legislation · 2017-09-08 · Potential Effects of Proposed Climate Change Legislation on PJM’s Energy Market Michael E. Nix Senior](https://reader030.vdocuments.net/reader030/viewer/2022040304/5e9b29169e348d50fb728041/html5/thumbnails/1.jpg)
PJM©2008
Potential Effects of Proposed
Climate Change Legislation
on PJM’s Energy Market
Michael E. Nix
Senior Strategist, Market Strategy
PJM Interconnection
Institute for Regulatory Policy Studies
December 10, 2009
www.pjm.com
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PJM©20082www.pjm.com
KEY STATISTICS
PJM member companies 550+
millions of people served 51
peak load in megawatts 144,644
MWs of generating capacity 164,634
GWh of annual energy 728,000
Generation sources 1,271
Area served 13 states + DC
Internal/external tie lines 247+
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PJM©20083
Cost of CO2 Reduction Through Re-Dispatch
www.pjm.com
Marginal Cost of Abatement ($/short ton)Re-dispatch from Coal (10 mmBtu/MWh )
to Gas Combined Cycle (7 mmBtu/MWh)
Gas price ($/mmBtu)
Region
Coal Price
($/mmBtu)
$3.60
(9-25-09)
$6.44
(Base)
$10.00
(High)
Mid-Atl $2.30 $3.57 $35.80 $76.21
ComEd $1.54 $15.89 $48.13 $88.53
West $1.97 $8.92 $41.15 $81.56
South $2.43 $1.46 $33.69 $74.10
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PJM©20084
Change in Load-Weighted Average LMP
www.pjm.com
Approximately 75-80% of CO2 price is transmitted to load-weighted Average LMP.
$10 $25 $40 $60 $100
Base Gas $7.44 $18.71 $29.71 $45.78 $80.35
Hi Gas $7.87 $19.22 $30.42 $45.55 $75.77
0
10
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40
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60
70
80
90
Do
llars
per
MW
hLMP Increase by CO2 Price and Gas Price
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PJM©20085
Change in Wholesale Power Costs
www.pjm.com
$10 $25 $40 $60 $100
Base Gas $5.87 $14.77 $23.45 $36.13 $63.42
High Gas $6.21 $15.17 $24.01 $35.95 $59.80
0
10
20
30
40
50
60
70
Bill
ion
s o
f D
olla
rs
15.5%
39.0%
61.9%
95.4%
167.4%Percentages shown are for Base Gas only
Increase in Wholesale Power Costs by Gas Price and CO2 Price
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PJM©20086
Potential Consumer Bill Impacts
www.pjm.com
$10 $25 $40 $60 $100
Base Gas $5.58 $14.03 $22.28 $34.34 $60.26
High Gas $5.90 $14.42 $22.82 $34.16 $56.83
0
10
20
30
40
50
60
70
Do
llars
per
Mo
nth
Increase in Monthly Bill of a Residential Customer Using 750 kWh
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PJM©20087
Change in Generation Mix
www.pjm.com
-150,000
-100,000
-50,000
0
50,000
100,000
150,000
$10 $25 $40 $60 $100
Change in Coal and Combined Cycle Generation by CO2 Price
Coal-Base Gas
Combined Cycle-Base Gas
Coal-High Gas
Combined Cycle-High Gas
GW
h
CO2 Prices
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PJM©20088
Emissions Reductions
www.pjm.com
Reductions are from the baseline 2013 emissions
$10 $25 $40 $60 $100
Base Gas 5.59 18.18 33.65 57.77 73.31
High Gas 2.24 6.09 14.40 25.26 61.03
0
10
20
30
40
50
60
70
80
Mill
ion
s o
f to
ns
Emissions Reductions by Gas and CO2 Price
0.4%
1.2%
2.8%
4.9%
11.8%
1.1%
3.6%
6.6%
11.3%
14.8%
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PJM©20089
Demand Reductions vs. Wind
www.pjm.com
Price and Cost Increases Mitigated
Load Reduction Percentage 15 GW Wind
2% 5% 10%
LMP ($/MWh) $2 - $4 $5 - $9 $11 - $17 $5 - $5.50
Wholesale
Power Cost$3 - $4 billion $6-$11 billion $10-$18 billion $4 - $4.5 billion
Consumer Bill
(monthly)$1 - $3 $4 - $6.50 $7 - $12.50 $3.50 - $4
• 15 GW of wind has same impact as somewhere between a 2% and 5% load reduction
• Displaced generation is at a $0 CO2 price in the base gas case only.
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PJM©200810
Demand Reductions vs. Wind
www.pjm.com
Generation Displacement and Emissions Reductions Achieved
Load Reduction Percentage 15 GW Wind
2% 5% 10%
Coal 6,741 GWh 18,376 GWh 41,972 GWh 26,303 GWh
Combined
Cycle Gas6,555 GWh 15,685 GWh 28,587 GWh 13,009 GWh
Additional CO2
Reductions
(tons)
10-14 million 29-34 million 58-64 million 34-37 million
• Approximately the same effect as a 5% reduction in load with regard to emissions
impacts gas displaced
• Displaced generation is at a $0 CO2 price in the base gas case only.
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PJM©200811
Conclusions from Whitepaper
• LMP increases by 75-80% of CO2 price
– results in increase in customer bills
• Dispatch of gas ahead of coal for large-scale emissions reductions
occurs only at
– Approximately $40/ton in the base gas case ($6.44/mmBtu)
– Approximately $80/ton in the high gas case ($10/mmBtu)
• Demand reduction and wind power can reduce emissions and offset
increases in LMP, wholesale power costs, and customer bills.
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PJM©200812
Fuel and Allowance Prices in the Context of
Waxman-Markey (H.R. 2454)
• A tight range of CO2 prices in 2013:
– $15-$20/ton in most likely scenarios
– ≈ $11/ton without any banking or with high availability of offsets
– $28/ton if no international offsets
– ≈ $51/ton with no international offsets and high hurdles for new nuclear and
renewable resources
• National average gas prices $6.20-$7.30/mmBtu
– Availability of shale gas production help to drive price
– Gas demand not appreciably higher either
• National average coal prices $2/mmBtu
– Increases in coal transportation costs offset
by declining coal demand
www.pjm.com
Marcellus Shale
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PJM©200813
Implication for CO2 Impacts in PJM
in the Context of Waxman-Markey (H.R. 2454)
• CO2 prices that cause widespread re-dispatch from coal to gas:
– National average prices: $20-$30/ton
– Less than $15/ton east of the Alleghenies
– $15-$20/ton in the West (not including ComEd)
– Greater emissions reductions at lower CO2 prices than in PJM whitepaper
• $11-$15/MWh increases in LMP on average IF CO2 price – LMP
relationship same as in whitepaper
– includes only increase due directly to CO2 prices, not increased fuel costs
– can separate out effects from direct CO2 price and impact on fuel prices
• Whitepaper update in progress
www.pjm.com
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PJM©200814
Additional/complementary factors
• Policy Changes from federal legislation
– Waxman-Markey (ACES)
– Bingaman (ACELA)
– Kerry-Boxer emissions caps
• Technology
– Determined partially by policy and legislation
– Carbon capture and storage
• AEP, Wall Street Journal, 12/9/09
• Nuclear
• Markets
– CO2/GHG
– RTO/ISO
www.pjm.com
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PJM©200815
Additional considerations
• Offsets
– Energy Information Administration analysis
– ICF analysis
• Renewable Portfolio Standards/Electricity Standards
– Federal v. State
– Production Tax Credits
– Renewable Energy Credits
– Wholesale electricity prices
– Cap and trade
– Allowance allocation
www.pjm.com