Feasibility of Natural Gas Combined Cycle Utilization Targets

Feasibility of Natural Gas Combined Cycle Utilization Targets: Evidence from Environmental Policy and Prices Kelly A. Stevens Ph. D Candidate in Public Administration and International Affairs Syracuse University: Maxwell School Visiting Student: Carnegie Mellon Engineering & Public Policy Program USAEE Conference: Tulsa October 24, 2016 1

US EPA’s Clean Power Plan Emissions Reductions (%) to Meet CPP Target State CO 2 Emissions Reductions from CPP 1. ) Improve existing coal power plants 2. ) Increase utilization of NGCC to offset coal 3. ) Increased renewable capacity 2

Utilization Across Groups Nuclear EPA Clean Power Plan target Coal NGCC Renewables Gas Turbines 3

Variation in NGCC Utilization Capacity Factors 4

Previous Literature • Dependent variables: natural gas generation (Linn et al. , 2014), coal generation (Fell & Kaffine, 2014; Linn et al. , 2014), fuel switching (Knittel et al. , 2015; Soloway, 2013), emissions reductions (Cullen & Mansur, 2013; Mansur, 2014; Murray & Maniloff, 2015) • Explanatory variables: natural gas prices (all of the above), greenhouse gas policies (Murray & Maniloff, 2015), intermittent renewable generation (Fell & Kaffine, 2014; Novan, 2013; Kaffine et al. , 2013) Natural Gas Coal 5

Research Question and Contribution How did environmental policies and natural gas prices affect NGCC utilization? • NGCC capacity factors • All NGCC plants • Air pollution policies • Counterfactual analysis 6

Model Generator Characteristics Policies Natural Gas Prices NGCC Capacity Weather NGCC Capacity Factors Load Characteristics NGCC Generation CO 2 emissions 7

NGCC • EIA and EPA’s e. GRID data on US power plants 2003 -2014 • Plant-fuel-technology groups 8

Policies: 1. Ozone NAA 2. Cross-State Air Pollution Transport 3. Regional GHG Programs 9

Estimating Equation Coal/NG Ratio Policies Fixed effects Age and policies Weather: HDD, CDD Unit characteristics: size, size 2, age, regulated, ISO/RTO Grid load: Area CF, coal capacity %, nuclear capacity %, renewable generation % Random effect composite error term 10

RESULTS: Prices and Policies Generator Characteristics Policies Natural Gas Prices NGCC Capacity Weather NGCC Capacity Factors Load Characteristics NGCC Generation CO 2 emissions 11

Prices and Policy Results 12

Counterfactual Analysis Model estimates under different scenarios Scenario Compare to original model Determine how much NGCC generation due to components Description 1. Actual NGCC generation 2. Baseline Model predicted values 3. Without policies Model with policies off 4. Historical NG prices Model with 2007 NG prices 5. Social cost of carbon tax Model with SCC tax 6. Policy equivalent tax Model with policy equivalent tax Calculate CO 2 averted Function/Equation Actual-Baseline 7. Without policies or NG prices Model with policies and historical prices 13

Counterfactual Results Policies SCC tax $36/ton $55/ton NG $ + tax Policies NG $ Decrease Actual < 1% Sum over time series 14

CO 2 Reductions by Component 15

RESULTS: Characteristics Generator Characteristics Weather Policies Natural Gas Prices NGCC Capacity Factors Load Characteristics NGCC Generation CO 2 emissions 16

Characteristics Results 17

Implications: Age • Policy Average Age of NGCC Plants CPP Emissions Reductions (%) More costly for some states to comply 18

Discussion • Difficulty could hinge on NG prices • Co-benefit of air quality policies for NGCC utilization • GHG programs effective • Air quality externality possible from uniform targets 19

Thank You! Kelly A. Stevens Maxwell School at Syracuse University kastev 01@syr. edu 20

EXTRA SLIDES 21

Implications: Weather 2012 baseline year for EPA’s targets 22

Environmental Policies • 23

Combined Cycle Gas Turbine (CCGT) 24

Difficulty Meeting Targets Size Age Coal % Nuclear % Renewable % 25

Grid Characteristics • 26

RE, FE, OLS Results 27

Descriptive Statistics 28

NGCC vs. Coal Natural Gas Combined Cycle (NGCC): 90% less sulfur dioxide 5 x less nitrogen dioxide Negligible PM 50% less CO 2 Coal NGCC GT Nuclear Renew 29

NGCC Utilization 30

$$ Natural < $ Coal < $Gas Natural Gas Marginal Cost Curve Fuel & Operating Variable Costs ($/MWh) 300 Low 250 High Medium 200 150 100 50 0 0 20 40 60 80 100 120 140 System Capacity (GW) to Meet Energy Demand Renewables Nuclear Hydro Coal NGCC Gas Turbines Oil 31

Policies: 1. Ozone NAA 32

Policies: 1. Ozone NAA 2. Cross-State Air Pollution Transport 33

Shifts in NGCC Capacity Factors 2003 2014 34

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