PNNL

Abstract

The authors use the Battelle Carbon Management Electricity Model (CMEM), a new electricity generation and dispatch optimization model, to explore the effects of carbon taxes and constraints on investment and operating decisions for new electric generating capacity as well as on the operation and market value of existing plants in a specific region of the United States and across three carbon dioxide (CO2) emission control scenarios. By modeling a specific region and its unique dynamic load curve and rates of load growth, they show that adopting carbon dioxide capture and storage (CCS) technologies is much more nuanced than simply comparing the costs of building and operating power plant technologies with and without CCS would seem to imply. The analysis shows that in the face of carbon constraints, baseload units are the first to be significantly decarbonized, with a significant portion of the allowable emissions consistent with the emissions reduction mandate being allocated to peaking and intermediate loads. In the face of tighter emissions restrictions (and consequently higher carbon prices), we see a large and growing spread between peak and off-peak prices for electricity, which could create powerful incentives for changing seasonal and perhaps even diurnal electricity use patterns. It is only under very stringent emissions reductions that we see the forced retirement of otherwise productive capital stock. In all other cases, electricity demand is met with a mix of baseload plants that employ CCS, existing coal and natural gas plants that vent their emissions directly to the atmosphere, and new, more efficient versions of conventional (non-CCS-enabled) power plants.