PNNL

Abstract

One option for reducing carbon emissions in the power sector is replacement of coal-fired generation with less-carbon intensive natural-gas combined cycle (NGCC) generation. In the United States, where there is abundant, low-cost natural gas supply, increased NGCC deployment is a cost-effective emissions abatement opportunity at relatively modest carbon prices. However, under scenarios in which carbon prices rise and deeper emissions reductions are achieved, other technologies may be more cost-effective than NGCC in the future. In such instances, the cost-effectiveness of new NGCC investment, when evaluated over a typical planning time horizon, could differ from its immediate cost-effectiveness. In this analysis, using a US energy system model with foresight, we find that varying expectations about carbon prices after 2030 does not materially affect NGCC deployment prior to 2030, all else equal. An important implication of this result is that, under a plausible set of natural gas and carbon price trajectories, myopic behavior or other imperfect expectations about potential future carbon policy are not likely to strand natural gas generation infrastructure. We explain these results in terms of the underlying economic competition between available generation technologies and discuss the broader relevance to US climate change mitigation policy.