Publications

    The Clean Power Plan Endangers Electric Reliability: RTO and ISO Market Perspectives.” In, 2015.Abstract

    Excerpt from the Executive Summary

    Background

    The Environmental Protection Agency’s proposed Clean Power Plan (CPP), published in June 2014, raises substantial operational challenges for regional transmission organizations (RTOs). In the CPP, EPA specifies emission reduction targets for 49 of the 50 states, based on EPA’s modeling that purportedly shows that each state can achieve the specified reduction targets through the use of four “building blocks.” States are to develop plans to meet the targets between 2020 and 2030, and are offered “flexibility” to use any combination of the four building blocks specified and/or other means (if approved by EPA) to achieve these targets. The State plans – required by June 30, 2016 (unless an extension is granted) - must specify how each state intends to meet the targets.

    While there are many issues, questions and concerns with the ability of states and utilities to meet EPA’s emission reduction targets based on the use of EPA’s four building blocks (or through other means), building block 2, in particular, raises substantial issues for systems operators and RTO/ISO market operations because it involves changing the current methods of how electricity is dispatched throughout the nation’s bulk power systems.

    Either FERC or the states have always overseen how security constrained economic dispatch is conducted to maintain reliability while cost-effectively serving customers. But, if EPA’s proposed rule becomes final, it, and not the system operators that federal and state regulators have entrusted, will make such critical decisions for our nation’s utility customers regardless of costs.

    Houde, Sebastien, and Joseph Aldy. “BELT AND SUSPENDERS AND MORE: THE INCREMENTAL IMPACT OF ENERGY EFFICIENCY SUBSIDIES IN THE PRESENCE OF EXISTING POLICY INSTRUMENTS .” NBER (2014).Abstract

    The effectiveness of investment subsidies depends on the existing array of regulatory and information mandates, especially in the energy efficiency space. Some consumers respond to information disclosure by purchasing energy-efficient durables (and thus may increase the inframarginal take-up of a subsequent subsidy), while other consumers may locate at the lower bound of a minimum efficiency standard (and a given subsidy may be insufficient to change their investment toward a more energy-efficient option). We investigate the incremental impact of energy efficiency rebates in the context of regulatory and information mandates by evaluating the State Energy Efficient Appliance Rebate Program (SEEARP) implemented through the 2009 American Recovery and Reinvestment Act. The design of the program - Federal funds allocated to states on a per capita basis with significant discretion in state program design and implementation - facilitates our empirical analysis. Using transaction-level data on appliance sales, we show that most program participants were inframarginal due to important short- term intertemporal substitutions where consumers delayed their purchases by a few weeks. We find evidence that some consumers accelerated the replacement of their old appliances by a few years, but overall the impact of the program on long-term energy demand is likely to be very small. Our estimated measures of cost-effectiveness are an order of magnitude higher than estimated for other energy efficiency programs in the literature. We also show that designing subsidies that reflect, in part, underlying attribute-based regulatory mandates can result in perverse effects, such as upgrading to larger, less energy-efficient models.

    Stavins, Robert. “What are the Benefit and Costs of EPA's Proposed CO2 Regulation?” In, 2014. Publisher's VersionAbstract

    EXCERPT:

    On June 2nd, the Obama Administration’s Environmental Protection Agency (EPA) released its long-awaited proposed regulation to reduce carbon dioxide (CO2) emissions from existing sources in the electricity-generating sector.  The regulatory (rule) proposal calls for cutting CO2 emissions from the power sector by 30 percent below 2005 levels by 2030.  This is potentially significant, because electricity generation is responsible for about 38 percent of U.S. CO2emissions (about 32 percent of U.S. greenhouse gas (GHG) emissions).

     

    On June 18th, EPA published the proposed rule in the Federal Register, initiating a 120-day public comment period.  In my previous essay at this blog, I wrote about the fundamentals and the politics of this proposed rule (EPA’s Proposed Greenhouse Gas Regulation: Why are Conservatives Attacking its Market-Based Options?).  Today I take a look at the economics.

    Agency, U.S. Environmental Protection. “Translation of the Clean Power Plan Emission Rate-Based CO2 Goals to Mass-Based Equivalents.” In, 2014.Abstract

    EXCERPT FROM THE INTRODUCTION

    This technical support document (TSD) describes two illustrative calculation-based approaches for translating the Clean Power Plan (CPP) emission rate-based goals to a mass-based equivalent. These approaches should be viewed as two potential ways in which implementing authorities may wish to translate the form of the goal to a mass-based equivalent. The first approach produces mass-based equivalents that apply to existing affected fossil fuel-fired sources only. In light of the fact that the CPP takes comment on the inclusion of new, fossil fuel- fired sources as a component of state plans, the second approach produces mass equivalents that are inclusive of emissions from existing affected and new fossil fuel-fired sources.

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