As U.S. policymakers consider how to tackle the challenge of greenhouse-gas constraints, the U.K.’s approach to the problem offers instructive examples.
Electric Vehicles and Gas-Fired Power
A strategic approach to mitigating rate increases and greenhouse gas price risk.
electrification scenario demonstrates that it’s possible to use electric vehicles to expand the utility’s rate base and reduce retail rates significantly below the BAU rate level, while reducing total emissions. However, this outcome is only achieved when the utility’s greenhouse gas emissions costs, due to the introduction of electric vehicles, are offset by emissions savings in the transportation sector from electric vehicles. In many regions where renewable energy is scarce, very costly, or both, the low-risk electrification case might be a lower-cost, more immediate means to achieve emissions reductions than a rigid renewable energy procurement target.
Carbon Cost Risks
The differences in retail rates and revenue requirements in each scenario are driven largely by the greenhouse gas emissions and policy assumptions for each case. The generation mix in each scenario results in different greenhouse gas emissions profiles, with the exception of the two BAU cases. Figure 8 shows that under the BAU generation mix, the utility’s GHG emissions are forecast to remain relatively flat between 2009 and 2030, averaging about 45 million metric tons of CO 2 per year. Emissions remain relatively flat in the BAU cases because in Duke Carolina’s existing plan, new load growth is met largely with zero-carbon nuclear power and the replacement of old coal generation with newer, more efficient coal plants and natural gas. In all of the other scenarios, GHG emissions are significantly lower than they are under the BAU scenarios.
Under the coal retirement scenario, emissions fall dramatically to about 15 MMT CO 2 through 2024, as existing coal is retired. After 2024, emissions start to increase again, as new load growth is met with additional natural gas generation, rebounding to about 20 MMT CO 2 by 2030.
The high-risk electrification case also shows a dramatic decline in GHG emissions, although not as steep as under the coal retirement scenario. This is because additional electrification loads are met with new natural gas generation, which increases electricity sector emissions, and in this scenario, the utility doesn’t receive any credit for emissions savings achieved in the transportation sector from electric vehicles. In contrast, in the low-risk electrification scenario, the utility is assumed to receive credit for 100 percent of the emissions reductions associated with carbon savings from electric vehicles in the transportation sector. The CO 2 savings in the transportation sector from electric vehicles nearly offsets all of the emissions from Duke Carolinas’ electricity generation.
Figure 8 clearly demonstrates that utilities are exposed to a significant emissions price risk from electrification unless policy measures are taken to give credit to the electric utility for emissions savings achieved by electric vehicles in the transportation sector.
These scenarios demonstrate the potential rewards to electric utilities, and the environment, from an electrification scenario that mitigates risks to utilities. These scenarios also demonstrate the high potential costs to utilities of unmitigated risks from electrification, especially emissions risk. The 2030 results of each scenario are summarized in Figure 9. The relative cost or risk of each category is indicated in the table on a scale from low to high.
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