How will carbon-emissions policies affect the generation fleet?
Victor Niemeyer is manager, Global Climate Change Risk Management, at the Electric Power Research Institute (EPRI). Contact him at NIEMEYER@epri.com.
Any climate policy is almost certain to target the electric-power industry, which is responsible for about 38 percent of U.S. carbon dioxide (CO2) emissions. Said policy especially would affect coal-fired power plants, which contribute about 82 percent of the electric power CO2 total. How would various policy options change the economic value of current and proposed generation assets? The answer to this question could affect the rapidly evolving generation mix profoundly, particularly at a time when utilities are planning to add more than 60 GW of carbon-intensive coal plants.
Determining the impacts of climate policy on the electric-power industry, however, is a complex problem that requires considering both regional diversity and the linkages among markets for fuel, power, and emissions. In particular, imposing a cost penalty on CO2 emissions from electricity generation would affect the net revenues of various types of power plants very differently. As these differences become more apparent, the value of current generating assets could rise or fall dramatically, and significantly alter preferences among investment options for future generation.