Energy Information Administration Studies The Impact of Clean Energy Standards (CES)

The Department of Energy's Energy Information Administration (EIA) recently released an analysis of the economic and other impacts that would result from the enactment of a number of different Clean Energy Standards. The analysis was done at the request of U.S. Senator Jeff Bingaman (D-NM), Chairman of the Senate Energy Committee. There are a number of interesting findings that arise from the study, including the dramatic impacts that enactment of a Clean Energy Standard (CES) would have on emissions of greenhouse gases and other pollutants compared to the relatively modest impact on electric prices and the economy. Specifically, Chairman Bingaman requested an analysis that compared a Clean Energy Standard that he is expected to offer next year (called the Bingaman Clean Energy Standard or BCES) with the Base Case from the EIA's 2011 Annual Energy Outlook. A number of alternative cases based on policy ideas that have been previously considered in Washington were also analyzed. As expected, the analysis finds a significant impact on the mix of technologies used to generate power:
The BCES policy changes the generation mix, reducing the role of coal technologies and increasing reliance on natural gas, non-hydro renewable and nuclear technologies. Coal-fired generation, which in the Reference case increases by 23 percent from 2009 to 2035, decreases by 41 percent in the BCES case over the same period. Relative to the Reference case, where natural gas generation grows steadily throughout the projection period, natural gas generation in 2025 is 34-percent higher and 53-percent higher in 2035. Under the BCES policy, non-hydro renewable technologies grow at the fastest rate, increasing from 146 billion kilowatthours in 2009 to 601 billion kilowatthours in 2025 and 737 billion kilowatthours in 2035. These totals are 60 percent and 75 percent greater than the 2025 and 2035 Reference case projections, respectively.
Also as expected the impacts of annual electricity sector carbon emissions are dramatic.
Under the BCES, projected annual electricity sector carbon dioxide emissions are 22 percent below the Reference case level in 2025 and 43 percent lower in 2035 (Figure 3, Tables B1 and B2). In the Reference case electricity-sector carbon dioxide emissions increase modestly over the projection period, reaching annual emissions of 2,345 million metric tons of carbon dioxide (MMTCO2) in 2025 and growing further to 2,500 MMTCO2 emitted in 2035. Over the 2009-to-2035 period, cumulative CO2 emissions are 20 percent lower in the BCES case than they are in the Reference case.
Finally, the report also found that in the early years, the impacts of the BCES on electricity prices is negligible, but grows as the standards ratchet down.
The BCES has a negligible impact on electricity prices through 2022, but prices rise in later years. In the early years of the projection period, there is negligible impact on average end-use electricity prices, as the requirement to hold BCES credits is modest. As shown in Table 1, the share of total sales that must be covered by credits does not exceed 45 percent until after 2030. This is important because, while coal-fired plants do not receive BCES credits, efficient combined cycle plants receive 0.48 credits for each megawatthour they generate, more than retailers purchasing their output are required to hold until after 2030. This effectively reduces the cost of most natural gas-fired generation until the later years of the projections. Electricity prices do grow later in the projections, reaching 21 percent above the Reference case level by 2035 in the BCES case.
The report can be found here.