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Bureau Seminar, October 12, 2012

Environmental Regulations, Renewables Policies, Power Price Caps and Gas Use

Click here for live streaming video at 8:55am Friday, October 12, 2012

Dr. Gurcan Gulen
Research Associate, BEG

The power sector is commonly seen as offering the largest potential for growth in gas consumption in today’s low price environment. But there are numerous factors, with dynamic interactions, that can impact the level of gas use. We use the AURORAxmp software to evaluate the impact of several key issues that has relevance for gas consumption by the power sector in the near future: the impact of Cross-State Air Pollution Rule (CSAPR), and Maximum Achievable Control Technology (MACT) and its implementation standards for power plants, Mercury and Air Toxic Standards (MATS). We only simulate the Eastern Interconnect (EI) and ERCOT regions since states covered by CSAPR are located in these regions. We test the sensitivity of this scenario to natural gas price fluctuations, a price on CO2, different levels of renewable incentives, and nuclear retirements. Finally, evaluate the impact of CREZ (competitive renewable energy zones) transmission expansion in ERCOT (Texas). Independently, we investigate the impact of proposed increases in the level of energy prices in the ERCOT market on average electricity prices, retirements, new builds (type of generation & fuel use) and the reserve margin. There is a concern that sufficient new generation capacity will not be built in Texas to maintain a desired level of reliability if energy price caps are not increased or a capacity market is instituted. Our research informs this debate.


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