Carbon Emissions Caps and the Impact of a Radical Change in Nuclear Electricity Costs

Benjamin D. Leibowicz, Maria Roumpani and Peter H. Larsen
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Benjamin D. Leibowicz: Management Science and Engineering Department, Stanford University, United States.
Maria Roumpani: Management Science and Engineering Department, Stanford University, United States.
Peter H. Larsen: Management Science and Engineering Department, Stanford University, United States.

International Journal of Energy Economics and Policy, 2013, vol. 3, issue 1, 60-74

Abstract: In this study we analyze the impact of a radical change in nuclear electricity costs on the optimal electricity generation technology mix (EGTM) and constrain the value of information (VOI) on future nuclear costs. We consider three nuclear cost events and four carbon emissions caps. We develop a two-stage framework for energy-economic model MARKAL to eliminate foresight of future nuclear cost movements. We examine how the EGTM responds to these movements under alternative caps and analyze how these movements affect the cost of each cap. We define the expected savings from perfect foresight (ESPF), an upper bound on the VOI. We found that with current technologies, carbon mitigation that does not rely heavily on nuclear electricity is economically insensible. The Strong Cap is extremely costly because it restricts flexibility to respond to cost signals in choosing among technologies. The ESPF is highest under the Medium Cap by a substantial margin.

Keywords: MARKAL; nuclear electricity; value of information; foresight (search for similar items in EconPapers)
JEL-codes: C60 H23 O13 O33 Q40 Q50 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eco:journ2:2013-01-7

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