A one-two punch: Joint eects of natural gas abundance and renewables on coal-red power plants

Harrison Fell and Daniel Kaffine

No 340063, CEnREP Working Papers from North Carolina State University, Department of Agricultural and Resource Economics

Abstract: Since 2007, coal-red electricity generation in the US has declined by a stunning 25%. At the same time, natural gas-red generation and wind generation have dramatically increased due to technological advances and policy interventions. We examine the joint impact of natural gas prices and wind generation on coal generation, with a particular focus on the interaction between low natural gas prices and increased wind generation. Exploiting detailed daily unit-level data, we estimate the response of coal-red generation across four transmission regions within the US. Low natural gas prices and increased wind generation have both led to reductions in coal-red generation. Furthermore, we nd evidence that the interaction between natural gas prices and wind generation is statistically and economically significantcant, and led to a greater reduction in coal-red generation than would be explained by either factor alone. In some regions, marginal responses of coal-red generation to natural gas prices in 2013 were several times what they would have been had wind generation remained at 2008 levels. Similar sensitivities were found for responses to wind generation. As a consequence, our results suggest that policies such as carbon pricing combined with those that increase wind generation would be complementary in terms of their impact on coal-red generation.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 50
Date: 2014-11
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Persistent link: https://EconPapers.repec.org/RePEc:ags:nccewp:340063

DOI: 10.22004/ag.econ.340063

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