The Impact of Long-Term Generation Contracts on Valuation of Electricity Generating Assets under the Regional Greenhouse Gas Initiative

Dallas Burtraw, Karen Palmer and Nathan Wilson (n.e.wilson@gmail.com)

RFF Working Paper Series from Resources for the Future

Abstract: The Regional Greenhouse Gas Initiative is an effort by nine states to constrain carbon dioxide emissions from the electric power sector using a cap-and-trade program. This paper assesses the importance of long-term electricity contracts under the program. We find that 12.2% of generation will be accounted for by long-term contracts in 2010, affecting select nuclear, hydroelectric, and cogeneration units. The contracts will have a negligible effect on the wholesale marginal cost of electricity and a small effect on retail price. States may want to consider contracts on a case-by-case basis when making decisions about the initial distribution of emission allowances, but they should account for effects on the portfolio of plants owned at the firm level, not the effects on individual facilities. Because of their relatively small effect, it seems unnecessary to allow the existence of long-term contracts to dictate the design of the overall program.

Keywords: climate; state policy; Regional Greenhouse Gas Initiative; long-term contracts; electricity (search for similar items in EconPapers)
JEL-codes: L14 L94 Q54 Q58 (search for similar items in EconPapers)
Date: 2005-08-08
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (6)

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Working Paper: The Impact of Long-Term Generation Contracts on Valuation of Electricity Generating Assets under the Regional Greenhouse Gas Initiative (2005)
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