Cost Analysis and Emissions Projections under Power Sector Proposals in Reconciliation

Nicholas Roy, Dallas Burtraw and Kevin Rennert
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Nicholas Roy: Resources for the Future
Dallas Burtraw: Resources for the Future
Kevin Rennert: Resources for the Future

No 21-15, RFF Issue Briefs from Resources for the Future

Abstract: Resources for the Future (RFF) deployed its electricity market model, Haiku, to examine the expected effects on the electricity sector of three policy proposals being considered for the budget reconciliation process: Clean Energy for America Act (CEAA) tax credit extensions, the Clean Electricity Performance Program (CEPP), and a carbon fee. Policy impacts were evaluated in terms of clean electricity generation, emissions reductions, and cost burden on consumers. We find:In 2030, the CEAA tax credit extensions achieve 69 percent clean generation, the CEAA combined with the CEPP achieves 78 percent clean generation, and the CEAA, CEPP, and a central case carbon fee achieve 91 percent clean generation.In 2030, the CEAA and CEPP together achieve 81 percent reduction from 2005 emissions levels in the electricity sector. Adding the central case carbon fee yields a 94 percent reduction.The combination of the CEAA, CEPP, and a central case carbon fee yields a 4.3 percent reduction in nationally averaged retail electricity prices for the 2022-2031 period.Policy scenario details can be found in the RFF issue brief “Emissions Projections under Alternative Climate Policy Proposals” and general modeling assumptions are detailed in the appendix of the issue brief “Emissions Projections for a Trio of Federal Climate Policies.” The CEAA as modeled includes direct pay to generators but excludes the energy efficiency investments to allow for direct comparison of cost-effectiveness across different supply-side policy investments. The CEAA as written is technology neutral, but Haiku only represents new builds of solar and wind. The CEPP is modeled as a $150 per MWh incentive to new solar and wind generation for the first year of operation and does not include a penalty for not achieving performance targets.[1] We assumed policies are implemented as described without strategic behavior from load serving entities. All policies modeled are exclusive to electricity generation and do not account for economy wide electrification, demand response (consumption is fixed for all policy scenarios), revenue use, or a broader economy-wide carbon fee. All dollar values are reported in 2018 USD and emissions estimates in metric tons. The Haiku model solves over a 30-year time horizon with outputs from 2020 to 2040.

Date: 2021-10-07
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