VALLEY FORGE, Pa., Jan. 28 /PRNewswire/ -- A PJM Interconnection study
concludes that the leading legislative proposals* of the 110th Congress to
reduce carbon dioxide (CO2) emissions from fossil-fuel generation plants could
increase wholesale electricity prices from $7.50 per megawatt hour (MWh) to
$45/MWh in 2013.
The study, "Potential Effects of Proposed Climate Change Policies on PJM's
Energy Market," also noted that at those prices the annual market-wide cost of
power increase would range from $5.9 billion to $36 billion.
"We recognize that legislation to reduce carbon emissions will have a
significant impact on PJM, our members and their customers," noted PJM CEO
Terry Boston. "This study was undertaken to help inform decisions of our
members and the discussions in Washington and elsewhere. We're not trying to
influence or shape policy, but do believe as the largest grid in North America
that we're in a good position to demonstrate with how climate control
proposals will affect wholesale market prices."
The study's calculations are based on projected carbon prices within ranges
identified by the U.S. Environmental Protection Agency and the Energy
Information Administration from $10 to $60 per ton and on typical residential
use of 750 kilowatt-hours (kWh) per month.
The study used market models to simulate in 2013 the impact of climate change
legislation whereby cap-and-trade or carbon tax policies place a cost on
emitting CO2. The year 2013 is examined as the year when major legislative
proposals would be effective, and also because it represents PJM's five-year
planning horizon, where there is a greater likelihood of predicting accurately
the planned new generation and transmission system upgrades that will be
commercially operational.
PJM's study is one of the few analyses that have examined the near term
impacts of climate change policy on a regional basis as opposed to more
macro-economic national analyses. The findings assume no offsets for making
homes, businesses and industry more energy efficient or efforts to reduce
electricity demand.
According to the study, however, reducing electricity consumption by two
percent to 10 percent could lower prices between $3/MWh and $13/MWh, or
between $3 billion and $17 billion per year. The same reductions in
consumption would lower CO2 emissions between 12 million and 60 million tons
in 2013.
Wind, a renewable energy resource, represents about 40 percent of all new
generation projects proposed in the PJM region. Analyzing the impact of the
addition of 15,000 megawatts (MW) of wind by 2013, about one-third of wind
generation in the interconnection queue, revealed that CO2 emissions would be
reduced by nearly 35 million tons and wholesale market prices collectively
would decline by $3.55 billion to $4.74 billion, without calculating the
effect of CO2 prices.
The study, led by PJM Senior Economist Dr. Paul Sotkiewicz and the Market
Simulation Department, also determined that only beginning at CO2 prices of
about $40/ton will natural gas combined cycle generating units will be run in
place of coal generating units on a large scale. A $40/ton emission cost
results in an increase in wholesale electricity costs of approximately $30/MWh
and a residential price increase of about $22.50/month.
PJM will hold a media briefing Wednesday from 2 p.m. to 3 p.m. EST via
telephone to discuss the study and answer questions. Please contact the PJM
News to register for the briefing.
* The Lieberman/McCain Bill (S.280), the Bingaman/Specter Bill
(S.1766) and the Lieberman/Warner Bill (S.2191).
PJM Interconnection ensures the reliability of the high-voltage electric power
system serving 51 million people in all or parts of Delaware, Illinois,
Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio,
Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.
PJM coordinates and directs the operation of the region's transmission grid,
which includes 6,038 substations and 56,350 miles of transmission lines;
administers a competitive wholesale electricity market; and plans regional
transmission expansion improvements to maintain grid reliability and relieve
congestion. Visit PJM at www.pjm.com.
The full study can be found at PJM Interconnection.
SOURCE PJM Interconnection
PJM News, toll free, +1-866-PJM-NEWS (+1-866-756-6397)
