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ERCOT Analysis: CPP Could Raise Retail Prices 16% by 2030

October 21, 2015 By Cheryl Kaften

The Electric Reliability Council of Texas (ERCOT) released an updated “Analysis of the Impacts of the Clean Power Plan” on October 16, related to the final rule released by the U.S. Environmental Protection Agency in August.

Based on the research findings, ERCOT anticipates that the impacts of changes related to the Clean Power Plan mandates could increase retail power prices by up to 16 percent by 2030, not including the impacts of new transmission projects or other investments that could be needed to support compliance.

ERCOT estimates that the final CPP, by itself, will result in the retirement of at least 4,000 megawatts (MW) of coal generation capacity – which would pose challenges to grid reliability, especially “when the effects of the CPP are combined with other environmental regulations [such as] EPA’s proposed Regional Haze Federal Implementation Plan (FIP) for Texas.”

Indeed, ERCOT CEO Trip Doggett warned, “We continue to have concerns about the potential impacts on planning and operation of the ERCOT power grid. Based on our analysis, we are especially concerned about reliability risks associated with multiple unit retirements within a short timeframe.

“As new technologies emerge and market conditions change, the grid is changing,” Doggett said. “Our market is designed to encourage new, more efficient technologies, but that change needs to occur at a pace that supports continued reliability.”

The analysis considers the impacts of the plan predicated on mass-based approaches (measuring tons of emissions) to achieve emissions targets for the ERCOT region, modeling four scenarios:

  • Baseline: This model is based on current trends in the ERCOT region and market, and considers announced retirements and current regulatory requirements.
  • CO2 Limit: This narrative considers a system limit on emissions, allowing the model to select the lowest-cost resource option without regard to market design or other considerations associated with implementation.
  • CO2 Price: This exemplar includes an estimated price for CO2 emissions that would cause the ERCOT region to achieve the compliance targets.
  • CO2 Price and Regional Haze: This game plan also includes a CO2 price and models the combined impacts of the CPP and the proposed Regional Haze Federal Implementation Plan within the ERCOT region.

In scenarios that include a price for carbon emissions, study results indicate that more than 14,000 MW of utility-scale solar, 9,000 MW of wind capacity, and nearly 3,000 MW of new gas-fired combustion turbines would be added to achieve compliance within the ERCOT market.

The model, which is consistent with ERCOT long-range planning studies, assumes a gradual increase in natural gas prices over time, to a little more than $6 per million British Thermal Units (MMBtu) by 2030, and a continued decrease in capital costs associated with wind and solar development.

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