Expensive, Ineffective, & Occasionally Counterproductive: Clean Peak Standards Simulation Results for New England

Abstract

Clean Peak Standards (“CPS”) have been proposed as a method to better align renewable generation with periods of higher electricity demand and higher emissions, by requiring that a percentage of peak period demand be met with renewables or clean-charged energy storage. Proponents argue that CPS can reduce costs, reduce emissions, and improve market efficiency.

Using a production-cost and capacity-expansion optimization model, we assess how CPS may affect wholesale market outcomes. We parameterize the model to approximate the New England system, and we test combinations of CPS and Renewable Portfolio Standards (RPS) that reflect needs into the 2040s.

In some instances, we find that CPS are ineffective and expensive; in others, we observe that CPS make the grid dirtier and more expensive. CPS offer de minimis reductions in production costs (<1%), suggesting efficiency is not improved. Depending on formulation, CPS lead to modest increases in carbon emissions (<2%), or modest reductions. Reductions, when present, come at high cost: RPS can reduce emissions by 5-10 times more, per dollar spent. Despite the paucity of benefits, CPS increase system costs (<5%). These results suggest that regulators can achieve similar market and environmental outcomes, at lower cost, if they simply do not implement CPS.

Keywords: Policy Effects, Energy Storage, Renewable Electricity, GHG Emissions Reductions, Wholesale Electricity Markets