Fuels for Electric Power Generation: Regulatory, Policy, and Economic Pressures
Global Climate Change and U.S. Law (2d ed., Michael B. Gerrard & Jody Freeman, eds.) (Forthcoming)
48 Pages Posted: 15 Dec 2012
Date Written: December 12, 2012
The electric power sector is facing significant new economic and regulatory pressures that are changing the electric generation mix. In this chapter in the forthcoming book Global Climate Change and U.S. Law, we examine the regulation of fuels used for electric power generation, focusing on regulatory trends and economic considerations that are likely to have the largest impacts on greenhouse gas emissions and, therefore, climate change. Perhaps the biggest driver of change is the prospect of stable, relatively low prices for natural gas for the foreseeable future. As gas becomes cost-competitive with coal as an electricity generation fuel, it is commanding a growing share of the electric generation market, usually at the expense of coal. Increasingly stringent regulation of the environmental externalities associated with coal mining and coal combustion seem likely to hasten this trend. But the prospect of inexpensive natural gas discourages the development of other, less carbon intensive electric generation sources, including nuclear and renewable generation. Prospective investors in new generation face an increasingly competitive wholesale electricity market: new nuclear and renewable plants will compete with natural gas-fired plants for customers, and price will be the focus of that competition. Policies like state renewable portfolio standards and financial incentives for nuclear and renewables will continue to drive some development of those technologies. However, absent a significant change in the relative costs of these electric generation fuels, the creation of additional market demand for renewables or nuclear power will require the creation of new policies driving that demand.
Keywords: greenhouse gas, electricity, natural gas, renewables, energy, climate change, nuclear, coal
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