Power Plant Heat-Rate Efficiency as a Regulatory Mechanism: Implications for Emission Rates and Levels

42 Pages Posted: 19 Jan 2019 Last revised: 6 Sep 2019

See all articles by J. Wesley Burnett

J. Wesley Burnett

College of Charleston; Economic Research Service; Economic Research Service

L. Lynne Kiesling

Northwestern University; University of Colorado Denver; Knowledge Problem LLC

Date Written: September 3, 2019

Abstract

In August 2018, the U.S. Environmental Protection Agency (EPA) proposed a new policy – the Affordable Clean Energy rule – to reduce greenhouse gas (GHG) emissions from existing coal-fired electric generating units and power plants. The new rule establishes emissions guidelines, including heat-rate efficiency improvements, for states when developing plans to limit GHG emissions. Past studies have indicated that heat-rate efficiency improvements can increase electricity output, leading to a reduction in emissions rates and an increase in emissions levels – a rebound effect that can temper the emissions-reduction benefits of plant-level heat-rate efficiency. This study adds to the literature by examining data on the relationship of plant-level heat-rate efficiency on the rate and level of GHG emissions. We explored three different types of GHGs – carbon dioxide, methane, and nitrous oxide. Controlling for variation across operators, our results suggest that gains in heat-rate efficiency are associated with higher levels of all three pollutants. Specifically, we found that a ten percent increase in heat-rate efficiency led to an average seven-to-nine percent increase in the level of GHG emissions. Our analysis highlights the need to further study the full effects of heat-rate efficiency policies before such rules are enacted.

Keywords: greenhouse gas emissions, thermal efficiency, electricity policy, regulation, electric utilities

JEL Classification: L51, L94, Q40, Q53, Q58

Suggested Citation

Burnett, James Wesley and Kiesling, L. Lynne, Power Plant Heat-Rate Efficiency as a Regulatory Mechanism: Implications for Emission Rates and Levels (September 3, 2019). Available at SSRN: https://ssrn.com/abstract=3312952 or http://dx.doi.org/10.2139/ssrn.3312952

James Wesley Burnett

College of Charleston ( email )

5 Liberty Street, 413 Beatty Center
Department of Economics, College of Charleston
Charleston, SC 29401
United States

Economic Research Service ( email )

1800 M Street, NW
Washington, DC 20036-5831
United States

Economic Research Service ( email )

1800 M Street, NW
Washington, DC 20036-5831
United States

L. Lynne Kiesling (Contact Author)

Northwestern University ( email )

375 E Chicago Ave
Chicago, IL 60611
United States

University of Colorado Denver ( email )

1475 Lawrence St
Denver, CO 80238-3363
United States

Knowledge Problem LLC ( email )

Chicago, IL 60613
United States

HOME PAGE: http://www.lynnekiesling.com

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