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Power sector carbon dioxide emissions sensitive to policy changes

Hydrocarbon Engineering,

The US Environmental Protection Agency (EPA) has issued a proposed rule that would require reductions in CO2 emissions from existing fossil fueled electric power plants. The proposal includes emissions target rates for each state, measured as compounds of CO2 emissions/MWH of covered generation, as well as guidelines for the development, submission and implementation of state plans.

According to the US Energy Information Administration (EIA), approximately 40% of 2012 energy related CO2 emissions resulted from electricity generation. Burning coal generated approximately 75% of those emissions. Today, policies to reduce CO2 emissions could result in less consumption of coal in favour of natural gas, which emits approximately 40% as much CO2/kWh as typical coal fired generation when used in a combined cycle plant.

The EIA Annual Energy Outlook 2014 (AEO2014) Reference case projections, which assumes current laws and regulations and therefore does not include the EPA proposal, show several CO2 related trends:

  • CO2emissions from the electric power sector increase from 2035 million t in 2012 to 2271 million t in 2040, an increase of 12%.
  • The share of power sector CO2 emissions from natural gas increases from 24% to 27%, as natural gas fired power plants account for most of the capacity that is added to meet increases in demand and to replace retiring plants.
  • Few new coal plants are added, as uncertainty about the future of carbon regulations influences capacity decisions.

The AEO2014 also includes alternative cases that impose a fee on energy related CO2 emissions. These side cases incorporate an initial CO2 value of US$ 10/t (GHG10 case) and US$ 25/t (GHG25 case) in 2015, rising by 5%/y. The GHG10 case is also combined with high oil and gas resources, which results in lower gas prices and encourages greater natural gas use. For these case, EIA projects the following results:

  • 2025 power sector CO2 emissions are 16% and 49% lower in the GHG10 and GHG25 cases with frees, respectively, and 23% lower when the GHG10 case is combined with high oil and case resource case.
  • 2040 CO2 emissions reductions range from 36% - 82% across the three side cases. This range is greater than the corresponding changes in other sectors and indicates that the electric power industry is typically the most cost effective sector to achieve reductions in response to economy wide CO2 fees.
  • Natural gas fired generation increases sharply beginning when CO2 fees are assumed to be introduced in 2015, followed by more nuclear and renewable plant additions as fees increase.
  • Natural gas fired generation levels off around 2030 in the GHG10 case, and it begins to decline after 2025 in the GHG25 case.
  • In the high oil and gas resource case without CO2 fees, lower natural gas prices result in higher gas fired generation and CO2 emissions in the power sector as more new natural gas plants are built instead of nuclear and renewable capacity.
  • Natural gas fired generation continues to increase through 2040 when the fees for the GHG10 case are combined with the lower gas prices from the high oil and gas resource case.

Adapted from a press release by Emma McAleavey.

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