THE ECONOMICS OF ELECTRIC POWER IN UNITED STATES - Dr. Erik Johnson School of Economics Georgia Institute of Technology
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THE ECONOMICS OF ELECTRIC POWER IN UNITED STATES Dr. Erik Johnson School of Economics Georgia Institute of Technology
OUTLINE 1. Electricity Market Structures in the United States 2. The Southern Electricity Landscape 3. Renewables 4. Electricity and the Environment
ELECTRICITY MARKET STRUCTURES Competition? Competition? • Public Utility Regulatory Policies Act (PURPA) – 1978 • Restructured wholesale and retail electricity
ELECTRICITY MARKET STRUCTURES
PJM SUPPLY CURVE
PJM SUPPLY CURVE
PJM SUPPLY CURVE
FRACKING HAS MADE GAS COMPETITIVE WITH COAL
FRACKING HAS MADE GAS COMPETITIVE WITH COAL
RENEWABLE CAPACITY IS GROWING EVERYWHERE
LEVELIZED COST OF ELECTRICITY
ELECTRICITY IN THE SOUTH Vertically Integrated Electricity Providers • Investments in new capacity approved by Public Service Commission • Utility creates an Integrated Resource Plan • Forecasts future demand, retirements, investments • Plans how to make investments • Usually has a guaranteed rate of return on capital • Complete pass through of fuel costs
ELECTRICITY TRENDS HAVE BEEN
AMPLIFIED IN THE SOUTH
.6 .5
Fraction Generation
.2 .3 .4
.1
1990 1995 2000 2005 2010
Year
South - Coal Rest of US - Coal
South - NG Rest of US - NG
South - Nuclear Rest of US - Nuclear
Source: EIA Forms 906, 920, 923MANY COAL POWER PLANTS HAVE BEEN RETIRED IN THE SOUTH
RIPE FOR RETIREMENT
NUCLEAR!?!?
2010 2017NATURAL GAS CAPACITY
NATURAL GAS PIPELINES
RENEWALBES
RENEWABLE PORTFOLIO STANDARDS
Renewable Portfolio Standard Policies
www.dsireusa.org / February 2017
WA: 15% x 2020* ME: 40% x 2017
NH: 24.8 x 2025
ND: 10% x 2015
MT: 15% x 2015 MN:26.5% VT: 75% x 2032
x 2025 (IOUs)
OR: 50%x 2040* 31.5% x 2020 (Xcel)
MA: 15% x 2020(new resources)
(large utilities) 6.03% x 2016 (existing resources)
SD: 10% x 2015 WI: 10% NY:50% x 2030
MI: 15% x RI: 38.5% x 2035
2015 2021*† CT: 27% x 2020
IA: 105 MW IN: OH: 12.5% NJ: 20.38% RE x 2020
NV: 25% x IL: 25% 10% x x 2026 + 4.1% solar by 2027
UT: 20% x
2025* CO: 30% by 2020 x 2026 2025† PA: 18% x 2021†
2025*† (IOUs) *† VA: 15%
CA: 50% KS: 20% x 2020 MO:15% x DE: 25% x 2026*
x 2025† DC
x 2030 2021 MD: 25% x 2020
NC: 12.5% x 2021 (IOUs)
DC: 50% x 2032
NM: 20%x 2020 OK: 15% x
AZ: 15% x
(IOUs) 2015 SC: 2% 2021
2025*
TX: 5,880 MW x 2015*
29 States + Washington
U.S. Territories DC + 3 territories have a
HI: 100% x 2045 NMI: 20% x 2016 Guam: 25% x 2035 Renewable Portfolio
PR: 20% x 2035 USVI: 30% x 2025
Standard
(8 states and 1 territories have
renewable portfolio goals)
Renewable portfolio standard
Renewable portfolio goal *† Extra credit for solar or customer-sited renewables
Includes non-renewable alternative resourcesINEFFICIENT INVESTMENT AND
ABATEMENT FROM RPS (1)
RPS Requirements in US file:///Users/erikjohnson/Documents/generator_data/paper/heart... Renewable Potential in US
file:///Users/erikjohnson/Documents/generator_data/pape
Low High No RPS Low High
Stringency Renewable Potential
Source: Johnson, E. P. (2014). Measuring the Productive Inefficiency in Renewable Electricity Generation. Mimeo, 1–30.INEFFICIENT INVESTMENT AND
ABATEMENT FROM RPS (2)
300
Billions of Dollars
200
100
0
2000 2010 2020 2030
Year
Current State RPS Costs
Equivalent National RPS Costs
Cost of Geographic Restrictions
Source: Johnson, E. P. (2014). Measuring the Productive Inefficiency in Renewable Electricity Generation. Mimeo, 1–30.RENEWABLES ARE COMPLEMENTS TO
FOSSIL GENERATION
Source: Verdolini, E., Vona, F., & Popp, D. (2016). Bridging the Gap: Do Fast Reacting Fossil Technologies Facilitate
Renewable Energy Diffusion. NBER Working Paper 22454.SOLAR CAPACITY IN US
NET METERING IN THE US • 44 states had net-metering policies in 2015 • 22 states had renewable portfolio standards with solar or distributed generation carve-outs
NET METERING
Net Metering
www.dsireusa.org / July 2016
DC
41 States + DC,
AS, USVI, & PR have
mandatory net
metering rules
KEY
U.S. Territories:
State-developed mandatory rules for certain utilities (41 states + DC+ 3 territories)
AS PR
No statewide mandatory rules, but some utilities allow net metering (2 states)
VI GU
Statewide distributed generation compensation rules other than net metering (4 states + 1 territory)SOLAR SUBSIDIES BY STATE
Source: Johnson, E. & Matisoff, D. (2016). Everybody Loves Cash! The comparative effectiveness of solar incentives.SOLAR CAPACITY ADDITIONS BY STATE
UTILITY ISSUES WITH SOLAR
The Utility “Death Spiral”GT-SOLAR MODULE
• PJM load shape
Inputs
Outputs
• Supply rates
• PJM hourly prices
• Distribution rates
• Customer load
profiles • Average bills
• Solar production • Solar-participant
profiles bills
• Rate design GT SOLAR • Solar non-
participant bills
• SREC prices MODEL • All results by
• Electricity demand customer class
• NG prices and scenario
• Solar installation
patterns
• Solar
requirementsRESULTS: IMPACT ON SUPPLY RATES
Result 1. High solar installation increases electricity supply rates: Tradeoff
between supply curve shift and SREC costs
$0.16
Supply Rate
2015
$0.14
2030 Base Case
$0.12 2030 High Case
$0.10
Price per kWh
$0.08
$0.06
$0.04
$0.02
$-
Summer Winter Summer Summer Winter Cost Winter Cost Summer On- Summer Off- Winter On- Winter Off-
Cost Cost - Night - Night Peak Cost Peak Cost Peak Cost Peak Cost
Residential Small Commercial C&I
Source: Johnson, E. et al. (2017). Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs., Energy
Policy, Forthcoming.RESULTS: HIGH SOLAR INCREASES
RESIDENTIAL DISTRIBUTION RATES
Result 2. Distribution costs rise as much as 30%; results depend on installation patterns
and rate design
Distribution Rate
30%
25%
20%
15%
% Difference
10%
5%
0%
Yearly Avg Summer Winter Yearly Avg Summer Winter Night Yearly Avg Summer Annual Yearly Avg Annual Summer
-5% Energy Energy Demand Demand
Res SCom LC/I
-10%
-15%
2030 Base Case 2030 High Case 2030 High Case - High Grid 2030 High Case - High Res
Source: Johnson, E. et al. (2017). Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs., Energy
Policy, Forthcoming.RESULTS – AVERAGE BILLS
Result 3. Changes in bills depends on who installs solar; rate design.
- Results highlight shifting in cost allocation
Change In Bill Relative to 2015
Residential Small Commerical C&I
8%
6.13%
6%
3.8%
4%
2.5%
2% 1.33%
Percent Change
0.1%
0%
-2% -1.0%
-2.1% -2.1%
-4% -3.06%
-4.4%
-6%
2030 Base Case 2030 High Case
-6.3% -6.3%
-8%
2030 High Grid 2030 High Residential
Source: Johnson, E. et al. (2017). Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs., Energy
Policy, Forthcoming.RESULTS –PARTICIPANT BILLS
Result 4. Net Metering Participants Reduce Electricity Bills; Avoid Costs
- Results depend on rate design and installation patterns
Partcipant Bill Changes
Base Case High Case High Grid High Residential
0%
-10%
-20%
Percent Change in Bill
-30%
Residential Bills
-33%
Scom Bills
-40%
C&I Bills
-44%
-50% -47%
-50%
-53% -53%
-60% -56%
-58%
-70%
-73% -73%
-75%
-80% -76%
Source: Johnson, E. et al. (2017). Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs., Energy
Policy, Forthcoming.RESULTS – NON PARTICIPANT BILLS
Result 5. Non-participants absorb cost increases. Cost increases depend on
quantity of solar, installation patterns, and rate design.
Non-Participant Bill Changes
16%
14%
14%
12%
12% 11% 11%
10%
Percent Change in Bill
8% 9%
Residential Bills
8%
Scom Bills
C&I Bills
6% 5%
5%
4%
4%
2%
2% 1% 1%
0%
Base Case High Case High Grid High Residential
Source: Johnson, E. et al. (2017). Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs., Energy
Policy, Forthcoming.RESULTS – BILLS OVER TIME
Residential Bills Over Time
• Kink points represent changes in peak
$165
hour of grid demand
$160
• Shifts from 4pm to 8pm
$155
Base Case
• Demand charges and distribution
$150
High Case charges change accordingly
$145
High Grid
$140
High Residential
$135
$130 $720
Small Commercial Bills Over Time
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
$710
$700
$690
$680
Base Case
$670
High Case
$660
High Grid
$650
High Residential
$640
$630
$620
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Source: Johnson, E. et al. (2017). Peak Shifting and Cross-Class Subsidization: The Impacts of Solar PV on Changes in Electricity Costs., Energy
Policy, Forthcoming.ENVIRONMENTAL IMPACTS OF ELECTRICITY GENERATION
ENVIRONMENTAL IMPACTS OF ELECTRICITY GENERATION
AVERAGE EMISSIONS VS MARGINAL EMISSIONS Source: Graff Zivin, J. S., Kotchen, M. J., & Mansur, E. T. (2014). Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies. Journal of Economic Behavior & Organization, 107, 248–268.
HOURLY MARGINAL EMISSIONS Source: Graff Zivin, J. S., Kotchen, M. J., & Mansur, E. T. (2014). Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies. Journal of Economic Behavior & Organization, 107, 248–268.
THANK YOU
Thank You
Dr. Erik Paul Johnson
School of Economics
Georgia Institute of Technology
erik.johnson@econ.gatech.eduYou can also read
