PJM Issues Analysis Of EPA Plan To Reduce CO2 Emissions From Power Plants

March 04, 2015

PJM released an economic analysis of the U.S. Environmental Protection Agency’s proposed plan to reduce carbon dioxide emissions from existing power plants. Among the conclusions: fossil steam unit retirements – i.e., coal, oil, and gas – “probably will occur gradually”; as CO2 emission limits decline over time, the financial positions of high-emitting resources “should become increasingly less favorable, with lower-emitting resources displacing them more often in the competitive energy market”; electricity production costs will likely increase with compliance because larger amounts of higher-cost, cleaner generation will be used to meet emissions targets; and the price of natural gas will likely be a “primary driver” of the cost of reducing CO2 emissions if natural gas combined-cycle units become a significant source of replacement generation for coal and other fossil steam units. PJM also said that state-by-state compliance options, compared with regional compliance options, “likely would result in higher compliance costs for most PJM states” and increase the amount of capacity at risk for retirement.

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