Reducing Carbon Intensity in Restructured Markets: Challenges and Potential Solutions

The U.S. electric power sector is in the early stages of transitioning from a reliance on carbon intensive generation sources to a system based on low-carbon sources. In this thesis, I present analyses of four different aspects of this transition, with an emphasis on the PJM Interconnection. The effects of bulk electricity storage on the PJM market I analyze the value of three storage technologies in the PJM day-ahead energy market, using a reduced-form unit commitment model with 2010 data. I find that large-scale storage would increase overall social welfare in PJM. However, the annualized capital costs of storage would exceed social welfare gains. Consumers would save up to $4 billion annually, largely at the expense of generator surplus. Storage modestly increases emissions of CO2 and other pollutants. The external costs and benefits of wind energy in PJM Large deployments of wind create external costs and benefits that are not fully captured in power purchase agreements. I find that wind’s external costs in the PJM market are uncertain but significant when compared to levelized PPA prices. Pollution reduction benefits are very uncertain but exceed external costs with high probability. The climate and health effects of a USA switch from coal to gas electricity generation I analyze the emission benefits created by a hypothetical scenario in which all U.S. coal plants are switched to natural gas plants in 2016. The net effect on warming is unclear; results are highly sensitive to the rate of fugitive methane emissions and the efficiency of replacement gas plants. However, the human health benefits of such a switch are substantial. The costs of building and operating new gas plants likely exceed the health benefits. Robust resource adequacy planning in the face of coal retirements Over the next decade, many U.S. coal-fired power plants are expected to retire, posing a challenge to system planners. I investigate the resource adequacy requirements of the PJM Interconnection, and how procuring less capacity may affect reliability. I find that PJM’s 2010 reserve margin of 20.5% was sufficient to achieve the stated reliability standard with 90% confidence. PJM could reduce reserve margins to 13% and still achieve levels of reliability accepted by other power systems.