PJM Issues Report on CPP Compliance

Earlier this month, PJM released a report analyzing the Clean Power Plan’s impact on electricity economics and reliability.  The report analyzed seven different compliance pathways and found that PJM would be able to both achieve the CPP’s CO2 emissions reduction goals and maintain resource adequacy.

The CPP gives states the option to take either mass-based or rate-based approaches to CO2 emissions reduction.  The PJM report evaluates four mass-based compliance pathways and three rate-based ones, as well as a reference scenario that models a future without the CPP.  The mass-based approaches vary in terms of whether states enforce mass-based limits on just existing sources or both existing sources and new ones, and whether states allow sources to trade CO2 allowances across state lines.  The rate-based approaches vary in terms of whether states act individually or as a region, and whether they use separate emissions rates for different sources or a weighted average rate.

According to the report, each of the compliance pathways satisfies CPP’s CO2 emissions goals, preserves resource adequacy, and reduces total congestion.  In addition, in every compliance scenario the primary resources replacing fossil steam resources and actively setting PJM energy prices are natural gas combined cycles.

But, despite these similarities, the various approaches do have different long-term impacts. Under both mass-based and rate-based pathways, regional approaches lead to lower costs than does individual state compliance.  Rate-based approaches to compliance result in lower wholesale energy prices but higher capacity market prices compared to both the reference scenario and mass-based approaches.  Rate-based approaches also result in larger amounts of new renewable resources, absent regulation of emissions from new sources.  Mass-based approaches lead to greater retirement of coal resources, although the geographic distribution depends on whether states take a regional or intrastate approach.  New nuclear generation was not economically viable under any of the scenarios examined in the report.

Whether any of the pathways analyzed by the PJM report will ultimately be implemented depends on that fate of the CPP itself.  Two weeks from today, the D.C. Circuit will hear 218 minutes of oral arguments on challenges to the CPP.

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