PENNSYLVANIA STATE UNIVERSITY

Carbon Dioxide is one of the primary greenhouse gases present in the Earth’s atmosphere and is driving global climate change. The power sector is the single largest source of carbon pollution in the United States. The EPA has recently designed a federal rule called the Clean Power Plan to reduce carbon dioxide emissions from existing power plants in the U.S. The purpose of this work is to study the impact of the Clean Power Plan on the PJM Interconnection and to compare the impacts of different strategies to achieve state emissions goals. Scenarios are designed to evaluate the environmental impacts and cost-effectiveness of three different compliance strategies and ascertain how these strategies interact with one another. The three main strategies analyzed in this thesis are 1) participating in interstate CO2 emissions trading, 2) increasing the operational efficiency of existing coal-fired power plants, and 3) increasing the amount of wind generation capacity. This thesis uses a unit commitment model to simulate a range of different scenarios and policy structures, and I compare the resulting cost and generation mix tradeoffs. I simulate the enforcement of the Clean Power Plan federal rule in this model by placing a limit on the total tons of CO2 that can be emitted over a certain period of time. The strategies simulated do not change the overall CO2 emissions, which is always equal to the emission cap imposed, but they vary with respect to the cost of compliance with the Clean Power Plan and the fraction of coal generation at risk of premature retirement. Electricity prices and total system cost will increase with compliance in all scenarios studied, as compared with a baseline case with no emissions limit. Coal generation is displaced by natural gas generation in all scenarios, when compared with the no carbon cap baseline. The relative economic and regulatory effectiveness of the strategies is framed in terms of the tradeoffs between the cost of meeting the cap and coal’s share of cumulative generation. The overall result is that increasing wind capacity reduces the risk of premature coal unit retirements whereas improving coal efficiency reduces economic risks, and that states compliance costs can reduce by cooperating within an emissions trading framework.