Measuring the Environmental. Wind Power. Joseph Cullen Harvard University Center for the Environment

Transcription

1 Measuring the Environmental Benefits of Wind Power Joseph Cullen Harvard University Center for the Environment

2 Motivation Environmental policies to reduce emissions Energy Policy Subsidies Green energy production Wind power Conventional generators emissions offset Important question: What is the quantity (value) of emissions offset due to wind subsidies?

3 Research Question Two parts 1. How much investment do subsidies induce? Evidence indicates that investment is highly dependent on subsidies Assume wind farms would not have been installed without subsidy 2. What is the quantity and value of offset emissions? Depend on generating unit specific substitution patterns Substitute for dirty generators (coal) Substitute for cleaner more efficient generators

4 Contribution Little empirical research on quantifying offsets Engineering simulations of wind entry on grid This paper Measures actual offset emissions On a grid with operating wind farms Observed behavior for conventional generators

5 Overview Fine scale data electricity data Quasi experimental variation in wind Generator specific substitution i patterns Emissions profiles total offset emissions Emissions value compared to subsidies

6 Results On aggregate 78% gas, 21% coal Per MWH Wind: 1 lb NOx 2 lbs SO 2 ¾ ton CO 2 Value of emissions depends on CO 2 At more than $25/ton CO 2, the subsidy/mwh > value of offset emissions/mwh

7 Wind Subsidies Needs subsidies to operate competitively Output based subsidies 1. Federal Production Tax Credit (PTC) $20 MWH tax credit for first 10 years Federal subsidies have expired 3 times since State Renewable Portfolio Standards $5 $15 MWH subsidy Wholesale power $30 $50MWH

8 Wind Capacity Expansion

9 Electricity Markets Demand Inelastic Highly variable Supply Conventional Generation Baseload: coal, nuclear Market Peak: CC gas, gas turbine, gas steam Wind power Low marginal cost Not dispatchable Daily /seasonal variation Electricity is not storable Supply=Demand each second

10 Daily Variation

11 11000 Seasonality 100 Wind Outpu t Demand month Wind Output Demand

12 The image part with relationship ID rid2 was not found in the file. ERCOT GRID

13 Data Plant output every 15 min 180 plants + windfarms Characteristics of each plant Temperature data (hourly) Plant level emissions data SO 2, NO x, CO 2 MWH lbs Pollution

14 Model Wind affects output through price only. Changes the residual demand curve Reduced form model model the effect of wind on output directly. Identification Exploit the exogeneity of wind power Wind farms do not have control over output Wind is low cost producer Cannot store fuel nor output

15 Model Wind output is exogenous, but not random. d output s eoge ous,but ot a do. Diurnal and seasonal variations Peak and seasonal demand Trends Capacity changes Input price tends Control for seasonality and trends in a reduced form model Random variation in wind output

16 Estimation Controls in the model Local and system hourly weather Date dummies Day specific effects Fuel, wind capacity, demand growth, etc. Interval dummies Diurnalvariation in demandandwind Separate regression for each plant on the grid Plant specific substitution coefficient Y ijd = i0 + βi1 β Wind + Zα + D + I + ε i id ij ijd

17 Offset Emissions β Plant output reduction ˆi1 β EPA plant emissions characteristics offset emissions Summing over all units gives the total i i ff emissions offset

18 Results Annual offsets: 6,540 tons of SO 2 3,237 tons of NO x 4,852,000 tons of CO 2.

19 Valuing Emissions Results Cap and Trade Regulated Emissions (NO x, SO 2 ) Cap and Trade Regulated Emissions (NO x, SO 2 ) Aggregate emissions level does not change No social benefit Firms reduce costly abatement Permit prices = abatement costs Constant over some range Unregulated emissions (CO 2 ) Real reductions in emissions of CO 2 Estimates of marginal damage costs (Tol, 2005)

20 Value of Offset Emissions Driven mostly by CO2 emissions Subsidies S b $30 MWH over 10 years $20 MWH over 20 years

21 Conclusion Identified substitutes for wind power Included both coal and natural gas plants Calculated and valued offset emissions Justification for subsidies driven by estimated CO 2 benefits marginal damage costs of CO 2 > $25/ton Least cost policy to achieve outcome??