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Electricity Markets

Paper Session

Saturday, Jan. 4, 2025 10:15 AM - 12:15 PM (PST)

Hilton San Francisco Union Square, Union Square 1 and 2
Hosted By: International Association for Energy Economics
  • Chair: Alberto Lamadrid, Lehigh University

The Reliability Pricing Model and Coal-Fired Generators in PJM

Stein-Erik Fleten
,
Norwegian University of Science and Technology
Benjamin Fram
,
NHH Norwegian School of Economics
Carl Ullrich
,
James Madison University

Abstract

We study the interplay between coal-fired electric power generator retirements, capacity markets, and environmental policies. We focus on the Reliability Pricing Model (RPM) electricity capacity market in PJM Interconnection L.L.C. (PJM). We find that RPM acts as a channel through which environmental regulations affect the supply mix. Surprisingly, increases in RPM prices lead to more coal retirements even when we control directly for increases in generator profitability induced by higher capacity payments. Increases in RPM prices signal the need for expensive capital improvements and increase the probability of coal retirement.

Nuclear Operations with a High Penetration of Renewables: The Case of France

Nicolas Astier
,
Paris School of Economics
Frank Wolak
,
Stanford University

Abstract

This (work-in-progress) paper aims at studying empirically the behavior of a power system with a high penetration of both nuclear and intermittent renewables (wind and solar). Specifically, our main objective is to explore whether technical constraints on nuclear operations bind more often as more renewable capacity gets installed and, if so, how quickly the occurrence of these constraints increases. Strategic responses will also be of great interest. We study the case of France, a country which, at the end of 2023, hosts about 61GW of nuclear, 23GW of wind and 19GW of solar. Preliminary results suggest that the increase in renewables may indeed be associated with more hours where the minimum output constraint of nuclear units binds. Further work will explore the robustness of these results to more engineering-grounded empirical strategies, and study other outcome variables such as ramping constraints or (planned/forced) outages.

Effects of Rooftop Solar on the Distribution Grid: Evidence from Connecticut

Kenneth Gillingham
,
Yale University
Marten Ovaere
,
Ghent University
Xingchi Shen
,
Shanghai Jiao Tong University

Abstract

This paper estimates the effect of distributed solar generation on distribution feeders, utilizing unique, proprietary data from individual solar installations and feeders in Connecticut. We find that each additional kilowatt (kW) of distributed solar reduces the annual maximum feeder load and the top one percentile of the load by 0.11 kW. In addition, we find evidence of a 3.6% solar rebound effect, primarily occurring in spring and fall, such that it does not affect the impact of distributed solar on peak feeder loading. The economic value of avoided distribution capacity ranges from $1.6 to $3.1 per MWh, significantly below the cost premium of distributed solar compared to utility-scale solar. Our estimate is an important input to policies for optimal solar investment and to the major debate on replacing solar net-metering policies.

Energy Transition and Mental Health

Jancy Ling Liu
,
Georgia Institute of Technology
Kaiyi Wen
,
Binghamton University
Dylan Brewer
,
Georgia Institute of Technology

Abstract

We provide quasi-experimental estimates of the impact of coal and natural gas power plant retirements on the mental health of local residents in the United States. Combining data on power plant retirements and restricted mental health data, we employ a difference-in-differences approach and find that coal-fired power plant retirements have a significant negative impact on mental health, while natural gas retirements have a positive effect. We explore potential mechanisms and find evidence suggesting that economic impacts and local amenity improvements drive these divergent effects. Our findings highlight the importance of considering mental health implications in energy transition policies and strategies.

Discussant(s)
Derek Olmstead
,
Alberta's Market Surveillance Administrator
Omer Karaduman
,
Stanford University
David Brown
,
University of Alberta
Rimvydas Baltaduonis
,
Gettysburg College and SLAC National Accelerator Laboratory
JEL Classifications
  • Q4 - Energy