January 28, 2009 / 6:35 PM / 9 years ago

Grid operator says CO2 controls will cost billions

NEW YORK, Jan 28 (Reuters) - PJM, the largest U.S. electricity grid operator, said on Wednesday that a study it commissioned indicates that Congressional proposals to reduce carbon dioxide emissions from power plants could boost power prices in its region by between $5.9 billion and $36 billion per year.

The Mid-Atlantic/Midwest grid operator said the study also showed energy efficiency programs and additional wind power would cut that price hike by billions of dollars and reduce CO2 emissions by millions of tons.

The study, by PJM Senior Economist Dr. Paul Sotkiewicz and the market simulation department, concluded wholesale power prices would climb from $7.50 per megawatt hour to $45/MWh in 2013.

Reducing electric consumption by 2 percent to 10 percent could lower prices between $3/MWh and $13/MWh, or between $3 billion and $17 billion per year, and lower CO2 emissions between 12 million and 60 million tons in 2013.

Installing 15,000 megawatts (MW) of wind power by 2013, about a third of the grid’s proposed wind projects, would cut CO2 emissions by nearly 35 million tons and reduce wholesale prices by $3.55 billion to $4.74 billion, the study found.

The study used models to simulate the impact of cap-and-trade or carbon tax policies. It based its calculations on projected carbon prices within ranges identified by government agencies from $10 to $60 per ton and on typical residential use of 750 kilowatt-hours (kWh) per month.

About 40 percent of new generation projects proposed in PJM are wind power farms.

CEO Terry Boston said in a release that PJM was not trying to influence policy, but believed “as the largest grid in North America that we’re in a good position to demonstrate how climate control proposals will affect ... prices.”

NATURAL GAS VERSUS COAL

The study said CO2 prices would have to reach $40/ton before natural gas combined cycle power plants would be run in place of coal-fired units on a large scale. At $40 a ton, wholesale electric costs would rise by about $30/MWh and boost residential prices about $22.50 a month.

Coal, which is much cheaper than other fossil fuels such as natural gas, generates about half the electricity used in the United States. But a coal plant produces about twice as much CO2 as a natural gas-fired plant, and CO2 is a greenhouse gas associated with global warming. A 1,000 MW coal plant produces about 6 million tons of CO2 per year.

PJM said that at the end of 2007 there were about 66,000 MW of coal-fired capacity and 23,000 MW of combined cycle gas.

PJM operates a grid serving 51 million people in Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. It also administers a $20 billion wholesale power market with a generating capacity of more than 168,000 MW. (Reporting by Scott DiSavino; Editing by David Gregorio)

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