MISO: Clean Power Plan costs largely hinge on natural gas prices

Dive Brief:

  • Analysts with the Midcontinent ISO have created a new model estimating Clean Power Plan compliance costs, and their data highlight the wide range of possible expenses and just how much they on difficult-to-predict natural gas prices.
  • Platts reports MISO compliance costs could range from $5.8 billion on up to $104 billion, with a large part of the variability due to the range of natural gas prices modeled between $2.30/MMBtu and $6.30/MMBtu.
  • MISO's model included five variables: coal retirements, carbon prices, gas prices, renewable portfolio standards and levels of energy efficiency.

Dive Insight:

Natural gas is the biggest variable in how much it will cost MISO to meet new greenhouse gas emissions limits, based on the grid operator's new modeling. The analysis considered coal retirements from 7 GW to 28 GW, and CO2 costs from $10 to $100/short ton.

Renewable standards were considered at the existing 14% level of penetration in MISO, as well as 20% and 30%. 

The least and most expensive combinations that hit right around prescribed targets both called for no additional coal retirements. The higher-cost option leaned more heavily on energy efficiency in a climate of expensive natural gas.

Interim reductions, on the way to a 32% cut in carbon emissions, are targeted for 2022 with a final deadline of 2030.

States can choose a mass- or rate-based approach, the latter of which places carbon limits per MWh of energy production. A growing number of studies have found regional compliance options are the most likely to save consumers money. MISO, along with the Southwest Power Pool and PJM Interconnection, have all released analysis showing states will save billions of dollars if they work together.

Most state regulators reportedly prefer a mass-based approach for its ease of inclusion in emissions trading and the potential for more liquid markets.

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Filed Under: Generation Regulation & Policy