The issue of climate change and its potential economic consequences for energy investments and the economy as a whole – though quite uncertain due to lack of policy resolution – cannot be ignored in energy asset valuation, utility resource planning, load forecasting, fuel development, and long-term risk management. A patchwork of pricing and control policies is emerging, including regional carbon pricing initiatives, externality penalties imputed for the cost of greenhouse gas (GHG) pollution, renewable resource standards and incentives, state-specific GHG reduction goals, and federal rules for operational controls or carbon dioxide (CO2) emissions limits.
As an example, if the U.S. Environmental Protection Agency's (EPA) Clean Power Plan (CPP) is upheld, or something akin to it allowing some degree of regional trading and choice in methods of compliance, it would affect the entire power industry as well as gas and coal producers and pipeline companies. States would need to choose among several compliance pathways over the next few years, and optimal choices would depend on what other states would do and states’ priorities to achieve various potential objectives such as cost minimization, wholesale price impact, retaining in-state coal and nuclear units, expanding in-state renewables, among others.
The Brattle team has a detailed understanding of the GHG exposure in terms of costs, emissions, and mitigation opportunities in each state, which allows us to evaluate policies and their impacts on value and supply plans for generation owners. We have several types of analytical tools to address key questions such as impacts on specific plant values, wholesale prices, revenue streams for low/zero-CO2 measures and investments, the need for additional grid infrastructure to support clean resources, and operational/investment efficiencies under alternative methods to allocate emissions allowances.
For Salt River Project (SRP), Brattle experts evaluated the EPA’s development of proposed CO2 rate targets in Arizona and assessed the reasonableness of the level and projected pace of emission reductions. The authors conducted a detailed assessment of the assumptions and modeling approach in the EPA’s IPM simulations, and identified areas of improvements. SRP included the resulting whitepaper that summarized the Brattle findings in their public comments to the EPA.
Brattle experts have prepared a series of reports examining the economic and environmental impacts of nuclear power plants at both the national and state-specific levels. The economic impacts included GDP, employment and tax revenues, and the environmental impacts which addressed changes in criteria pollutant emissions and carbon emissions. The study prepared for New York has been particularly influential in policymaking regarding the promotion of zero carbon emission generating sources. Brattle has also applied such regional modeling to determine the value and market consequences of Zero Emission Credits (ZECs) as uplift payments for nuclear plants to preserve their societal value as clean resources.
For the National Hydropower Association, Brattle experts conducted an analysis of the EPA’s proposed rule for regulating CO2 from existing sources under Section 111(d) of the Clean Air Act, focusing on potential economic impact to hydropower. We summarized key aspects of the rule, and assessed how the compliance options for states could differ from the Best System of Emission Reduction (BSER) options in setting the target rates, and how states can utilize hydropower (existing or new) as a compliance option under the rule.
A Brattle team built and ran simulation models to forecast power prices and GHG allowance prices in California and the Western U.S. through 2050, and to assess how the GHG prices and electric sector emissions would be affected by the early retirement of nuclear plants. The modeling team simulated the GHG emissions and price-sensitive emissions reductions from the electric and non-electric (transportation, industrial and commercial) sectors covered under the AB32 program. The model accounts for the banking of allowances over time, as well as the GHG allowance requirements for power imports into California, with and without the additional GHG restrictions under the Clean Power Plan.
Complex business and legal matters require intellectually honest and analytically rigorous solutions that are thoughtfully developed and clearly communicated. We apply economic and finance principles with uncompromising quality to achieve clarity in the face of complexity. Independent analysis, responsive execution, and compelling presentation. That’s Brattle. That’s the Power of Economics.