3. Fossil energy prices are uncertain and can alter dispatch and investment decisions among different fossil plants. The historical variability and uncertainty in natural gas prices, in particular, has caused substantial changes in the dispatch and investment in natural gas plants over time. Moreover, forecasts of future natural gas prices have been decidedly poor and, because future fossil generation mixes are strongly dependent on these forecasts, those mixes are also highly uncertain. In addition, new discoveries or sources of fossil energy can significantly alter future fossil energy price expectations. For example, new discoveries and recovery practices for shale gas may help stabilize and lower natural gas prices below what has been observed historically, thus increasing the share that natural gas power plants contribute to electric generation (MIT 2010; EIA 2010b), although countervailing environmental concerns may limit those impacts. 4. New power plant operational needs and practices are likely to become more common with higher levels of variable and uncertain generation supply from wind and solar, in particular. Specifically, greater operational flexibility in fossil energy power plants, including more frequent and greater cycling and ramping, may be required to accommodate the additional variability in renewable energy supply. Some recent studies have shown that operation and maintenance (O&M) costs, emissions, and heat rates may be negatively affected by this increased need for operational flexibility (GĂśransson and Johnsson 2009; Troy et al. 2010; Agan et al. 2008). These impacts are expected to influence the future role of coal and natural gas power plants, particularly when high levels of renewable electricity sources are deployed, but remain uncertain and may be mitigated by new technical solutions for new generating units and retrofitting existing units (Tilley and McCalla 2004) to enable greater operational flexibility with a lower cost penalty. However, some new power plants, particularly natural gas combustion turbine and combined cycle plants, are designed for flexible operation without these penalties. Further work is needed to more accurately understand and quantify these impacts. The uncertainties in these factors, and their numerous potential combinations, prevent their full consideration in RE Futures. The models and analyses included in RE Futures partially address these issues by including the following: (1) a SO2 cap based on the Clean Air Interstate Rule requirements issued by the EPA in March 2005; (2) additional carbon policy regulatory risk for new coal generators based on the methodology used in EIA (2010a); and (3) additional operational costs for fossil unit ramping and cycling (see Short et al. 2011 for details). Nonetheless, the uncertainties described above may lead to future fossil energy generation decisions that differ markedly from those reflected in RE Futures. These differences would appear in the baseline scenarios, but also in the residual fossil energy generation mix for the higher renewable scenarios. For example, some combination of new environmental regulations, a federal carbon policy, increased accessibility of shale gas, and the need for greater fossil plant operational flexibility might be expected to lead to greater amounts of natural gas generation compared with what is presented in RE Futures. In addition, because of the coarse temporal resolution of the “timeslicesâ€? used in ReEDS, electric generation for ancillary services is not estimated in ReEDS, and electricity generation from natural gas generation is therefore likely underestimated. While the results presented in RE Futures reflect only a narrow range of possible future pathways for fossil energy generation given the narrow range of input assumptions, different outcomes even for this narrow range are possible.
Renewable Electricity Futures Study Volume 1: Exploration of High-Penetration Renewable Electricity Futures 1-15