Costs and Benefits of Saving Unprofitable Generators: A Simulation Case Study for US Coal and Nuclear Power Plants

Abstract:

We use a detailed power sector model, E4ST, to project multi-decade effects of preventing a set of unprofitable generators from retiring. We simulate the “Grid Resiliency Pricing Rule” proposed by the US Department of Energy in 2017, and several variations, as an illustrative case study for similar national, regional, or state policies in the US or elsewhere. In the proposed policy, eligible coal and nuclear generators would be guaranteed revenues sufficient to ensure profitability. The simulation results show that, in 2025, $7.6 billion in subsidy is required to guarantee coal and nuclear generator profits. If in effect from 2020 to 2045, the policy delays the retirement of 25 GW of coal capacity and 21 GW of nuclear capacity, causes 27,000 premature deaths, increases carbon dioxide emissions by 420 million short tons, and has costs with a net present value of $263 billion during that period. The policy's net non-environmental cost for electricity end-users is $72 billion and net benefit for generation owners is $28 billion. In alternative scenarios, preventing retirement of only nuclear capacity produces positive total net benefit, while guaranteeing recovery of only going-forward costs shifts $77 billion of costs from customers to generators, but does not reduce emissions or total net cost.

Highlights

• As modeled, rule delays retirement of 25 GW of coal and 21 GW of nuclear capacity.
• Over 25 years, higher SO2 and NOX emissions cause 27,000 premature deaths in the US.
• Electricity consumer loss is $72 billion while generator profit gain is $28 billion.
• Total net cost is $263 billion, of which $217 billion are environmental damages.
• Preventing the retirement of only nuclear generators produces positive net benefits.