States that are better-situated to meet carbon emission levels under the Clean Power Plan still might suffer from higher compliance costs if they don't work with their neighbors, according to an economic analysis by the PJM Interconnection.
"State-by-state compliance options, compared to regional compliance options, likely would result in higher compliance costs for most PJM states," according to a report from the regional grid organization, which serves 13 states in or near the Mid-Atlantic and Midwestern regions, as well as the District of Columbia. "This is because there are fewer low-cost options available within state boundaries than across the entire region."
U.S. EPA's Clean Power Plan asks states to write their own plans to reduce electricity-sector emissions by differing amounts, either working alone or together.
Because the electric grid is so interconnected, the study implies that states with lower compliance costs might still see higher regional electricity prices if they don't share carbon-reducing resources with states that are working toward tougher goals.
"The implication is that even though the ... regional compliance scenario resulted in a CO2 price of zero, and some states on an individual basis also have a CO2 price of zero, there is still a cost in the form of higher [locational marginal price] and load energy payments to all states by choosing individual state compliance," according to state-level data.
PJM's study instituted a carbon price to predict the impact of the Clean Power Plan in 17 scenarios, examining varying levels of renewable resources, energy efficiency, natural gas prices, nuclear generation and new natural gas combined-cycle units. The report looked at the cost of achieving mass-based targets, or caps on the amount of carbon dioxide that states would emit.
The report says the modeling can be compared to an emissions tax or a system for states to swap credits for emissions or reductions. Either way, compliance would be ensured for the whole region.
PJM operates in 14 jurisdictions: Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. At least four states -- Indiana, Illinois, Ohio and West Virginia -- would not meet their mass targets for 2020 if they tried to comply individually.
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