--> --> Abstract: Impact of Regulation on the Power Sector: Opportunities for Natural Gas, by Svetlana Ikonnikova; #90124 (2011)

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Making the Next Giant Leap in Geosciences
April 10-13, 2011, Houston, Texas, USA

Impact of Regulation on the Power Sector: Opportunities for Natural Gas

Svetlana Ikonnikova1

(1) Bureau of Economic Geology, University of Texas at Austin, Austin, TX.

Power generation using natural gas emits less carbon dioxide and other air pollutants than other fossil fuels. Growing environmental and climate change concerns have resulted in an increasing number of energy and environmental policies. Certain emission regulations have already been implemented - Renewable Portfolio Standards, non-attainment zones, Best Available Control Technology, Maximum Achievable Control Technology - to name a few. These have had positive and negative impacts, depending upon your perspective. Other policies are being discussed, which also affect investment decisions, bringing risks and uncertainty into projects, and making some technologies more expensive and riskier than others.

The growing abundance and accessibility of natural gas is leading to worldwide shifts in energy policies and in particular power sector shaping regulation. Factors include new global transportation options, like LNG, and new resources of shale gas. Lower natural gas prices and corresponding overall lower fossil energy costs tend to defer energy conservation efforts and stimulate natural gas produced power and encourage retirement (or curtailment) of aging coal-fired generation. In addition, natural gas is the primary fuel to backup renewable sources of energy such as wind, and hence, with more wind farms installed there will be a corresponding increased demand for natural gas. The surprising result of the analysis is that lower natural gas prices appear not to be the primary driver shaping the generation portfolio. Instead, imposed regulation and incentives - including those affecting return on investment - and expected future emissions regulation play a more significant role in determining the energy and technology mix.

We will review key policies and regulations having an impact on the power sector, namely electricity prices, investments in new generating capacity, and choice of fuels. The analysis of command-and-control policies versus market-based instruments will be presented, with a discussion on the inefficiencies in policies’ formulations. The impact of fuel prices and expectations about future policies will also be explored. Results argue for a careful examination of key attributes required to align policy options that are intended to increase efficient natural gas use with those designed to lower overall greenhouse gas and other emissions.