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Natural Gas Combined Cycle Utilization: An Empirical Analysis of the Impact of Environmental Policies and Prices

Abstract:
Recent climate regulations include increased utilization of natural gas-fired combined cycle (NGCC) generators as a means for offsetting coal generation to reduce carbon emissions. There have been substantial increases in utilization for some generators, but most remain below baseload levels. This paper examines the factors that have driven NGCC utilization from 2003-2014. I run difference-in-difference models to evaluate the relationships between environmental policies and natural gas prices on NGCC utilization. Both low natural gas prices and the Clean Air Interstate Rule (CAIR) drive increases in utilization. However, the size of the impact by CAIR depends on the age of the plant. I use the estimates from this model for a counterfactual analysis which reveals CAIR had nearly twice the impact of low natural gas prices on increased utilization in nationwide averages.Keywords: Natural Gas, Utilization, Environmental Policy, Natural Gas Prices

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Energy Specializations: Natural Gas – Markets and Prices; Natural Gas – Policy and Regulation; Energy and the Environment – Carbon Capture and Sequestration; Energy Modeling

JEL Codes: Q54: Climate; Natural Disasters and Their Management; Global Warming, Q41: Energy: Demand and Supply; Prices, Q53: Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling, Q35: Hydrocarbon Resources, L94: Electric Utilities, L95: Gas Utilities; Pipelines; Water Utilities, Q42: Alternative Energy Sources, Q28: Renewable Resources and Conservation: Government Policy

Keywords: Natural Gas, Utilization, Environmental Policy, Natural Gas Prices

DOI: 10.5547/01956574.39.5.kste

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Published in Volume 39, Number 5 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.