The impact of future carbon dioxide (CO2) regulation is a significant risk in long-term utility resource planning. Improper accounting for this risk when evaluating resources may result in poor resource decisions and higher costs for the region’s ratepayers. This study is an examination of the rate of avoided CO2 emissions over time under different water and CO2 price conditions.
In comparison to the opportunity to purchase a similar resource on the market, a resource that avoids CO2 emissions, such as conservation, mitigates risk. The opportunity for risk mitigation depends on what the next available megawatt of generating resource is available and how much CO2 it emits. The marginal resource is the least variable cost resource available and needed to meet the next megawatt of load.
In the Northwest, the average CO2 production rate from all electricity generation is low in comparison to other parts of the Western Electric Coordinating Council region (WECC). This is because there are vast hydroelectric and wind generation resources in the Pacific Northwest. These resources have low operating costs, no CO2 emissions, and dispatch before coal-fired or natural gas-fired generating units. However, since the next megawatt of generation avoided would be available from the marginal unit, not an average of all the units online, the emissions of the marginal unit would best represent the avoided carbon risk of serving the last unit of load.