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Managing carbon regulatory risk in utility resource planning: Current practices in the Western United States

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  • Barbose, Galen
  • Wiser, Ryan
  • Phadke, Amol
  • Goldman, Charles

Abstract

Concerns about global climate change have substantially increased the likelihood that future policy will seek to minimize carbon dioxide emissions. As such, even today, electric utilities are making resource planning and investment decisions that consider the possible implications of these future carbon regulations. In this article, we examine the manner in which utilities assess the financial risks associated with future carbon regulations within their long-term resource plans. We base our analysis on a review of the most recent resource plans filed by 15 electric utilities in the Western United States. Virtually all of these utilities made some effort to quantitatively evaluate the potential cost of future carbon regulations when analyzing alternate supply- and demand-side resource options for meeting customer load. Even without federal climate regulation in the US, the prospect of that regulation is already having an impact on utility decision-making and resource choices. That said, the methods and assumptions used by utilities to analyze carbon regulatory risk, and the impact of that analysis on their choice of a particular resource strategy, vary considerably, revealing a number of opportunities for analytic improvement. Though our review focuses on a subset of US electric utilities, this work holds implications for all electric utilities and energy policymakers who are seeking to minimize the compliance costs associated with future carbon regulations.

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  • Barbose, Galen & Wiser, Ryan & Phadke, Amol & Goldman, Charles, 2008. "Managing carbon regulatory risk in utility resource planning: Current practices in the Western United States," Energy Policy, Elsevier, vol. 36(9), pages 3300-3311, September.
    • Handle: RePEc:eee:enepol:v:36:y:2008:i:9:p:3300-3311
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    1. Carvallo, Juan Pablo & Sanstad, Alan H. & Larsen, Peter H., 2019. "Exploring the relationship between planning and procurement in western U.S. electric utilities," Energy, Elsevier, vol. 183(C), pages 4-15.
    2. Wiser, Ryan & Bolinger, Mark & Heath, Garvin & Keyser, David & Lantz, Eric & Macknick, Jordan & Mai, Trieu & Millstein, Dev, 2016. "Long-term implications of sustained wind power growth in the United States: Potential benefits and secondary impacts," Applied Energy, Elsevier, vol. 179(C), pages 146-158.
    3. Zhifang Zhou & Tao Zhang & Kang Wen & Huixiang Zeng & Xiaohong Chen, 2018. "Carbon risk, cost of debt financing and the moderation effect of media attention: Evidence from Chinese companies operating in high‐carbon industries," Business Strategy and the Environment, Wiley Blackwell, vol. 27(8), pages 1131-1144, December.
    4. Abadie, Luis M. & Chamorro, José M., 2009. "Income risk of EU coal-fired power plants after Kyoto," Energy Policy, Elsevier, vol. 37(12), pages 5304-5316, December.
    5. Barbose, Galen & Wiser, Ryan & Heeter, Jenny & Mai, Trieu & Bird, Lori & Bolinger, Mark & Carpenter, Alberta & Heath, Garvin & Keyser, David & Macknick, Jordan & Mills, Andrew & Millstein, Dev, 2016. "A retrospective analysis of benefits and impacts of U.S. renewable portfolio standards," Energy Policy, Elsevier, vol. 96(C), pages 645-660.
    6. Hannum, Christopher & Cutler, Harvey & Iverson, Terrence & Keyser, David, 2017. "Estimating the implied cost of carbon in future scenarios using a CGE model: The Case of Colorado," Energy Policy, Elsevier, vol. 102(C), pages 500-511.
    7. Wiser, Ryan & Millstein, Dev & Mai, Trieu & Macknick, Jordan & Carpenter, Alberta & Cohen, Stuart & Cole, Wesley & Frew, Bethany & Heath, Garvin, 2016. "The environmental and public health benefits of achieving high penetrations of solar energy in the United States," Energy, Elsevier, vol. 113(C), pages 472-486.
    8. Anthony G. Patt & Elke U. Weber, 2014. "Perceptions and communication strategies for the many uncertainties relevant for climate policy," Wiley Interdisciplinary Reviews: Climate Change, John Wiley & Sons, vol. 5(2), pages 219-232, March.
    9. Barradale, Merrill Jones, 2014. "Investment under uncertain climate policy: A practitioners׳ perspective on carbon risk," Energy Policy, Elsevier, vol. 69(C), pages 520-535.

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