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The Environmental Impacts of Fuel Switching Electricity Generators

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  • J. Scott Holladay
  • Steven Soloway

Abstract

We examine the environmental and policy impacts of switching from oil-fired to natural gas-fired generation in New York City (NYC). We create an hourly panel of the fuel use of NYC’s generators and use a semi-parametric approach to identify the fuel-price spread that induces the switch from oil to gas. We find that NYC’s pollution emissions decrease significantly after generators switch to natural gas. Around two-thirds of these emission reductions come from reduced emission intensity within plants, while the remaining third comes from less intense dispatch of oil fired generators. To illustrate the policy impact, we simulate the introduction of a real time pricing (RTP) program in NYC. The results suggest that the environmental benefits of the RTP decreased by nearly 30% due largely to fuel switching. While we focus on RTP, these results can be used to evaluate any energy policy that has a heterogeneous impact across time or the demand profile.

Suggested Citation

  • J. Scott Holladay & Steven Soloway, 2016. "The Environmental Impacts of Fuel Switching Electricity Generators," The Energy Journal, , vol. 37(4), pages 187-213, October.
    • Handle: RePEc:sae:enejou:v:37:y:2016:i:4:p:187-213
    DOI: 10.5547/01956574.37.4.jhol
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    References listed on IDEAS

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    1. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    2. Stephen P. Holland & Erin T. Mansur, 2006. "The Short-Run Effects of Time-Varying Prices in Competitive Electricity Markets," The Energy Journal, , vol. 27(4), pages 127-156, October.
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