The Fall of Coal: Joint Impacts of Fuel Prices and Renewables on Generation and Emissions

Abstract

Since 2007, US coal-fired electricity generation has declined by a stunning 25 percent. Detailed daily unit-level data is used to examine the joint impact of natural gas prices and wind generation on coal-fired generation and emissions, with a focus on the interaction between gas prices and wind. This interaction is found to be significant. Marginal responses of coal-fired generation to natural gas prices (wind) in 2013 were larger, sometimes much larger, than the counterfactual with 2008 wind generation (gas prices). Additionally, these factors jointly account for the vast majority of the observed decline in generation and emissions. (JEL L94, L95, Q35, Q38, Q42, Q53)

The roles of energy markets and environmental regulation in reducing coal‐fired plant profits and electricity sector emissions

“…However, because coal‐fired units were quite profitable in the absence of the shocks, neither of these shocks is sufficient by itself to cause profits to fall to zero. It is the combined effect of the shocks that causes the retirements, which is consistent with Fell and Kaffine (), who show that natural gas prices and wind power interact positively with one another to reduce coal‐fired generation.…”

“…Like the findings in the recent literature (e.g., Fell and Kaffine, ), our results confirm the effects of natural gas prices on coal‐ and gas‐fired generation, but in contrast to the empirical literature that has examined natural gas prices and local air pollution (Linn and Muehlenbachs, ; Johnsen, LaRiviere, and Wolff, forthcoming), we show that the natural gas price shock had little effect on NO x emissions. This demonstrates the importance of accounting for long‐run interactions between emissions caps and market shocks and offers evidence that claims about the environmental benefits of low natural gas prices may be overstated.…”

“…The economics literature suggests that on the margin, low natural gas prices reduce coal‐fired generation, but it does not provide direct evidence for the aggregate effects of natural gas prices and other market forces and does not identify the causes of the retirements. Several recent articles examine the statistical relationships among natural gas prices, wind generation, fossil fuel‐fired generation, and emissions (e.g., Cullen and Mansur, ; Holladay and LaRiviere, ; Fell and Kaffine, ; Linn and Muehlenbachs, ; Johnsen, LaRiviere, and Wolff, forthcoming). However, because of their reduced‐form approach, these articles focus only on the short‐run and marginal effects of natural gas prices and wind generation; long‐run responses may differ.…”

Productivity Spillovers From Pollution Reduction: Reducing Coal Use Increases Crop Yields

“…It has been replaced by technologies that emit less pollution—mostly natural gas but also wind and other renewables. Multiple government policies have targeted emissions from electric power plants, but the main driver of this move away from coal has been the declining price of natural gas due to hydraulic fracturing (fracking), which dramatically lowered the cost of natural gas extraction (Coglianese, Gerarden, and Stock 2017; Fell and Kaffine 2018). In addition, emissions from the remaining coal‐fired power plants declined substantially over the same period due to adoption of abatement technology (Fowlie 2010).…”

Turning the corner on US power sector CO2 emissions—a 1990–2015 state level analysis

“…Our analysis contributes to the literature that examines the impact of the recent increases in electricity generation from renewables and natural gas on US power sector CO 2 emissions (for renewables see e.g. ; Cullen, 2013, Kaffine et al 2013, Callaway et al 2015, Novan 2015, Millstein et al 2017and for natural gas;Lu et al 2012, Knittel 2015, Kotchen and Mansur 2016, Holladay and LaRiviere 2017, Linn and Muehlenbachs 2018 for both factors EIA-US Energy Information Administration 2018a, Fell and Kaffine 2018 for the period 2008-2013; and for a descriptive analysis of CO 2 intensity trends, Schivley et al 2018). Most of these studies, however, are limited in scope: they either provide estimates of the marginal emissions impact or the CO 2 reduction impact during a limited time period, without yielding an overview and quantification of the relative contributions for the range of factors behind recent US CO 2 reductions.…”