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Given the recent release of the Biden Plan—a $2 trillion
jobs and clean energy plan proposed by the Democratic nominee for
president, Joe Biden— there is renewed interest in cases
involving faster and deeper decarbonization. IHS Markit explores
decarbonization in two major modeling cases: our comprehensive
power outlook through 2050, also called the "Planning Case," and
"Fast Transition," our alternative case evaluating how both the
power sector and the economy as a whole would have to evolve to
achieve significantly faster and higher decarbonization.
Fast Transition deeply decarbonizes the US and Canadian
economies and power sectors, achieving economywide carbon emission
reductions exceeding 70% in both countries by 2050 (and greater
than 90% decarbonization in the power sectors). You can learn more
about the Fast Transition pathway to decarbonization through our
summary post, as well as
download the Fast Transition case's full Executive Summary.
Case Study: How does a case with deep decarbonization
alter the performance outlook for various power sector
technologies? Using our
North American Power Analytics product, we looked at the
average capacity factor by technology over time in New England in
both the Planning Case and Fast Transition:
Natural gas-fired combined cycle gas turbine (CCGT) plants are
split into two buckets based on their heat rates, to assess how
plant efficiency affects operations in the future under the two
cases. In the Planning Case, natural gas-fired CCGTs see their
capacity factors decline before leveling out in the latter half of
the study period. In Fast Transition, however, the capacity factors
continue to decrease through the 2040s and drop well under 20% by
2050 (both heat rate buckets).
Renewables do not see large differences in capacity factors
between the two cases, although offshore wind sees higher
fleet-wide capacity factors in the early 2020s as offshore wind is
built more aggressively in Fast Transition, and newer offshore wind
plants have higher capacity factors than the existing Block Island
plant.
A more interesting way to delve into the cross-technology
differences between the cases is to view the generator energy
margins, or the revenues each plant makes in the energy market
minus the variable costs of operation, including fuel costs,
variable operation and maintenance costs, startup costs, and
emissions costs. The evolution of each technology's energy margin
is presented below.
There are some notable differences between the two cases with
respect to the energy margin paths for the various technology
types. While natural gas-fired CCGTs don't have high energy margin
forecasts in the Planning Case, they have even lower margins in
Fast Transition.
Renewables also see lower margins over time in the Fast
Transition case. Onshore wind, offshore wind, and solar all see
their energy margins decline in the last twenty years of Fast
Transition, with their energy margins ending below half the margin
values realized in the Planning Case in 2050. We know that
renewables are not running less in the Fast Transition case, so
much of the difference is from the lack of Federal carbon price in
the Fast Transition case and higher renewable penetration levels
cannibalizing the captured prices, revenues, and energy margins of
renewable generators.
Drew Bobesink, Senior Research Analyst at IHS Markit,
focuses on power market simulation and is a member of the North
American Power and Renewables team.
Barclay Gibbs, Senior Director of Power and Renewables
at IHS Markit, specializes in power market analysis, due diligence,
and regulatory advisory for the North American Power and Renewables
team.
