New York — Adding Pennsylvania to the Regional Greenhouse Gas Initiative cap-and-trade program would roughly double the volume of carbon dioxide emissions traded and would add about $6/MWh to the cost of in-state coal-fired generation and about $2/MWh to the cost of gas-fired generation, an analyst said.
However, while Pennsylvania Governor Tom Wolf, a Democrat, took a preliminary step Thursday toward joining RGGI by issuing an executive order to develop a regulation addressing CO2 emissions from fossil fuel-powered generation with a market-based mechanism consistent with RGGI rules, there is uncertainty regarding the state ultimately joining.
"RGGI prices for 2019 and 2020 delivery moved up by only 1% Thursday, which illustrates a degree of skepticism on behalf of market participants that this linking may actually occur," Jeff Berman, manager of emissions and clean energy at S&P Global Platts Analytics, said Friday.
Benchmark RGGI market prices settled Thursday at $5.44/short ton, which adds roughly $6/MWh to the cost of coal-fired generation and about $2/MWh to the cost of gas-fired generation, Berman said in a client note.
Wolf's executive order gives the state Department of Environmental Protection until July 31, 2020, to develop the regulation that could potentially allow Pennsylvania to join RGGI as soon as 2021.
Emissions in the current RGGI program which covers the six New England states, New York, Maryland and Delaware, were 73 million st of CO2 in 2018, and with New Jersey joining the program next year, an incremental 19 million st of 2018 emissions will be added.
Pennsylvania's 2018 emissions alone equaled 81 million st, potentially doubling the size of RGGI, Berman said.
Coal accounted for about 20% of 2018 RGGI emissions, but roughly 60% of Pennsylvania's power sector emissions are derived from coal. So in addition to increasing the RGGI program size, bringing that volume of coal-fired emissions would also offer "additional potential for emissions reductions from carbon price-based coal-gas fuel switching," Berman said.
"As a major electricity producer, Pennsylvania has a significant opportunity to reduce emissions and demonstrate its commitment to addressing climate change through a program with a proven track record," Patrick McDonnell, DEP secretary, said.
FirstEnergy Solutions, owner of the 1,872-MW Beaver Valley nuclear power plant in Pennsylvania, applauded the news. The company has been pushing for legislation that would provide state-supported funding to nuclear plants struggling with historically low wholesale power prices pulled down by abundant natural gas and stagnant power demand.
"This market-based approach to assigning a cost to carbon emissions in the Commonwealth will eventually play an important role in preserving existing non-emitting and low-emitting generation sources and accelerating the development of additional non-emitting sources," the company said in a statement.
The company said it looks forward to working with the Wolf administration and General Assembly on a near-term solution to prevent the premature closure of any of the state's remaining nuclear reactors.
Large industrial energy users and Pennsylvania House Republicans blasted the executive order, fearing higher energy costs under RGGI and bemoaning the lack of legislative approval.
"The RGGI cost imposed on electric generators in Pennsylvania will increase the cost of electricity to Pennsylvania residents, commercial businesses and large energy intensive, trade-exposed industrial manufacturers," the Industrial Energy Consumers of Pennsylvania argued on their website.
"The people of our Commonwealth, as represented and heard through the General Assembly, have the absolute right to review, approve, or disapprove any plan that has such far reaching implications," the House Republican Caucus said in a statement.
"This move calls for another new energy fee on Pennsylvanians. Taxpayers will pay more every time they flip a switch, make breakfast or charge their phone," the lawmakers said.
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