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The Environmental Impacts of Fuel Switching Electricity Generators

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  • J. Scott Holladay and 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.

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  • J. Scott Holladay and Steven Soloway, 2016. "The Environmental Impacts of Fuel Switching Electricity Generators," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    • Handle: RePEc:aen:journl:ej37-4-holladay
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    Cited by:

    1. Abrell, Jan & Kosch, Mirjam & Rausch, Sebastian, 2022. "How effective is carbon pricing?—A machine learning approach to policy evaluation," Journal of Environmental Economics and Management, Elsevier, vol. 112(C).
    2. Jan Abrell & Mirjam Kosch, 2022. "The Impact of Carbon Prices on Renewable Energy Support," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(3), pages 531-563.
    3. Holladay, J. Scott & LaRiviere, Jacob, 2017. "The impact of cheap natural gas on marginal emissions from electricity generation and implications for energy policy," Journal of Environmental Economics and Management, Elsevier, vol. 85(C), pages 205-227.

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