A new study from the University of Pennsylvania’s Kleinman Center for Energy Policy finds Pennsylvania’s decision to open its wholesale and retail electric power markets to competition in 1996, through its “Electricity Generation Customer Choice and Competition Act” has resulted in lower prices, improved operating efficiency, increased capacity, and significant reductions in air pollution and carbon dioxide emissions.
Pennsylvania is part of the PJM Interconnection LLC, the nation’s largest wholesale electricity market in the United States. The competitive market allows within PJM allows “low natural gas commodity prices to be quickly passed through to the electricity sector.
“The lower price of gas has created lower compensation for everybody else that’s participating in the market. So for some of the least efficient, high-cost units, they’re not able to generate enough revenue to keep themselves financially operating,” Simeone said to Energywire. A large number of coal-fired plants have been retired in Pennsylvania, replaced by natural gas powered units. As a result, the study reports, coal-fired generation has dropped 16.8 percent since 1996 while natural gas generation increased by 26 percent.
This shift has resulted in number of positive changes.
In real terms, the average annual wholesale energy price of $36.26 per megawatt hour (mwh) in 2015 was lower than the 2000 price of $42.28 mwh, within the PJM market, indicating competition has benefited power consumers. At the same time, from 1995 through 2015, there was a 17 percent net increase in installed capacity within Pennsylvania’s electric power market, better ensuring system reliability.
In addition, between 2005 and 2015 on a pounds of emission mwh basis, carbon dioxide emissions decreased by 21 percent, nitrogen oxides decreased by 70 percent, and sulfur dioxides decreased by 81 percent largely attributable to a significant shift from coal-fired generation to natural gas powered electricity.
H. Sterling Burnett, Ph.D., ([email protected]) is the managing editor of Environment & Climate News.
Christina Simeone and John Hanger, “A Case Study Of Electric Competition Results In Pennsylvania,” Kleinman Center for Energy Policy, October 28, 2016: https://heartland.org/publications-resources/publications/a-case-study-of-electric-competition-results-in-pennsylvania