IEEE Power & Energy Magazine - July/August 2015 - 27

figure 6. London Air pollution Level 9-Very High: 3 April 2014. [Source: David Holt, https://www.flickr.com/photos/
zongo/13599753564, Creative Commons (CC) License.]

(although learning rates are rapidly reducing capital costs
of renewables). But the system overall would gain from the
substantially cheaper operating costs. Again, this shift creates a natural tension; however, as high cost fuel oil units
are replaced with generation with zero or near-zero operating costs; in the case of wind and solar, the system short-run
marginal costs will erode the profitability many of the fossil
based generators on the system.
In addition, there has been a decoupling of natural gas
prices in some world markets, primarily the North American natural gas market, from the rest of the world. Many
regions rely on the additional supply of LNG for their natural
gas supplies, including parts of Europe and Asia. Due to the
limited supplies of LNG in the world market and the high
development costs for new LNG, the cost of LNG is reflected
in both cost of natural gas supplies in these regions. In North
America, however, with the large scale of shale natural gas
development, natural gas supplies have created an overhang
of supply and driving down natural gas prices.
This natural gas price decoupling has created economic
opportunity in North America to build export LNG facilities to increase the supply of LNG to the rest of the world
markets. While there has been some political opposition
locally to LNG export facilities in North America, this
development may have tendency to increase the price of natural gas in domestic markets in the United States and Canada
and decrease price pressures on those countries receiving the
additional LNG supplies.

july/august 2015

Environmental Regulations
Environmental regulations have had both an indirect and
direct impact on electricity supplies and the cost of supply and utility rates. The most common form of environmental regulations is typically the control of air emissions
from fossil fuel generating plants, for conditions like those
shown in Figure 6.
For example, air quality environmental regulations are
currently changing the landscape of generation in North
America, with coal‑fired power plants subject to the Mercury
and Air Toxics Standards, requiring significant reductions in
emissions of mercury, acid gases, and toxic metals with plant
upgrade requirements of expensive emission clean up technologies. A coal plant operator with high coal prices or located in
a market with lower wholesale electricity prices (often tied to
natural gas prices as noted previously) could make the additional investment in equipment like scrubbers uneconomical
to the plant. Plant operators also have to weigh whether they
can seek to pass on these additional costs to rate payers. In
spot markets for electricity, the additional capital costs could
only be recouped from higher spot prices for electricity. In the
regulated markets, the installation of additional environmental equipment would have to be approved by the regulator for
inclusion in the rates passed on to consumers.
The U.S. Energy Information Agency estimates that 60
gigawatts (GW) of coal fired generation capacity will retire
by 2020, or nearly one third of the total coal fleet of 310 GW
in the United States. How much of this fleet is replaced with

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Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2015