Carbon Emissions Caps and the Impact of a Radical Change in Nuclear Electricity Costs

TitleCarbon Emissions Caps and the Impact of a Radical Change in Nuclear Electricity Costs
Publication TypeJournal Article
Year of Publication2013
AuthorsLeibowicz, Benjamin, Maria Roumpani, and Peter H. Larsen
JournalInternational Journal of Energy Economics and Policy
Volume3
Start Page60
Issue1
Date Published2013
Keywordsforesight, MARKAL, nuclear electricity, value of information
Abstract

In this study we analyze the impact of a radical change in nuclear electricity costs on the optimal electricity generation technology mix (EGTM) and constrain the value of information (VOI) on future nuclear costs. We consider three nuclear cost events and four carbon emissions caps. We develop a two-stage framework for energy-economic model MARKAL to eliminate foresight of future nuclear cost movements. We examine how the EGTM responds to these movements under alternative caps and analyze how these movements affect the cost of each cap. We define the expected savings from perfect foresight (ESPF), an upper bound on the VOI. We found that with current technologies, carbon mitigation that does not rely heavily on nuclear electricity is economically insensible. The Strong Cap is extremely costly because it restricts flexibility to respond to cost signals in choosing among technologies. The ESPF is highest under the Medium Cap by a substantial margin.

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