A new planning guide for states “changes a lot of the traditional arguments” about the best balance of energy efficiency and new supply to meet the requirements of the U.S. Environmental Protection Agency’s Clean Power Plan.
“Shifting natural gas prices are making it a challenge for states to place their bets on the most cost-effective and least risky ways to comply with impending carbon regulations,” Midwest Energy News explains. The model, developed by the University of Michigan and Lansing-based 5 Lakes Energy, “considers the risks that would apply to ratepayers as states develop new combinations of energy sources and efficiency into their portfolios.”
“The choice of natural gas versus renewables to replace obsolete coal plants depends on what you expect future prices to be,” said 5 Lakes Principal Douglas Jester. “If you make a bet on natural gas and then the price of that goes up fairly rapidly, it takes time to develop the alternative. How much are you losing and how costly is it in the meantime?”
“On the other side, if you go the renewables route, you’ve committed money to those and if gas turns out to be cheaper, how much are you losing in the meantime?”