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Summary

Future paths of electric vehicle adoption in the United States: Predictable determinants, obstacles and opportunities
Author(s):
James E. Archsmith, University of Maryland
Erich Muehlegger, University of California, Davis and NBER
David S. Rapson, University of California at Davis
Abstract:

This paper identifies and explores major determinants of electric vehicle (EV) demand in order to inform widely-held aspirations for market growth. Archsmith, Muehlegger, and Rapson use a simple discrete choice framework to estimate the contribution of intrinsic (no-subsidy) EV demand growth, net-ofsubsidy EV cost declines (e.g. batteries) and government subsidies to future EV market share in the United States from 2020-2035. Geographic variation in preferences for sedans and light trucks highlights the importance of viable EV alternatives to conventional light trucks; belief in climate change is highly correlated with state-level EV adoption patterns; and the first $500 billion in cumulative nationwide EV subsidies is associated a 7-10 percent increase in EV market share in 2035, an effect that diminishes as subsidies increase. The rate of intrinsic demand growth dwarfs the impact of demand-side subsidies, highlighting the importance of efficient allocation of public resources.

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Long-Term Resource Adequacy in High Intermittent Renewables Wholesale Electricity Markets: Lessons from California
Author(s):
Frank A. Wolak, Stanford University and NBER
Abstract:

Long-Term Resource Adequacy in Wholesale Electricity Markets with Significant Intermittent Renewables Growing amounts of intermittent renewable generation capacity substantially increases the complexity of determining whether the industry has sufficient generation resources to meet hourly demands throughout the year. As the events of August 2020 in California and February 2021 in Texas demonstrate, this can have large economic and public health consequences. An empirical analysis of these two events demonstrates that similar supply shortfall events are likely to occur in the future without a paradigm shift in determining generation adequacy for an electricity supply industry. An alternative approach that explicitly recognizes the characteristics of different generation technologies is outlined and its properties explored relative current approaches.

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Designing Fuel Economy Standards in Light of Greater Electric Vehicle Offerings
Author(s):
Kenneth Gillingham, Yale University and NBER
Abstract:

Electric vehicles are declining in cost so rapidly that they may claim a large share of the vehicle market by 2030. This paper examines a set of practical regulatory design considerations for fuel-economy standards or greenhouse-gas standards in the context of highly uncertain electric vehicle costs in the next decade. The analysis takes a cost-effectiveness approach and uses analytical modeling and simulation to develop insight. Gillingham shows that counting electric vehicles under a standard with a multiplier or assuming zero upstream emissions can reduce electric vehicle market share by weakening the standards. Further, there are tradeoffs from implementing a backstop conventional vehicle standard along with a second standard that also includes electric vehicles, but such a backstop offers the possibility of ensuring that low-cost conventional vehicle technologies are exploited.

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Coal Fired Power Plant Retirements in the U.S.
Author(s):
Rebecca J. Davis, Stephen F. Austin State University
J. Scott Holladay, University of Tennessee
Charles Sims, University of Tennessee
Abstract:

Davis, Holladay, and Sims summarize the history of U.S. coal-fired generator retirements over the last decade, describe planned future retirements, and forecast the remaining operating life for every operating coal-fired generator. Nearly one-third of the coal fleet retired during the 2010s and a quarter of the remaining capacity has announced plans to retire. They summarize the generator technology and location trends that are correlated with the observed retirements. The researchers then describe a theoretical model of the retirement decision coal generator owners face. Davis, Holladay, and Sims use retirements from the last decade to quantify the relationships in the model for retired plants. They use a machine learning algorithm to predict the decisions of active generators based on the relationship observed in retired units. Davis, Holladay, and Sims simulate future coal and electricity prices and identify which generators retire at what time in a business-as-usual policy scenario, under a coal subsidy, and under a carbon tax. Their model predicts that three-quarters of coal generation capacity will retire in the next twenty years, with most of that retirement concentrated in the next five years. Policy has limited ability to affect retirement times. A $20 per MWh electricity subsidy extends the average life of a generator by six years. A $51 per ton carbon tax brings forward retirement dates by about two years. In all scenarios, a handful of electricity generators remain on the grid beyond their twenty-year forecast horizon.

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Business Cycles and Environmental Policy
Author(s):
Barbara Annicchiarico, University of Rome Tor Vergata
Stefano Carattini, Georgia State University
Carolyn Fischer, World Bank Group
Garth Heutel, Georgia State University and NBER
Abstract:

Annicchiarico, Carattini, Fischer, and Heutel study the relationship between business cycles and the design and effects of environmental policies, particularly those with economy-wide significance like climate policies. First, the researchers provide a brief review of the literature related to this topic, from initial explorations using real business cycle models to New Keynesian extensions, open-economy variations, and issues of monetary policy and financial regulations. Next, Annicchiarico, Carattini, Fischer, and Heutel provide a list of the main findings that emerge from this literature that are potentially most relevant to policymakers, including the impacts of policy on volatility and how to design policy to adjust to cycles. Finally, they propose several important remaining research questions.

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Implications of Residential Energy Pricing for Energy Substitution and Welfare
Author(s):
Severin Borenstein, University of California, Berkeley and NBER
James B. Bushnell, University of California, Davis and NBER
Abstract:

Electrification of transportation and buildings to reduce greenhouse gas (GHG) emissions requires massive switching from natural gas and refined petroleum products. All three end-use energy sources are mispriced due in part to the unpriced pollution they emit. Natural gas and electricity utilities also face the classic natural monopoly challenge of recovering fixed costs while maintaining efficient pricing. In this paper, Borenstein and Bushnell study the magnitude of these distortions for electricity, natural gas, and gasoline purchased by residential customers across the continental United States. They find that the net distortion in pricing electricity is much greater than for natural gas or gasoline. In most of the country, residential retail electricity prices are well above social marginal cost (the sum of private marginal cost and unpriced externalities), while in some areas with large shares of coal-fired generation, prices are below SMC. The researchers then analyze the impact of these pricing distortions on the incentive to adopt electric space heating, water heating, and vehicles in California. Combining their estimates of the gap between price and SMC for each of the fuels with a large survey of California households' energy use, they calculate the distribution of annual fuel costs for space heating, water heating, and electric vehicles under actual pricing and under counterfactual prices equal to SMC. Borenstein and Bushnell find that moving prices for all three fuels to equal their SMC would significantly increase the incentive for Californians to switch to electricity for these energy services.

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Participants

Fatima Maria Ahmad, United States Energy Association
Sunah An, University of Alabama
Rachel Anderson, Princeton University
Reuben Aniekwu, U.S. Global Change Research Program
Kevin C. Ankney, Georgetown University
Katherine Antonio, U.S. Energy Information Administration
David Austin, Congressional Budget Office
Megan R. Bailey, University of Calgary
Lauren Beatty, University of Maryland
Sylwia Bialek, New York University
Erin Blanton, Columbia University
Josh Blonz, Federal Reserve Board of Governors
Yuliya Borodina, University of California at Berkeley
Heather Boushey, White House Council of Economic Advisors
Becka Brolinson, Georgetown University
Raphael Calel, Georgetown University
Ivy Cao, Yale University
Sanya Carley, Indiana University
Anomitro Chatterjee, London School of Economics
Jonathan M. Colmer, University of Virginia
Joel Corona, Environmental Protection Agency
Andie Creel, Yale University
Wade I. Davis, Yale University
Benjamin M. Dawson, University of California at Davis
Hao Deng, Yale University
Luke Dodds, Federal Emergency Management Agency
Eugenie Dugoua, London School of Economics
Allen Fawcett, OAR, Climate Change Division
Diana Galperin, Environmental Protection Agency
Teevrat Garg, University of California at San Diego
Vance Ginn, Texas Public Policy Foundation
David Gohlke, Argonne National Laboratory
John Gomez, Georgia State University
Matt Gordon
Myriam Gregoire-Zawilski, Syracuse University
Howard Gruensprecht, Massachusetts Institute of Technology
Jonathan Hawkins, Yale University
Gloria Helfand, OAR, Office of Transportation and Air Quality
Jennifer Helgeson, National Institute of Standards and Technology
Julie A. Hewitt, US Environmental Protection Agency
Elke Hodson, Office of Management and Budget
John Holmes, National Academies of Sciences
Christopher Holt, University of Maryland
Wesley Howden, University of California, San Diego
Allan Hsiao, University of Chicago
Pei Huang, Yale University
Dana Jackman, Environmental Protection Agency
Sara A. Johns, University of California, Berkeley
Diego R. Kaenzig, London Business School
Jenya Kahn-Lang, University of California at Berkeley
Travis Kavulla, NRG
Suzi Kerr, Environmental Defense Fund
Heather Klemick, Environmental Protection Agency
Laura Konda, Department of the Treasury
Peiley Lau, University of California at Berkeley
Jennifer Li, US Department of Energy
Alexander Macpherson, Environmental Protection Agency
Kelly Maguire, Department of Agriculture
Joseph Maher, U.S. Government Accountability Office
Joseph Majkut, Niskan Center
Aastha Malhotra, Boston College
Alex Marten, Environmental Protection Agency
James McFarland, Environmental Protection Agency
Allen McGartland, Environmental Protection Agency
Ignacia Mercadal, Columbia University
Evan Michelson, Alfred P. Sloan Foundation
Elizabeth Miller, Environmental Protection Agency
Juan Odriozola, Arizona State University
Miray Omurtak, MIT
Glenda Oskar, Federal Energy Regulatory Commission
William B. Peterman, Federal Reserve Board
John Powell, Department of Energy
Narasimha Rao, Yale University
Chris Rasmussen, Department of Commerce
Noah Rauschkolb, Columbia University
Dave Rejeski, Environmental Law Institute
Nickolas Reynolds, University of Alabama, Tuscaloosa
Catrina Rorke, Climate Leadership Council
Steven Rose, Electric Power Research Institute
Isabella Ruble, DOE/EPSA
Devashree Saha, World Resources Institute
Daniel L. Shawhan, Resources for the Future
Michael Shelby, Office of Transportation and Air Quality
Ensieh Shojaedinni, Environmental Protection Agency
Kate Shouse, Congressional Research Service
Anne Smith, NERA Economic Consulting
Katalin Springel, HEC Montreal
John Staub, US Energy Information Administration
Elif Tasar, London School of Economics
Amanda Thomas, Office of Management and Budget
Rebecca E. Toseland, University of California at Santa Barbara
Sugandha Tuladhar, NERA
Johannes Urpelainen, Johns Hopkins University
Brent Yacobucci, Congressional Research Service
Starla Yeh, NRDC
David Young, Electric Power Research Institute

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