Costs and Emissions Reductions from the Competitive Renewable Energy Zones (CREZ) Wind Transmission Project in Texas

Abstract

Wind power has the potential to significantly reduce air emissions from the electric power sector, but the best wind sites are located far from load centers and will require new transmission lines. Texas currently has the largest installed wind power capacity in the U.S., but a lack of transmission capacity between the western part of the state, where most wind farms are located, and the major load centers in the east has led to frequent wind curtailments. State policymakers have addressed this issue by approving a $5 billion transmission project, the Competitive Renewable Energy Zones (CREZ), which will expand the transmission capacity to 18,456 MW by 2014. In this paper, we examine the impacts of large-scale wind power in ERCOT, the power market that serves 85% of the state’s load, after the completion of the CREZ project. We assess the generation displaced and the resulting emissions reductions. We then examine the public costs of wind to estimate the CO2 abatement cost. We develop an economic dispatch model of ERCOT to quantify the generation displaced by wind power and the emissions reductions in 2014. Since there is uncertainty about the amount of new wind developed between now and 2014, three wind penetration scenarios were assessed that correspond to wind supplying 9%, 14% and 21% of ERCOT’s total generation. In the 21% wind energy penetration scenario, the CREZ transmission capacity is fully utilized, and wind displaces natural gas 74% of the time and coal 26% of the time. This results in CO2, NOX, SO2 and Hg emissions reductions of 19%, 17%, 13%, and 15%, and a CO2 abatement cost of $60 per ton of CO2. Lower wind penetrations result in gas being displaced more frequently, lower emissions reductions and an abatement cost up to $91 per ton of CO2. Our results should be compared with other technologies and policies so that policymakers can cost-effectively reduce emissions.