Will Retiring Coal-Fired Power Plants Lead To More Volatile Electricity Prices?


The latest issue of The Takeaway explores the financial implications of coal-to-gas fuel switching in U.S. power plants.

Low natural gas prices and environmental regulations have led many U.S. utilities to retire their coal-fired power plants and build new natural gas generators. But because coal prices tend to be more stable than natural gas prices, some worry that this trend will lead to more volatile electricity prices.

Anastasia Shcherbakova, an applied economist in the Texas A&M University Department of Agricultural Economics and research fellow with the Mosbacher Institute for Trade, Economics, and Public Policy, did the math. She and her collaborators examined data from the Pennsylvania-New Jersey-Maryland power grid to see what happens to electricity price volatility when coal generators unexpectedly go offline, and found that electricity price volatility was actually lower during hours when the natural gas generators were setting the price of electricity.

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