Carbon Pricing in US Electricity Markets: Expediting the Low-Carbon Transition While Mitigating the Growing Conflict between Renewable-Energy Goals and Regional Electricity Markets

Abstract

Open access to electric markets supports the integration of growing renewable energy resources. This is increasingly important as more US states aim to meet 100 percent of their energy needs with zero-emission resources. Currently states employ a wide variety of renewable energy targets and eligibility requirements. An example of the increasingly complex US state policy patchwork is state-mandated zero-emission credits (zecs) for nuclear facilities. Rather than increase conflict between clean energy goals and wholesale electric markets, there is a need for a more comprehensive regional approach that provides the appropriate price signals for carbon through existing market mechanisms. A carbon charge could be designed to eliminate the need for out-of-market zec payments to nuclear generation and significantly reduce state payments for renewable energy credits. This article examines the growing conflict between regional electricity markets and more localized clean-energy goals and explores how a carbon charge in the US regional electricity markets both mitigate this conflict and expedite the low-carbon transition.