Dynamic Management of NO^sub x^ and SO^sub 2^ Emissions in the Texas and Mid-Atlantic Electric Power Systems and Implications for Air Quality

Cap and trade programs have historically been designed to achieve annual or seasonal reductions in emissions of nitrogen oxides and sulfur dioxide from power plants. Emissions reductions may not be temporally coincident with meteorological conditions conducive to the formation of peak ozone and fine particulate matter concentrations. Integrated power system and air quality modeling methods were developed to evaluate time-differentiated emissions price signals on high ozone days in the Mid-Atlantic portion of the Pennsylvania-New Jersey-Maryland (PJM) Interconnection and Electric Reliability Council of Texas (ERCOT) grids. Sufficient flexibility exists in the two grids with marked differences in demand and fuel generation mix to accommodate time-differentiated emissions pricing alone or in combination with a season-wide program. System-wide emissions reductions and production costs from time-differentiated pricing are shown to be competitive with those of a season-wide program on high ozone days and would be more cost-effective if the primary policy goal was to target emissions reductions on these days. Time-differentiated pricing layered as a complement to the Cross-State Air Pollution Rule had particularly pronounced benefits for the Mid-Atlantic PJM system that relies heavily on coal-fired generation. Time-differentiated pricing aimed at reducing ozone concentrations had particulate matter reduction co-benefits, but if particulate matter reductions are the primary objective, other approaches to time-differentiated pricing may lead to greater benefits.