U.S. energy sector impacts of technology innovation, fuel price, and electric sector CO₂ policy: Results from the EMF 32 model intercomparison study

We study the impact of fuel prices, technology innovation, and a CO₂ emissions reduction policy on both the electric power and end-use sectors by comparing outputs from four U.S. energy-economic models through the year 2050. Achieving innovation goals decreases CO₂ emissions in all models, regardless of natural gas price, due to increased energy efficiency and low-carbon generation becoming more cost competitive. For the models that include domestic natural gas markets, achieving innovation goals lowers wholesale electricity prices, but this effect diminishes as projected natural gas prices increase. Higher natural gas prices lead to higher wholesale electricity prices but fewer coal capacity retirements. A CO₂ electric power sector emissions cap influences electric sector evolution under reference technology assumptions but has little to no incremental influence when added to innovation goals. Long-term, meeting innovation goals achieves a generation mix with similar CO₂ emissions compared to the CO₂ policy but with smaller increases to wholesale electricity prices. In the short-term, the relative effect on wholesale prices differs by model. Finally, higher natural gas prices, achieving innovation goals, and the combination of the two, increases the amount of renewable generation that is cost-effective to build and operate while slowing the growth of natural-gas fired generation, which is the predominant generation type in 2050 under reference conditions.