Synthetic Baseload and Intermediate Decarbonization

Abstract

Synthetic baseload (SBL) generation is power generation at a constant ("baseload") rate by a plant composed of flexible thermal generation, such as a combined cycle gas turbine (CCGT) plant, and one or more sources of variable renewable energy (VRE). The paper uses the notion of SBL as an analytic construct and conducts a high-level (basic business case, exploratory) economic analysis. At current U.S. prices for natural gas and VRE (solar PV and wind power), SBL is in many locations either economically attractive now or close to it. SBL would be unambiguously attractive economically with a price on carbon of $60 per metric ton, or even less in some areas. The paper finds that two distinct approaches to assessing fuel price risk - a decision analysis approach and a hedging approach based on a zero-cost collar - agree that the resulting adjusted cost of natural gas (incorporating the cost of risk) makes SBL widely economically attractive. SBL, whether driven by cost fundamentals or prodded by regulation, affords an economic path to intermediate decarbonization of the electric power system.