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Published on Dec 18, 2015
Jeffrey Peters explains how the electricity sector plays a crucial role in the global economy. The sector is a major consumer of fossil fuel resources, producer of greenhouse gas emissions, and an important indicator and causal factor for economic development. As such, the sector is a primary target for policy-makers seeking to address these issues. The sector is also experiencing rapid technological change in generation (e.g. renewables), primary inputs (e.g. horizontal drilling and hydraulic fracturing), and end-use efficiency. This work seeks to further our understanding of the role of the electricity sector as part of the dynamic global energy-economy, which requires significant research advances in both database construction and modeling techniques. First, we identify useful engineering-level data, present a novel matrix balancing method for integrating these data in global economic databases, demonstrate the relationship between matrix balancing method and modeling results, and present the full construction methodology for GTAP-Power, the foremost, publicly-available global computable general equilibrium database. Next, we present an electricity-detailed computational equilibrium model that explicitly and endogenously captures capacity factor utilization, capacity expansion, and their interdependency -- important aspects of technological substitution in the electricity sector. The individual, but interrelated, research contributions to database construction and electricity modeling in computational equilibrium are placed in the context of analyzing the US EPA Clean Power Plan (CPP) CO2 target of 32% reduction of CO2 emissions in the US electricity sector from a 2005 baseline by 2030. Assuming current fuel prices, the model predicts an almost 28% CO2 reduction without further policy intervention. Next, a carbon tax and investment subsidies for renewable technologies to meet the CPP full targets are imposed and compared. In doing so, this work furthers our understanding of the role of the electricity sector as part of the dynamic global energy-economy.