Graduation Year

Fall 2013

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Janet Smith

Reader 2

Eric Helland

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Terms of Use for work posted in Scholarship@Claremont.

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© 2013 Andrew Bergman

Abstract

Despite increasing fuel cost volatility, regulatory uncertainty, and imminent shifts to industry dynamics, utility managers are forced to make tough decisions in regards to installing long-life generation assets. This study seeks to identify and quantify determinants of fuel choice in new electric power plants given vast uncertainties in the electricity generation sector.

Using a probit functional form to estimate marginal effects on the likelihood of choosing wind versus natural gas powered generation, I find positive effects of natural gas prices in the period three years prior to initial operation of the new facility, positive effects of static-level standard score of mix, and positive effects of wind-power density. Additional feedstock choice sets and parameters are considered.

All models suggest that (a) feedstock costs are significant predictors of fuel choice, (b) state-level regulatory learning enhances likelihood of choosing relatively young technologies, (c) Renewable Portfolio Standards result in artificial substitution between wind and solar technologies, and (d) population density, more so than political influence, predicts choices to install wind-powered capacity. Public policy and managerial implications are discussed.

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This thesis is restricted to the Claremont Colleges current faculty, students, and staff.

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