Early power plant retirement programs phase out the most inefficient fossil generation sources. Standards for early retirement should be based on objective, performance-based measurements and should avoid evaluating individual plants on an ad hoc basis. Early retirement programs should target the emissions intensity of plants, establishing a benchmark level of emissions per unit energy (i.e. an energy performance standard). The use of a performance standard acknowledges a role for highly efficient fossil fuel plants, permitting upgrades to environmental control equipment rather than outright closure, if the plants can remain profitable. Flexible compliance will reduce the burden created by retirements and help keep costs modest.
While most retirement plans will be based on environmental measurements like GHG emissions or conventional pollutants, it is important to also weigh reliability and financial measures, and grid planners and operators must consider what resources could replace retired capacity. For example, retrofits of certain plants might be justified by grid reliability benefits due to their particular location in the power grid.
To ensure cleaner resources replace retired assets, it is best to supplement this policy with programs encouraging efficiency and renewable energy.
For a more detailed discussion, see the applicable chapter of Designing Climate Solutions, our book on smart energy and climate policy design.