Impact of Gasoline and Natural Gas Prices on Capacity Planning for Automakers and Electricity Generators Under GHG Emission Constraints

Both automakers and electricity generators are facing increasingly more stringent greenhouse gas (GHG) emission targets. With the introduction of plug-in hybrid and electric vehicles, the transportation and electricity generation sectors become connected. This provides an opportunity for both sectors to work jointly to achieve cost efficient reduction of CO₂ emissions. Due to the low cost and low carbon content of natural gas (NG), NG enabled vehicles are drawing increasing attention. With GHG targets rapidly decreasing, how to judiciously choose among plug-in hybrid vehicles, electric vehicles, NG-enabled vehicles, and gasoline vehicles to save societal cost is worth serious consideration. On the other hand, gasoline and NG prices play an important role in this decision-making process. In order to estimate the impact of gasoline and NG prices and quantify the benefit of the collaboration between automakers and electricity generators, an optimization model is developed to evaluate the total societal cost and CO₂ emissions for both sectors. Various scenario analyses are conducted to understand the cost and capacity planning differences when gasoline and NG prices vary while the two sectors can work jointly or independently to meet the CO₂ emission constraints. These results help us understand the impact of gasoline and NG prices in achieving GHG reduction targets for the two major sectors of CO₂ emissions in the United States.