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Model Shows Clean Power Plan Could Have Little, if Any, Cost Impact for Arkansas Ratepayers

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Under tested scenarios, energy efficiency, renewable energy, natural gas, and interstate trading achieve EPA power plant compliance with minimal rate increase, even potential savings, in 2030, new analysis shows

[Washington, D.C. – November 18, 2015]: Implementing the U.S. Environmental Protection Agency’s Clean Power Plan could have minimal impact on electricity costs in Arkansas, and even provide savings for ratepayers, compared with projected energy costs in 2030. Those are the findings of multiple scenarios run through a new analytic tool developed for the Advanced Energy Economy Institute and applied to Arkansas-specific data. The open-access tool is available for free to help state officials and other stakeholders consider compliance options and their economic impacts. 

“Modeling Low Cost Approaches to Clean Power Plan Compliance for Arkansas,” published today by the AEE Institute, presents the results of three specific scenarios that are representative of multiple runs of the new State Tool for Electricity Emissions Reduction (STEER).

The analysis is available for download here, as is the STEER-Arkansas model itself, which allows users to use publicly available data on Arkansas energy demand and resources to assess the cost impact of compliance options, just as electric utilities are able to do.

“STEER is an easy-to-use tool that allows state officials and other interested parties to identify the lowest cost path to Clean Power Plan compliance under a variety of assumptions,” said Matt Stanberry, Vice President of Market Development for Advanced Energy Economy (AEE), a national business association, and head of analytics for the affiliated AEE Institute. “In Arkansas, STEER shows that energy efficiency is always a low-cost option that should be used to meet electricity needs as much as possible regardless of the need to reduce carbon emissions. Depending on assumptions regarding future prices, renewable energy, natural gas generation, and interstate trading provide the remaining emission reductions needed to meet state targets. None of the scenarios we have run result in significant electric rate increases for Arkansas customers in 2030.”

“STEER is an extremely valuable tool for understanding the options available to Arkansas for complying with the Clean Power Plan,” said Steve Patterson, executive director of the Arkansas Advanced Energy Association, a partner organization of AEE based in Little Rock. “It should be no surprise that energy efficiency is a key strategy for reducing emissions and giving savings to customers at the same time. Renewable energy resources that are so-far untapped provide additional opportunity to meet energy needs while also contributing to the Arkansas economy. We can now see that, under a range of assumptions about energy prices between now and 2030, there are ways to comply with the Clean Power Plan that allow Arkansas to keep improving its electricity system, keep creating jobs and economic growth, and still keep costs down.”

For each scenario of assumptions run through the tool, STEER identifies the combination of generation sources, efficiency improvements, and other measures that represents the lowest cost means of meeting the state’s electric power needs in 2030 while complying with Clean Power Plan standards for Arkansas. The compliance period established by EPA for the carbon emission regulation – which was finalized in August and became official on October 23, when it was published in the Federal Register – begins in 2022, with final standards for carbon emissions from the electric power sector in each state in 2030.

In all three of the scenarios detailed in the paper, Arkansas is able to reach compliance with the Clean Power Plan in 2030 with minimal increases or small savings in electricity costs compared with a business-as-usual projection of electricity prices for that year. Two of the scenarios show increases of one-third of a cent per kilowatt-hour or less, while one scenario, which is predicated on continued low natural gas prices through 2030, shows a small savings of one-fifth of a cent per kilowatt-hour for electricity customers. 

The projected savings result in part from efficiency improvements in both the distribution network and in the use of electricity by customers, which is maximized as the lowest-cost measure in all three scenarios. None of the scenarios project the closing of any coal-fired generating plant beyond those already announced for retirement, meaning that the remaining generating assets could stay in place for reliability purposes.

STEER was developed by the University of Michigan and 5 Lakes Energy for the AEE Institute. STEER is being delivered to a number of states as a free, open-access model so that anyone with an interest in thinking about the Clean Power Plan will have access to the necessary data and calculations for an informed analysis. First developed for application to EPA’s Clean Power Plan as it was proposed in June 2014, STEER has been revised to account for the changes made by EPA in finalizing the carbon emissions rule.

STEER for Arkansas is available for download as an Excel spreadsheet, with user manual, at http://info.aee.net/steer-arkansas. After downloading the model, evaluating any scenario takes only a few minutes, enabling the user to develop a deeper understanding of the tradeoffs involved in various approaches to implementing the Clean Power Plan. STEER optimizes for least cost and analyzes the economic impacts of compliance, including rate impacts to multiple customer classes. The model has a default set of data, which is composed of publicly available data for Arkansas; however, a user can incorporate more granular data if available. 

About Advanced Energy Economy Institute

The Advanced Energy Economy Institute is a 501 (c)(3) charitable organization whose mission is to raise awareness of the public benefits and opportunities of advanced energy. AEE Institute provides critical data to drive the policy discussion on key issues through commissioned research and reports, data aggregation and analytic tools. AEE Institute also provides a forum where leaders can address energy challenges and opportunities facing the United States. AEE Institute is affiliated with Advanced Energy Economy (AEE), a 501(c)(6) business association, whose purpose is to advance and promote the common business interests of its members and the advanced energy industry as a whole. AEE and its State and Regional Partner organizations are active in 26 states across the country, representing more than 1,000 companies and organizations in the advanced energy industry.

Media Contact

Monique Hanis, 202-391-0884, mhanis@aee.net