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Model Shows Clean Power Plan Could Produce Savings for Pennsylvania Ratepayers

Posted by Advanced Energy Economy on Nov 3, 2015

Under varying scenarios, energy efficiency, natural gas, renewable energy, and interstate trading achieve compliance without electric rate increases in 2030, new analysis shows

[Washington, D.C. – November 3, 2015]: Implementing the U.S. Environmental Protection Agency’s Clean Power Plan need not raise electricity costs in Pennsylvania but rather may provide savings for ratepayers compared to 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 Pennsylvania-specific data.

“Modeling Low Cost Approaches to Clean Power Plan Compliance for Pennsylvania,” 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.

“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 Pennsylvania, STEER shows that energy efficiency is always a low-cost way to meet electricity needs and reduce carbon emissions. The combination of natural gas generation, renewable energy generation, and interstate trading that provides the remaining emission reductions varies according to assumptions in each scenario regarding future prices. But, in every scenario we have run, compliance with the Clean Power Plan provides savings for customers in 2030, not higher electricity costs.”

For each scenario, 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 Pennsylvania.

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, Pennsylvania is able to reach compliance with the Clean Power Plan in 2030 with no increase in electricity costs compared with a business-as-usual projection of electricity prices for that year. Rather, the three scenarios show a small savings for electricity customers of between one-half and 1 cent per kilowatt-hour.

The projected savings largely result from significant efficiency improvements in both the distribution network and in the use of electricity by customers, as well as replacement of some coal-based generation with either natural gas or renewable energy generation. None of the scenarios project the closing of any coal-fired generating plant beyond those already announced for retirement.

“STEER is an extremely valuable tool for understanding the options available to Pennsylvania for complying with the Clean Power Plan,” said Brian Kauffman, executive director of the Keystone Energy Efficiency Alliance, a partner organization of AEE based in Philadelphia. “It should be no surprise that energy efficiency stands out as a key strategy for reducing emissions and giving savings to customers at the same time. Even with various assumptions about energy prices between now and 2030, there are ways to comply that allow Pennsylvania to keep improving its electricity system and still keep costs down.”

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. The AEE Institute analysis for Pennsylvania is the first to be performed since the tool has been updated.

STEER for Pennsylvania is available for download as an Excel spreadsheet, with user manual, here. 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 Pennsylvania; 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.

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