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Model Shows Clean Power Plan Could Result in Cost Savings for Illinois Ratepayers

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Proposed increases in state efficiency and renewable energy standards 
would reduce emissions and 
lower electric rates

[Washington, D.C. – December 16, 2015]: Implementing the U.S. Environmental Protection Agency’s Clean Power Plan would have minimal impact on electricity costs in Illinois, and could even provide savings for ratepayers under some scenarios, 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 Illinois. 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 Illinois,” 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 demonstrated scenarios consider policy and market decisions that could lead to different compliance paths, but find that in all cases Illinois could reach EPA’s prescribed emission targets without significant cost impact.

The analysis is available for download here, as is the STEER-Illinois model, which allows users to use publicly available data on Illinois 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.

"STEER is an extremely valuable tool for understanding the options available to Illinois for complying with the Clean Power Plan,” said Ian Adams, Director of Public Affairs at Clean Energy Trust, an AEE partner organization in Chicago. “It shows that legislation now before the Illinois legislature to increase state energy efficiency and renewable energy standards would significantly reduce emissions and produce cost savings at the same time.”

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 Illinois. The compliance period established by EPA for the carbon emission regulation 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, Illinois is able to reach compliance with the Clean Power Plan in 2030 with minimal increases or small savings in electricity prices compared with a business-as-usual projection of electricity costs for that year. The three scenarios hold constant assumptions about natural gas prices (setting them at $4/MMBtu, below the midpoint between today’s roughly $2/MMBtu and Energy Information Administration’s 2030 projection of $6.73/MMBtu) and do not introduce the option of trading emission allowances or credits, although STEER can be used to consider such variations.

The three scenarios incorporate different policy and market decisions. Scenario A assumes no change in state energy policies, such as Illinois’s renewable portfolio standard (RPS) or energy efficiency portfolio standard (EERS). This scenario for compliance with the CPP results in substantial expansion of natural gas electricity generation capacity, along with energy efficiency gains under the EERS, and results in just a small increase ($0.0018/kWh, or less than one-quarter of a penny per kilowatt-hour) over business-as usual.

Scenarios B and C both assume passage of HB 2607/SB 1485, now pending before the Illinois legislature, which would increase the renewable energy requirement (RPS) to 35 percent and the efficiency standard to 20 percent of demand by 2025. STEER shows these measures alone are sufficient to meet the 2030 target (indeed, either one of them would be enough). Under Scenario B, electric rates in 2030 are reduced by $0.0015/kWh compared with business as usual.

Scenario C factors in the potential closure of the Byron, Clinton, and Quad Cities nuclear power plants, which has been proposed by the plants’ owner, Exelon. Once again, the 2030 emission target is achieved by RPS and EERS, and the additional renewable energy capacity is sufficient to meet electric power needs. Under Scenario C, the savings are even greater – $0.0038/kWh, nearly double the drop in price under Scenario B, or more than one-third of a penny per kilowatt-hour.

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 Illinois is available for download as an Excel spreadsheet, with user manual, at http://info.aee.net/steer-illinois. 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 Illinois; 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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Media Contact: 

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