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STATEMENTS FROM ADVANCED ENERGY ECONOMY ON EPA’S FINAL RULE UNDER SECTION 111(D) OF THE CLEAN AIR ACT (CLEAN POWER PLAN)

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[Washington, D.C. – August 3, 2015]: Advanced Energy Economy (AEE), a national business association, issued the following statements from Malcolm Woolf, Senior Vice President for Policy and Government Affairs, in response to the Environmental Protection Agency’s final rule for carbon emissions from the electric power sector:

OVERALL REACTION:

“AEE and its member companies see the Clean Power Plan as an opportunity to modernize the electric power system for the 21st century, and today’s release of the final rule begins to make that opportunity a reality. By making use of advanced energy technologies and services for compliance, states will be able to improve reliability, reduce costs, and give customers more energy choices. These investments in a higher-performing electricity system will also grow businesses, create jobs, and drive economic growth.

“Although we saw no need to delay the start of compliance by two years, based on our assessment of states’ abilities to meet emission targets by 2020 with proven advanced energy technologies, we are pleased with the increased commitment to renewable energy and energy efficiency in the final rule. That said, we are disappointed that there is no credit for action taken between now and 2020, and that not all energy efficiency is eligible for credit between 2020 and 2022. These are missed opportunities in the short run. But in the long run, the final Clean Power Plan will drive improvement in the electric power system. We, our member companies, and our state partner organizations around the country stand ready to work with state regulators to make the most of this historic opportunity.”

ON SHIFT IN START OF COMPLIANCE PERIOD FROM 2020 TO 2022:

“Our analysis found that every state, with appropriate planning, could have deployed proven advanced energy technologies to meet EPA’s proposed targets in 2020 in a cost-effective way. While we are disappointed that EPA chose to delay the implementation date to 2022, we hope that states will take the opportunity to fully integrate these technologies into the grid as soon as possible so they can get maximum credit from these resources when the initial compliance period begins in 2022.”

ON ENERGY EFFICIENCY BEING REMOVED FROM “BEST SYSTEM OF EMISSION REDUCTION” USED TO SET STATE TARGETS:

“We believe that energy efficiency was a valid building block, given the experience of established energy efficiency programs and services in delivering energy savings and therefore emission reductions. But what matters to our companies is the size of the market opportunity that can be addressed by advanced energy technologies, not how it's calculated. Energy efficiency should be strongly considered in every state compliance plan, for its emission reduction and cost saving benefits.”  

ON CLEAN ENERGY INCENTIVE PROGRAM:

“We are pleased with the increased commitment to renewable energy and energy efficiency in the final rule. But we are disappointed that there is no credit for action taken between now and 2020, and that not all energy efficiency is eligible for credit between 2020 and 2022. These are missed opportunities in the short run. But in the long run, the final Clean Power Plan sends a strong market signal that will drive improvement in the electric power system.”

ON RELIABILITY:

“Most of the concerns raised to date about reliability fail to take into account the rapid and on-going changes in the power grid that utilities and grid managers are already managing today. We believe that advanced energy technologies – which provide smarter, more flexible more diverse ways to meet our energy needs – will increase the reliability and resiliency of the electric power system, not reduce it.

ON COST:

“High efficiency natural gas and wind are currently the cheapest forms of electricity generation, the cost of solar is plummeting, and energy efficiency is almost always the lowest cost way to meet new electricity needs. With these and other advanced energy options that also reduce emissions, there is every reason to believe that states can achieve compliance at low cost.”

ON EXPECTED MARKET RESPONSE:

“Time and again, when there’s a market signal — whether it’s from consumers, from states, or from EPA — markets respond. There is no reason to think the Clean Power Plan should be any different. Advanced energy is a $200 billion industry in the U.S. today. With strong markets in place for these technologies, which can be used for compliance, there is every reason to expect an industry response that will make implementation of the Clean Power Plan easier and cheaper.”

ABOUT FEDERAL IMPLEMENTATION PLAN:

“We also look forward to reviewing and commenting on EPA’s draft Federal Plan. A Federal Plan can reduce costs for states by making full use of energy efficiency and demand response, renewable energy, and other advanced energy technologies. Utilities, independent power producers, and their parent companies are already investing in these and similar resources. Even in states that decline to develop their own implementation plans, EPA can slash compliance costs by allowing voluntary trading of emission reduction credits generated by these resources, a practice very familiar to the agency and industry.”

Background

Today, the Environmental Protection Agency (EPA) released the final rule for carbon emissions from existing power plants under Section 111(d) of the Clean Air Act, commonly referred to as the Clean Power Plan (CPP). The CPP sets state-by-state targets for emission reductions, but allows states to develop their own compliance plans. The state targets are based on what EPA determined to be the “best system of emission reduction” (BSER). EPA based the BSER on state-specific potentials for emission reductions from a set of “Building Blocks” that include both traditional smokestack controls and “beyond the fence line” measures. Although emission rate targets are set by the building blocks, there is no requirement that states use those specific measures for compliance.

The CPP presents an opportunity for states to modernize and upgrade their electricity systems with a range of advanced energy technologies and services, including energy efficiency, demand response, energy service company (ESCO) building retrofits, natural gas, wind, solar, smart grid, nuclear power, fuel cells, combined heat and power, and transmission and distribution system efficiencies. Used together, these technologies and services create and maintain a high-performing energy system—one that is reliable and resilient, diverse, cost-effective, and clean—while also enabling new customer services.

Following release of the proposed rule on June 2, 2014, AEE submitted formal comments to EPA, noting ways that the draft rule underestimated the full potential of advanced energy technologies to reduce emissions while improving the electric power system.

Since then, AEE and the Advanced Energy Economy Institute (AEE Institute), our nonprofit educational affiliate, have issued a series of studies, several of them involving leading consultants to the utility industry, examining issues identified by the North American Electric Reliability Corp. and found there to be little cause for concern. These reports demonstrated that utilities and grid operators in some areas of the country, such as Texas and Colorado, are already integrating variable renewable energy at levels as high as contemplated by the EPA plan with no impact on reliability; that renewable energy and energy efficiency are cost-competitive resources, which can be readily used to reduce emissions, often saving money at the same time; and that the country’s pipeline infrastructure, already being expanded to accommodate additional natural gas use, can support the levels of demand anticipated under the Clean Power Plan. AEE Institute also looked back at prior EPA rules that allowed for market-based compliance and predicted that, given current advanced energy technologies and market infrastructure, the CPP will likely result in a robust industry response to regulatory signals.

At the state level, AEE Institute and the Virginia Advanced Energy Industries Coalition commissioned Meister Consultants Group to analyze compliance scenarios in Virginia, finding that the Commonwealth could create thousands of permanent and temporary jobs by making investments to diversify its power sources with renewable energy, energy efficiency, and natural gas generating plants.

In the coming weeks, AEE will release a series of state modeling scenarios based on the open-access STEER model developed for AEE Institute by 5 Lakes Energy. The first analysis utilizing STEER, published by the Institute for Energy Innovation, shows that reducing energy waste, using more renewable energy sources, cogeneration fueled by natural gas and, depending on long-term price projections, an appropriate amount of natural gas-fired combined cycle generation can help Michigan comply with the CPP at lowest cost. The STEER model itself is available for download. 

AEE also proposed design principles for a Federal Plan, showing that a voluntary market-based trading approach would allow flexible compliance through a variety of advanced energy technologies without exceeding EPA’s regulatory authority. AEE plans to submit formal comments to EPA on the proposed Federal Plan.

 

About Advanced Energy Economy and the Advanced Energy Economy Institute

Advanced Energy Economy (AEE) is a national association of businesses that are making the energy we use secure, clean, and affordable. AEE’s mission is to transform public policy to enable the rapid growth of advanced energy companies. The Advanced Energy Economy Institute is a nonprofit educational and charitable organization whose mission is to raise awareness of the public benefits and opportunities of advanced energy.

ADDITIONAL RESOURCES:

ENSURING GRID RELIABILITY:

NERC’s Clean Power Plan “Phase I” Reliability Assessment: A Critique: Shows that NERC reliability concerns are mainly a function of the constraints inherent in NERC modeling that considered only the Bulk Power System and lacked flexibility, even though many important technology and market developments (and thus tools for CPP compliance and maintaining reliability) on the distribution system, including low-cost options for distributed generation, demand response, and energy efficiency already exist. 

EPA’s Clean Power Plan and Reliability: Assessing NERC’s Initial Reliability Review: This in-depth analysis of NERC Initial Reliability Review by The Brattle Group, a leading consultant to utilities and grid operators, finds shortcomings in a number of NERC’s assumptions and assertions and ultimately concludes that EPA Clean Power Plan implementation is “unlikely to materially affect reliability.”

DRIVING MARKET RESPONSE & EFFECTIVE TOOLS:

Markets Drive Innovation: Why history shows that Clean Power Plan will stimulate a robust industry response: This report looks at outcomes under prior EPA rules and finds that when regulations allow for market-based compliance, efficient and active markets develop rapidly and industry responds with innovations that reduce compliance costs. Examples draw from impact of rules to reduce the lead content in gasoline, combat acid rain, and control regional transport of ozone due to emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx); in all cases, regulatory signals set by EPA rules have led to the development of active and efficient markets.

Advanced Energy Technologies for Greenhouse Gas Reduction: 40 Solutions for Cutting Carbon from Electricity Generation: Provides details on the use, application, and benefits of 40 specific advanced energy technologies and services that provide emission reductions. These advanced energy technologies provide states the opportunity to not only meet carbon reduction goals but also improve the efficiency, resiliency, and cost effectiveness of service provided by electric utilities.

Competitiveness of Renewable Energy and Energy Efficiency in U.S. Markets: Shows how renewable energy and energy efficiency are competitive resources in today’s marketplace that will not only be cost-effective mechanisms for CPP compliance but should also be expected to grow strictly on the basis of competitiveness. The report notes that many discussions of these technologies are based on inaccurate information and specifically points out shortcomings in the U.S. Energy Information Administration’s projections for these technologies.

Integrating Renewable Energy into the Electricity Grid: The Brattle Group found that “ongoing technological progress and ongoing learning about how to manage the operations of the electric system will likely allow the integration not only of the levels of variable renewable capacity now in places like Texas and Colorado but even significantly larger amounts in the future.” Includes case study examples from ERCOT and Xcel Energy Colorado.

Impacts of the Clean Power Plan on U.S. Natural Gas Markets and Pipeline Infrastructure: Changes in the U.S. natural gas market independent of the CPP are driving increases in pipeline gas infrastructure, prompted by dramatic growth in new gas supplies from areas like the Marcellus and Utica shales. This report produced with ICF International finds that compliance with the CPP, even under an unlikely “stress test” scenario of unexpectedly high gas usage, would only modestly increase gas infrastructure needs, in the range of 3% to 7%.

FEDERAL IMPLEMENTATION PLANNING:

Design Principles for a Rate Based Federal Plan Under EPA’s Clean Power Plan: Shows that a Federal Plan (for guidance or for states that decline to develop their own plans) can reduce costs for states by making full use of energy efficiency and demand response, renewable energy, and other advanced energy technologies. Utilities, independent power producers, and their parent companies are already investing in these and similar resources. Notes how states can slash compliance costs by participating in voluntary trading of emission reduction credits generated by these resources.

State Electric Power & CPP Backgrounders with chart of current power generation mix (as of July 30, 2015):

Michigan STEER model (July 25, 2015) analysis: Reducing Energy Waste is Least-Cost Option for Implementing Clean Power Plan.

Media Contact

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

 

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