EPA Expands the Role of Renewable Energy in the Final Clean Power Plan

, director of state policy & analysis, Clean Energy | August 7, 2015, 1:02 pm EDT
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On August 3, the EPA finalized the Clean Power Plan, placing limits on carbon emissions from our nation’s power plants for the first time. Undervalued as carbon-curbing technologies in the proposed draft, the EPA took several steps to strengthen the role that renewables can play in the final rule. That means wind, solar, and other renewable energy sources are well positioned to help states meet their emission reduction targets and accelerate our nation’s transition to a clean, low-carbon economy.

I support CPP because I heart renewablesStrengthening the renewable energy building block

In its draft rule, the EPA made the sensible decision to include renewable energy as an eligible compliance option for states to cut their carbon emissions. Renewable energy was also one of the four low carbon options, or “building blocks”, that the EPA used to set state emission reduction targets.

However, in detailed technical comments submitted to the EPA, my colleagues and I identified several ways that the draft rule significantly underestimated the potential role of renewable energy in determining those targets. In fact, the EPA’s proposed methodologies resulted in barely any additional renewable energy beyond what would have occurred under business as usual (i.e., without the proposed rule).

So when the final Clean Power Plan came out earlier this week, I was especially eager to see what changes the agency might have made. And I’m happy to report that the EPA largely agreed with our comments (and similar comments from many others) and made several important modifications that strengthened the renewables building block:

  • First, the EPA modified its approach for quantifying the building block to incorporate historical deployment patterns for renewable energy technologies. Demonstrated rates of renewables deployment onto the power grid are a sound barometer for what states can achieve in future years.
  •  Second, the EPA validated its historical deployment approach by modeling the economic potential of renewable energy technologies using a set of improved model assumptions. In addition to updating their cost and performance estimates for wind and solar energy technologies to better reflect actual project experience, they eliminated a key parameter that artificially constrained the development of cost-effective renewables.

A significant improvement

As a result of these changes, the EPA identified more than 706,000 gigawatt-hours (GWh) of new (post 2012) renewable energy generation nationally as meeting the economic and technical criteria for inclusion in the final rule. That’s more than double the results from the EPA’s proposed rule (Figure 1). And combined with existing (2012) non-hydro generation levels, is equivalent to 25 percent of total current U.S. electricity consumption.

Data Source: EPA

Data Source: EPA

What’s more, because of the updates in cost and performance assumptions for renewables, the EPA’s modeling found that the increased renewables generation in the final plan can be achieved at virtually the same level of cost-effectiveness ($37/ton of carbon dioxide reduced) as in the draft plan ($36/ton).

Because of other significant changes that the EPA made to calculating state emission rate targets (a blog topic for another day), not all of the cost-effective renewable energy generation made its way into state-level emission rates. Instead, the amount of incremental renewable energy generation fully captured in those targets nationwide is 540,000 GWh. While that’s more than 60 percent greater than the renewables generation used to set emission rates under the proposed rule, the potential for cost-effectively deploying renewables is still much greater. And of course, the Clean Power Plan creates a framework for states to go further with renewable energy than the levels embedded in the building block.

Directly displacing fossil generation with renewables

The EPA further strengthened the role of renewable energy by recognizing their value in directly displacing fossil fuel generation and its associated carbon emissions. The EPA didn’t fully account for this effect under the formula for setting state emission rate targets in the draft proposal.

However, in the final rule, the agency does credit renewables for emission reductions from displaced fossil generation. The change much more accurately reflects what happens in real life when we get more renewables onto the power grid, and has a meaningful impact in tightening the Clean Power Plan’s emission rates.

Credit trading and the Clean Energy Incentive Program

In addition to a stronger renewables building block, the Clean Power Plan offers at least two additional features that will accelerate the growth of renewables nationwide:

  • Credit Trading: The final rule paves the way for states who choose to do so to design compliance strategies that are “trading ready”, providing for the opportunity to use out-of-state credits (under rate-based plans) or allowances (under mass-based plans) to meet emission reduction requirements. This offers a golden opportunity for states to tap into regional markets for the most cost-effective renewable energy resources available.
  • Clean Energy Incentive Program: In an effort to spur early investments in renewable energy and limit a rush to natural gas, the EPA developed the Clean Energy Incentive Program (CEIP). The CEIP offers states credits for renewables generation in the years 2020 and 2021 (ahead of the Clean Power Plan’s 2022 start date) from wind and solar projects that start construction after a state’s compliance plan is finalized. Energy efficiency investments in low-income communities also qualify. The voluntary program should give states a jumpstart on their compliance strategies and help keep the momentum in renewables deployment going.

States now in the batter’s box

As the details of the final Clean Power Plan come into focus, it’s clear that clean energy facts trumped fossil-fuel fiction with the EPA prioritizing the role of renewable energy as a cost-effective cutter of carbon. Now it’s time for states to step up to the plate and prioritize renewables in their compliance plans. Doing so will help reduce the risks of our growing reliance on natural gas, accelerate carbon emission reductions, and transition the U.S. to a truly clean and affordable energy economy.

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