Meeting the Clean Power Plan: Illinois, Michigan, and Minnesota Are Well on Their Way

, energy analyst | August 28, 2015, 11:48 am EDT
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The Environmental Protection Agency’s final Clean Power Plan (CPP) presents a significant opportunity for Midwest states to build on what they have already been doing: investing in renewable energy and energy efficiency while transitioning away from a reliance on outdated, inefficient and dirty coal-fired power plants.

Let’s take a quick dive into a few key Midwest states to see how existing policies and commitments are already reducing carbon emissions, and how policy proposals under consideration can help move these states towards the CPP’s ultimate goal of reducing carbon emissions from the electricity sector by more than 30 percent below 2005 levels by 2030.

In our States of Progress report, we looked at how current policies and commitments will help states comply with the CPP, and found that several Midwest states were among those in good position to meet their 2022 interim and 2030 final targets. Here are a few of the highlights from the Midwest when it comes to complying with the CPP and putting ourselves on a trajectory to achieve significant reductions in carbon emissions from our electricity sector.

Illinois

Under the CPP, Illinois’ 2022 emission reduction target is 1,647 pounds of carbon dioxide (CO2) for every megawatt-hour of electricity produced (lbs/MWh) (green line in the figure below). This is significantly lower than the state’s 2012 baseline (yellow dot) of 2,301 lbs/MWh. However, when we take into account the progress that Illinois has already made in reducing carbon emissions—due primarily to clean energy policies and retirements of aging coal-fired power plants—the state is already well on its way towards meeting the 2022 interim target.

In fact, current policies and coal retirement commitments will take the state a full 62 percent of the way toward meeting its 2022 target, and 48 percent of the way towards meeting its ultimate 2030 target of 1,245 lbs/MWh.

Illinois SoP

Current policies and already-announced coal plant retirements combine to put Illinois well on its way towards achieving its 2022 interim target under the Clean Power Plan. These commitments also mean the state is nearly 50% of the way towards its 2030 requirement compared to the 2012 baseline.

Part of the reason Illinois is already well-positioned to comply are its current policies that are driving investments in zero-carbon resources. Illinois’ energy efficiency standard—which requires the state’s investor-owned utilities to reduce electricity demand by 2 percent each year—and its renewable energy standard—which requires 25 percent of its electricity to come from renewable energy by 2025—are already moving the state towards compliance and will continue to spur investments in cost-effective, carbon-free electricity resources. Recent coal plant retirements and the announcement of more to come are also moving the state towards a lower-carbon energy future.

A proposal is currently being considered by the state legislature that would fix some design flaws in the state’s efficiency and renewable energy standards that are inhibiting full compliance and would further strengthen these standards to achieve a 20 percent reduction in energy demand by 2025 and 35 percent renewable energy by 2030. Enacting this proposal into law would continue to move the state towards cost-effectively complying with its emission reduction targets.

UCS analysis, released in March, shows how these fixed and strengthened policies (even in the absence of the Clean Power Plan) provides significant economic, public health, and environmental benefits to Illinois. In fact, strengthening Illinois’ renewables and efficiency standards would put the state on track to be more than 150 percent toward meeting its rate-based emissions reduction targets in both 2022 and 2030.

Michigan

Michigan’s 2022 emission reduction target is 1,526 lbs/MWh of electricity generated, and much like Illinois, the state’s current energy efficiency and renewable energy standards, combined with recent or announced coal plant retirements put the state in a good position to meet it 2022 interim target. When these commitments are accounted for, they will take the state 63 percent of the way towards compliance in 2022.

However, Michigan’s energy efficiency standard only requires utilities to achieve 1 percent savings annually, leaving significant cost-effective savings still on the table. And the state’s renewable energy standard of 10 percent by 2015 has already been achieved. These relatively modest goals mean that Michigan is currently on track to be only 37 percent of the way towards compliance with its ultimate 2030 target.

Michigan SoP

Michigan is already well on its way towards complying with the Clean Power Plan’s 2022 carbon emission reduction targets. Strengthening the state’s energy efficiency and renewable energy standards would continue to cost-effectively move the state towards achieving its 2030 target.

There are currently as many as four competing proposals at the state legislature that range from completely eliminating the standards to strengthening them to achieve 1.5 percent energy savings and 20 percent renewable energy by 2022. The debate is expected to continue through 2015, but it is clear that maintaining and strengthening the state’s energy efficiency and renewable energy standards would continue to cost-effectively move the state towards compliance with the Clean Power Plan.

An analysis that we released in 2014 shows how the state can achieve at least 30 percent renewable energy by 2030 while driving significant economic, environmental and public health benefits to Michigan even without considering the benefits of Clean Power Plan compliance.

Minnesota

Minnesota stands in a class all by itself when it comes to Midwestern states and reducing CO2 emissions.

Minnesota’s strong energy efficiency standard—requiring investor-owned utilities to achieve 1.5 percent reductions in energy demand annually—and renewable energy standard, which requires at least 25 percent renewable energy by 2025 from all utilities (it is stronger for investor-owned utilities), mean the state has a solid head-start on compliance with the Clean Power Plan.

In fact, if these policies are fully implemented and commitments to retire coal-fired power plants are fulfilled, the state will go well beyond compliance in both 2022 and 2030.  This presents a unique opportunity for Minnesota to become a net exporter of carbon-free electricity to the surrounding region.

Minnesota SoP

Minnesota’s leadership on clean energy will serve it well as it looks to comply with the Clean Power Plan. Strong energy efficiency and renewable energy standards are a key component to Minnesota’s cost-effective compliance, and the state is on a path towards exceeding its targets under the CPP.

Attempts to weaken Minnesota’s energy efficiency and renewable energy standards were defeated in the state legislature during the 2015 session thanks in large part to Governor Dayton’s strong stance in support of clean energy.

Unfortunately, another proposal that would have strengthened Minnesota’s energy efficiency standard to 2 percent annual savings and its renewable energy standard to 40 percent by 2030 did not pass the legislature  in 2015 despite strong evidence (including UCS analysis) that these policies would have brought significant benefits to Minnesotans. We expect the proposal to be reconsidered in the near future, and the Clean Power Plan provides additional motivation for Minnesota to continue its leadership on clean energy.

Incentivizing early action, encouraging cooperation, and addressing concerns

The final Clean Power Plan also includes at least three important elements that states can take advantage of to develop the most cost-effective and beneficial pathway to compliance:

  • The EPA encourages states (by offering additional emission reduction credit) to take early action on renewables and efficiency (particularly in low-income or distressed communities). This early credit system should make compliance easier for states like Illinois, Michigan, and Minnesota that have already established momentum in driving investments in clean energy resources, and help states minimize the risks of an overreliance on natural gas.
  • The Clean Power Plan also strongly encourages states to seek out opportunities to cooperate with other states in developing compliance plans that take advantage of states’ unique strengths—whether robust renewable energy resources, potential for cost-effective energy efficiency, transmission infrastructure and so forth—to maximize the options for developing and implementing a least-cost plan to compliance.
  • Finally, the rule provides significant guidance on maintaining a reliable electricity system while reducing CO2 emissions, even providing an outlet in cases where reliability may be threatened. While it’s unlikely that this will be necessary, it’s important for the EPA to show that it is listening to legitimate concerns being expressed and taking action to address them.

The unique elements of the Clean Power Plan, combined with the ability to take advantage of commitments already made, make transitioning to a lower-carbon electricity sector a tremendous opportunity for Midwest states to build upon the successful clean energy policies and programs that have already provided significant benefits to the Midwest. It’s an opportunity that should be embraced by state leaders and decision-makers to provide a clean, sustainable, and economically beneficial electricity system to those of us who make the Midwest our home.

 

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