Most States Well on the Path to Comply with Final Clean Power Plan

August 13, 2015 | 9:47 am
Jeremy Richardson
Former UCS Fellow & Energy Analyst

On August 3, President Obama announced the release of the final Clean Power Plan (CPP), setting the first ever limits on carbon dioxide emissions from existing power plants. Today, UCS is releasing an updated version of our States of Progress analysis, which calculates the progress states are expected to make toward meeting their CPP emission reduction targets based on committed clean energy actions. We find that 31 states are on track to be more than halfway toward meeting their 2022 emission rate benchmarks, and that 20 states are on track to be more than halfway toward meeting their final 2030 CPP rate-based compliance targets.

Clean energy progress already underway

This analysis looks at state progress toward meeting the 2022 benchmarks and 2030 final targets set forth in the final rule, based on committed actions. We analyzed four types of committed actions that help cut a state’s emissions: Ramping up renewable energy to meet mandatory state Renewable Electricity Standards (RESs); ramping up energy efficiency to meet mandatory state Energy Efficiency Resource Standards (EERSs); bringing on line under construction nuclear power units; and replacing coal plants already announced for retirement with renewable energy, energy efficiency, and natural gas.

As allowed by the rule, renewables and efficiency can replace coal- and gas-fired generation in proportion to their share in the state’s current (2012) generation mix. We examined how these committed actions would contribute to states’ progress under both the rate-based and mass-based approaches for compliance that the EPA has provided.

Under a rate-based compliance approach, we find that 31 states are on track to be more than halfway toward achieving their 2022 benchmark, and 21 are on track to surpass it.

State progress toward meeting the 2022 rate reductions set in the Clean Power Plan.

State progress toward meeting the 2022 rate reductions set in the Clean Power Plan.

Our analysis also shows that 20 states are on track to be more than halfway toward their final 2030 emissions rates, and that 16 states will have exceeded their required rate reductions by 2030.

State progress toward meeting 2030 rate reduction requirements in the Clean Power Plan

State progress toward meeting 2030 rate reduction requirements in the Clean Power Plan

States leading the pack

Many states are on track toward meeting their rate reduction benchmarks and targets laid out in the final CPP. For example:

  • Western states like Nevada, Oregon, and Washington are projected to exceed their rate reduction requirements in both 2022 and 2030 based on commitments to investing in renewable energy and retiring coal-fired power plants, putting them on a path to a cleaner generation mix. Similarly, New Mexico is on track to exceed its 2022 benchmark and to be nearly two-thirds of the way toward meeting its 2030 rate target.
  • Minnesota is on track to exceed its required rate reductions in both 2022 and 2030, thanks to strong investments in efficiency and renewable energy. Committed actions will take other Midwestern states like Illinois, Michigan, and Missouri more than 60 percent toward their near-term 2022 rate reductions because of coal plant retirements combined with RES and EERS policies. Even coal-heavy states Ohio and Kentucky are poised to be more than halfway toward meeting the 2022 rate benchmarks, largely because of announced coal plant retirements.
  • South Carolina, Tennessee, and Georgia are all on track to exceed their 2022 targets, and South Carolina and Tennessee will also exceed their 2030 targets as well, assuming under construction nuclear units come online as expected.
  • California and the northeast states that participate in the Regional Greenhouse Gas Initiative (RGGI) have taken ambitious steps to cap and price carbon, as well as implement complementary renewable energy and energy efficiency policies, all of which put them well ahead of their collective 2022 and 2030 CPP goals. They are also in a position to trade low cost emission reduction credits with other states that may have a more challenging path to compliance.
  • Among the at least 18 states that have already filed or are expected to file suit against the final CPP, five states—Alabama, Arizona, Kentucky, Ohio, and Wisconsin—make our list of states that will achieve more than half of their required rate reductions in 2022 through committed actions, and another three states, Georgia, North Carolina, and South Carolina, would fully meet their targets in 2022 (and South Carolina would also meet its 2030 target).

New flexibilities in the final rule

The final rule incorporates a number of important changes, based on the 4.3 million comments that the EPA received on its June 2014 proposed rule. These changes create additional flexibilities for states, including delaying the start date of the initial compliance period from to 2020 to 2022, allowing a more gradual phase-in of the “glide path” of emissions reductions through 2030, and enhancing opportunities for emissions trading.

The final rule also treats all covered fossil-fired units equally by setting the same technology-specific (fossil steam and NGCC) emissions rates for all units nationwide. It’s also true that while energy efficiency potential was excluded from target setting, states are still free to use energy efficiency measures to achieve low-cost reductions.

Emissions trading options for states and utilities are a further flexibility. The fact that our analysis finds that so many states are positioned to go well beyond their prescribed targets, while some are less far along, creates a clear pathway for mutually beneficial emissions trading to help all states reach their goals.

Mass-based targets

The final rule also provides an option for states to comply by meeting a mass-based emission target, measured in tons of carbon dioxide (CO2). Mass-based targets can help facilitate interstate and utility-based trading of emissions credits, and are also compatible with existing programs like RGGI.

Each state’s target was derived from its corresponding rate-based target, and is thus reflective of the best system of emission reduction (BSER). The EPA quantifies mass-based goals that are equivalent to the rate-based goals, with certain additional requirements to help align potential differences between the two, including allowing affected electric generating units the opportunity to increase output (and emissions) so long as it is offset by excess generation from the renewable energy building block (see EPA’s Technical Support Document of Goal Setting for more details).

Our estimates of CPP compliance progress under a mass-based approach assume that no affected electric generating units exercise this option. As a result, we find that the planned activities considered here position states farther along toward meeting their mass-based targets than their rate-based targets. If affected electric generating units did increase their output in accordance with this provision, total progress toward compliance would decline accordingly.

Our analysis

In our analysis we looked at four specific actions that states are taking (or have already taken) that will help them meet their emissions reduction requirements under the Clean Power Plan. These are: announced retirements of coal-fired power plants since 2012; incremental renewable energy demand from mandatory state Renewable Electricity Standards that comes on line after 2012; avoided generation from mandatory Energy Efficiency Resource Standards that occurs after 2012; and the completion of nuclear power plants under construction as of 2012.

Following the EPA’s methodology in the final rule, our calculation of state progress toward meeting emissions benchmarks and targets assumes that zero-emitting resources like renewables and efficiency displace existing fossil-fired generation in direct proportion to each state’s fossil steam and natural gas generation mix.

In our calculations, we use future electricity sales based on the reference case from EIA’s Annual Energy Outlook 2015. We include expected retirements of coal plants that have been announced through the end of July 2015 (SNL data). And we reflect the projected impact of state RES and EERS policies as of July 24, 2015, based on LBNL and UCS calculations respectively.

Our analysis may be considered a conservative estimate of state progress because we did not include other types of mandatory state measures and programs, apart from EERSs, that could advance energy efficiency. We also did not explicitly incorporate emissions trading which would allow states to take advantage of low-cost emissions reductions outside their borders, nor do we account for the potential emission reduction benefits from the EPA’s proposed Clean Energy Incentive Program.

This analysis updates a previous study we completed in June 2015 for the draft rule.

The way forward

The final Clean Power Plan includes multiple compliance flexibilities for states, and sets targets that can be achieved by continuing down the path of progress that many states are already on. Our analysis shows that complying with the Clean Power Plan is well within the reach of most states through committed actions and, with the option to trade emissions credits, all states should be able to readily comply. It’s now up to states to take charge of their clean energy future, helping to meet our climate goals, and simultaneously generating economic benefits.