5 Questions to Ask About the CEPP, A Powerful Tool For Clean Energy

August 19, 2021
Mike Blake/REUTERS
John Rogers
Energy Campaign Analytic Lead

In budget reconciliation, Congress has a pivotal opportunity to confront climate change and take meaningful strides in transforming our nation to a clean energy economy—including through a potentially powerful tool called the Clean Electricity Payment Program (CEPP). The CEPP could help get the nation to 80% clean electricity by 2030.

The key now is to make sure that what comes out of Congress is robust.

How the CEPP might work

The CEPP, included in the recently approved Senate framework for reconciliation, stands to incentivize utilities and other retail electricity providers all across the country to shift to a steadily cleaner electricity mix. It shares some similarities with the clean energy standards (CES) and renewable electricity standards (RES) that many states have adopted and successfully implemented for driving innovation and driving down emissions. There are also several critical differences. In particular, because of the rules of the reconciliation process, the CEPP is an incentive-based program, instead of an enforceable standard like a CES or RES. But the CEPP can help get us many of the same benefits—and even a few benefits all its own.

While we’re waiting to see the actual language from Congress, here’s how the CEPP might work: The policy sets the goals and guidelines, and retail electricity providers (utilities, or separate providers in competitive markets) do the rest.

  • Congress defines annual targets for providers to meet—likely growing percentages of each provider’s power supply that must come from clean electricity options.
  • Those electricity providers comply by building and owning their own new clean energy resources or contracting with separate clean energy developers/project owners, along with drawing on their existing qualifying clean energy resources.
  • Those entities meeting their annual targets get incentive payments; ones that fall short get assessed penalties.

There are devils and details, though. So we’ll be looking for positive answers to these five key questions.

1. Are the targets as strong as needed?

The CEPP has the potential to be a key piece of the puzzle for how we get the carbon out of our electricity—and by extension, the economy as a whole. To be effective, its clean electricity targets will have to be commensurate with our need.

In this case, that means getting our nation’s clean electricity supply to around 80% emissions-free by 2030. And it means incentivizing annual progress on the path to that level to keep things on track. The reconciliation process limits the policy time horizon to 10 years, but that level of progress over a decade would be a transformative down payment on full decarbonization soon after.

It’ll also be important for the CEPP to drive a high minimum level of effort that utilities would have to meet to avoid the stick component of the policy, even if they’re willing to forego the carrots. Some retail providers are further back in the move to clean energy; a design that allows them to start where they are and gives them time to catch up could work, as long as they’re well motivated to move forward, and as long as the country as a whole hits the 2030 target. Congress needs to tilt the balance strongly toward bold action overall.

2. Is there enough funding to power the transition?

The CEPP would give electricity suppliers money to incentivize the rapid buildout of clean energy resources. Estimates for what level of funding might be involved come from calculating what it would take to move to a decarbonized power sector, and subtracting out other tools that can be brought to bear. Those other tools include things like the renewable energy investment/production tax credits that have been so powerful at driving progress to date, and that are another key piece of the draft reconciliation plans.

The Senate’s reconciliation budget framework proposes to channel $198 billion over the 10 years through the relevant committee (Energy and Natural Resources), with the CEPP as a major—though far from only—priority to share in that funding.

Notably, having the funding come from taxpayers via the federal budget, as with the CEPP, can base it in the progressive structure that our tax policy generally provides. That’s an important consideration, because we need to not only address today’s inequitable energy burdens but also make sure that the transition ahead makes further improvements on those issues.

3. Will the funding be used well?

The rules of reconciliation may hem in the full extent to which stipulations can be made around use of CEPP funds by utilities, but we’ll be pushing for Congress to do as much as it can to ensure that our federal dollars get invested in “beneficial uses”. Beyond driving the necessary deployment of clean energy resources, those could include things like supporting energy efficiency, providing customer refunds or targeted bill assistance, and expanding the reach of, and access to, technologies like rooftop solar (see below).

Some of the task of ensuring good use of funding will likely fall to the states or local authorities—state legislators, who could put in statute what can be done with the funds, for example, or public utility commissions, which oversee utility decisions and can make sure that the public good is best served. And any decision making will need a robust stakeholder process, to make sure the views of the public are heard and incorporated.

4. Will it drive the cleanest sources?

A big question for the CEPP will be what technologies get to count toward a utility’s target. As I’ve described it elsewhere,

Some technologies are virtual slam dunks for including…, like solar, wind, geothermal, and low-impact hydro. Others are more controversial, such as nuclear, biomass, waste-to-energy, and natural gas or coal plants fitted with carbon capture and storage.  

We’ll be pushing Congress to drive the development of the cleanest mix possible. That means putting guardrails to prioritize development of safe, sustainable, and clean resources, with a full consideration of their lifecycle impacts. And it means excluding some outright, including waste-to-energy (trash-burning) facilities, and most or all natural gas plants.

Another important resource category is clean distributed generation (DG), particularly rooftop solar. DG is a key resource for generating power where and when it is so often needed. It allows electricity customers to engage much more directly in making clean energy happen. And, particularly when paired with energy storage, it can play a vital role in enhancing community and household resilience.

We’re going to want and need DG to be a substantial part of our electricity mix as we make the switch to clean. The CEPP language coming out of Congress should reflect that need, by supporting the development of DG.

5. Will all electric utilities be covered?

Because carbon emissions anywhere in the power sector matter to us all, it’ll be important for Congress to design the policy to encompass every retail electricity provider in the country. If the CEPP offers stronger carrots than sticks, one could hope that rational providers, including municipal utilities and cooperatives, would want to be part of it. But reason doesn’t always win the day. We need Congress to be fully inclusive.

Bonus round

There’ll be more to laying out the policy in the reconciliation process—sealing off escape hatches that could allow providers to skirt the policy, for example, or making sure that states can move faster if they want.

And it’ll be important to keep in mind that the CEPP, powerful as we push for it to be, is one tool among many that will be needed to make sure the transition to clean energy happens, and happens smoothly and equitably. The reconciliation package itself will need to include other approaches to fostering equity and access, like not only including those tax credits in a robust way, but making them more broadly accessible. And like driving down local air pollution, by accelerating coal plant retirements and supporting the transition to electric vehicles, trucks, buses, and ports, for example.

But if we push, and Congress gives climate change the attention it deserves, the CEPP will be in a great position to be a key tool for accelerating our move to a low-carbon, just, and affordable electricity mix.

About the author

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John Rogers is a senior energy analyst at the Union of Concerned Scientists with expertise in clean energy technologies and policies and a focus on solar, wind, and natural gas. He co-managed the UCS-led Energy and Water in a Warming World Initiative, a multi-year program aimed at raising awareness of the energy-water connection, particularly in the context of climate change, and motivating and informing effective low-carbon and low-water energy solutions.