The Clean Power Plan’s Clean Energy Incentive Program

November 1, 2016 | 11:38 am
Installing solar panels in
Rachel Cleetus
Policy Director

Today is the comment deadline for the Clean Energy Incentive Program (CEIP), a voluntary component of the Clean Power Plan. The program encourages early investments in renewable energy and targeted investments in efficiency and renewables in low-income communities. In our comments, we urge every state to join the program and take advantage of the CEIP’s incentives, and also offer the EPA some recommendations to help improve it.

What is the CEIP?

The CEIP is a voluntary program that is part of the Clean Power Plan (CPP), the nation’s first-ever limits on carbon emissions from power plants. Under the CEIP, the EPA is proposing extra incentives for investments in near-term deployment of renewables (RE) and energy efficiency (EE) and RE investments in low income communities.

States that opt in and meet the program’s criteria would be able to get these incentives in the form of additional allowances (if they adopt a mass-based compliance program for the CPP) or emission rate credits (or ERCs, if they adopt a rate based compliance program). The overall matching pool of credits is capped at 300 million short tons spread across all participating states. More information about how the program works is available here.

States should opt in because they will benefit from the early deployment of renewable and energy efficiency resources. These investments can deliver health and economic benefits, help lower their long-term compliance costs for the CPP, and reduce the likelihood of an overreliance on natural gas (which comes with significant consumer, environmental and climate risks).

CEIP investments must meet some basic criteria, as outlined in a June 2016 proposal from the EPA, including:

  • To get credits, projects must save or generate electricity in 2020 and/or 2021, ahead of the first compliance period of the CPP in 2022.
  • The renewable energy project pool must meet specific technology criteria, which the EPA has solicited comment on, and projects are credited on a 1:1 basis, based on megawatts-hours (MWh) of generation.
  • The low-income community pool includes both energy efficiency and renewable energy projects and investments are credited at a 2:1 rate based on MWh of energy saved or generated.

Expanding clean energy benefits to disadvantaged communities

Renewable energy and energy efficiency have been delivering economic and health benefits to many Americans, but those benefits have not been equitably shared. The CEIP, together with other programs such as the Administration’s Clean Energy Savings for All Initiative, can help drive investments in low-income and disadvantaged communities.

We should note that environmental justice (EJ) groups have expressed concerns about the fact that the CEIP is necessarily tied to the carbon trading elements of the CPP because the incentives are provided via allowances and ERCs. This underscores the need to ensure that the CEIP is not the only way to drive these much-needed investments. It can and should be complemented by other state and federal programs targeting clean energy investments in disadvantaged communities.

In our comments today we have made several recommendations to improve the low-income component of the CEIP to increase potential benefits to these communities:

  • We recommend that the low-income community component of the CEIP be expanded to include explicit benefits for communities of color, Native American communities, and EJ communities, as defined by a state stakeholder process.
  • We support the current proposal for the EPA to award credits at a rate of two-to-one for low-income community projects. We also call on the EPA to make clear that states are free to increase their rate of awards per project, while staying within their emissions budget set by the CPP. (Expanding the EPA match per project would mean that the clean energy gains would come at the expense of relaxing the emissions cap, so we don’t consider that a prudent approach.)
  • We expressed the concern that the states that choose not to opt in might be precisely the states with disadvantaged communities in greatest need of improved access to energy efficiency and clean energy resources. Thus we believe the EPA should consider ways to open opportunities to projects in such states. Projects that provide direct benefits to CEIP-participating states should be eligible to receive awards, even if they are located in a state that has not opted to participate in the CEIP. These projects would be treated similarly to projects located in areas not covered by the CPP (e.g. Vermont or the District of Columbia) but that provide benefits to CEIP-participating states.
  • The EPA should increase the proportion of credits available for projects in low-income communities because there is a greater need here relative to renewable energy projects in general (which have already received a significant boost from the December 2015 extension of the federal production and investment tax credits). To the extent that the EPA gives states flexibility on apportioning credits, they must at a minimum not allow the low-income project pool to drop below 50 percent in any participating state.

Which clean energy technologies should be eligible for the CEIP?

In our comments, we have emphasized the need for robust criteria for technologies that should be eligible for credits.

  • For the renewable energy project pool, we have proposed that the EPA allow wind, solar, hydro and geothermal projects to be eligible. These clean energy technologies can be quickly deployed, in the timeframe for the CEIP, and help cut emissions cost-effectively.
  • For the low-income project pool, we have proposed that the EPA include efficiency investments, solar projects (at the residential and community scale), and appropriately scaled geothermal, wind, small hydro, and combined heat and power (CHP) projects, where these resources have a similar ability to generate direct economic benefits for low-income communities.

Continued momentum toward clean energy

Regardless of the stay on the CPP, the reality is that clean energy momentum is continuing nationwide. In 2015, wind capacity additions to electric generation exceeded that of any other resource, including natural gas, and in 2016 solar is on track to do the same. Just last week, the EIA said that, in 2015, 11 states had a share of wind generation that exceeded 10 percent of total power generation.

Renewable energy and energy efficiency are smart, cost-effective options that deliver public health, economic and climate benefits. Communities that have been overburdened with pollution and historically disadvantaged should also reap those benefits.

Over 17,000 UCS supporters agree, and have submitted comments to the EPA in support of the CEIP. Thank you!

So why delay progress? States should seize this opportunity to join the clean energy economy by developing compliance plans for the CPP that include robust participation in the CEIP.