EPA Unveils New Details for Clean Energy Incentive Program

On June 16, the Environmental Protection Agency (EPA) released proposed details for the Clean Energy Incentive Program (CEIP), a voluntary program that would encourage states to quickly implement clean energy initiatives as part of the Clean Power Plan (CPP). The Plan, if upheld by the courts, would be the nation's first regulation of carbon emissions from existing power plants, and would seek to reduce U.S. energy sector emissions 30 percent from 2005 levels. Though the Supreme Court placed a stay on the Clean Power Plan earlier this year—i.e., the regulation won’t go into effect until all litigation against it is complete—many states are nevertheless moving ahead with plans to meet the emission reduction targets the plan would set for them. The proposed CEIP details will help inform the states and tribes that are moving forward with their compliance plans.

Stakeholders will be welcome to provide comments on the new CEIP details for 60 days following its coming publication in the Federal Register.

Clean Energy Incentive Program Background

The Clean Energy Incentive Program was designed to incentivize early adoption of wind and solar energy, as well as energy efficiency measures for low-income communities. In order to be eligible for CEIP's benefits, states and tribes must begin construction on qualifying projects after they submit a final Clean Power Plan compliance plan to the EPA. To qualify for the CEIP benefits, projects must generate clean energy or save energy in the period from 2020 to the end of 2021. The first deadline for general compliance to the Clean Power Plan is in 2022, so early compliance benefits are no longer available at that point.

CEIP is in essence a voluntary matching program. Under CEIP, the EPA will provide a limited number of either matching allowances or Emission Rate Credits (ERCs) to states and tribes that are making early investments in energy efficiency and renewable energy, in addition to the allowances or ERCs the projects would generate anyway. Low-income projects will receive double the allowances or ERCs; EPA is providing this extra support for low-income communities as part of its efforts to integrate environmental justice concerns into the Clean Power Plan. Whether a state receives allowances or ERCs for its projects depends on how the state chooses to comply with the Clean Power Plan (it can choose either a mass-based target, measured in pounds of carbon released per megawatt hour, or a rate-based target measured in total tons of carbon emissions).

New Details in June 16 Proposal

The new proposal eases the initial restriction that only energy efficiency projects in low-income communities could receive double the matching allowances or ERCs; now, solar energy projects in low-income areas would also qualify. The proposal also expands eligible renewable energy projects from solely solar and wind to include certain forms of geothermal and hydropower.

In response to previous public comments, EPA clarifies that the term "commence commercial operation" means the point when energy is being sold (for renewable energy projects) and the point when communities are saving electricity (for energy efficiency projects). EPA suggests that renewable energy projects in all communities should become eligible for matching allowances or ERCs if they begin commercial operations on or after January 1, 2020. EPA also proposes that energy efficiency projects in low-income communities become eligible for double the matching allowances or ERCs if they begin operation on or after September 6, 2018. These timelines are subject to change due to the uncertainty caused by the Supreme Court stay.

In addition, EPA attempts to clarify definitions for “low-income communities.” Because states and pre-existing programs use different definitions, EPA proposed that definitions remain flexible to meet the needs of states and tribes. However, the proposal states that definitions established after the publication of the final Clean Power Plan (October 23, 2015) are not allowable, and that definitions must be consistent within the state or tribe.

The largest part of the new proposal aims to clarify how much of the matching pool will go to each state or tribe, as well as how much will go to renewable energy projects versus low-income projects. EPA suggests that the allowances and ERCs be split half-and-half between renewable energy and low-income energy efficiency or solar projects. To provide further guidance, EPA released a chart with the proposed amounts of allowances or ERCs that each state and tribe could qualify for.

EPA proposes that the total amount of the matching pool be 300 million allowances (equivalent to 300 million short tons of carbon emissions) or 375 million ERCs (equivalent to 375 million megawatts of renewable energy, energy efficiency, or natural gas combined cycle generation).

Going Forward

The EPA will be accepting public comments on the new proposal for 60 days after its publication in the Federal Register. Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation, commented on the importance of public input, saying, “For nearly a year we have collaborated with communities and other stakeholders, listening closely to ideas about how to design a range of elements of the CEIP. Today’s proposal keeps that conversation moving forward.”

However, opponents of the Clean Power Plan feel that moving forward with programs like CEIP is not in line with the stay. Sen. Inhofe (R-OK) said in a hearing, “EPA is attempting to downplay the significance of the stay and argue against clear legal precedence as a last-ditch effort to scare states into spending scarce resources complying with a rule that could very well be overturned.” Until the judicial review of the Clean Power Plan is complete, the fate of the Clean Energy Incentive Program remains uncertain.

Author: Rebecca Chillrud