How Can States Comply with the Clean Power Plan?

You can also watch C-Span's recording of this briefing.

The Environmental and Energy Study Institute (EESI) held a briefing examining the breadth of options available for states to comply with the Environmental Protection Agency’s (EPA) proposed Clean Power Plan, which will be finalized later this summer. The Plan will set rules limiting carbon dioxide emissions from existing power plants. Each state will be given a different target for emissions reductions, based on its specific circumstances. States will then have to submit plans to the EPA outlining how they will achieve their targets.

State energy, environmental, and utility officials are already working closely together to identify compliance options, with the National Association of Clean Air Agencies (NACAA), National Association of Regulatory Utility Commissioners (NARUC), and National Association of State Energy Officials (NASEO) leading the way. On May 21, NACAA, which represents air regulators in 41 states and over 100 local agencies, released a comprehensive document examining potential state compliance strategies under the Clean Power Plan. NARUC and NASEO are helping to disseminate the report, Implementing EPA’s Clean Power Plan: A Menu of Options, to state energy offices and utility commissions throughout the country. The report does not include recommendations, but instead provides an objective assessment of the strengths and weaknesses of the different approaches to Clean Power Plan compliance. The speakers discussed the co-benefits, costs and effectiveness of these different approaches, as well as the opportunities and challenges the Clean Power Plan represents to states.

Despite some states’ opposition to the federal regulation, only one state, Oklahoma, has publicly said it will not prepare a state compliance plan for the Clean Power Plan. Even states with strong coal interests, such as Kentucky, Pennsylvania, Michigan, Missouri and Utah, are said to be developing plans. These plans may range from regional cap-and-trade systems, which California and the Northeast are currently using, to single-state plans that focus on technical efforts like increasing the efficiency of coal-fired power plants.

Highlights:

• Bill Becker, Executive Director, National Association of Clean Air Agencies (NACAA), emphasized that since the Clean Power Plan (CPP) is authorized by the Clean Air Act, state and local air quality agencies will have the primary responsibility to manage, develop, and submit state compliance plans, though they will be working very closely with utility regulators, state energy offices, and all other affected stakeholders.
• Becker stressed that although there is strong opposition to the CPP in various states, unless the program is curtailed by Congress or the courts, NACAA members will be legally required to implement this program as effectively and as expeditiously as they can.
• He also noted that at this stage, the plan is still a proposal, not a final rule, and while some of the criticism is well founded, many of these issues will likely be addressed in the final plan when it is released in August. The EPA has worked extensively to meet with states to hear their concerns, and Becker said he is confident the EPA will incorporate their feedback into the final plan.
• One of the main concerns the EPA has heard regarding the proposed rule is the difficulty states will have in meeting the interim emissions goal set for 2020, referred to as “the cliff,” which requires a large portion of the overall 30 percent emissions reductions goal to be achieved ten years before the 2030 target date. Becker believes this interim goal will likely be altered in the final plan.
• Each state will receive a specific emissions target, and the EPA has provided recommendations and guidance as to how states can most effectively achieve their reduction goals. Becker stressed, however, that there is immense flexibility in which strategies states can use to meet their respective goals.
• While no states have officially begun the development of their plans because the rule has yet to be finalized, they are already working extensively to meet with all their energy stakeholders to determine which emissions reductions strategies will work best in their state, and how can they incorporate those strategies into a plan that is satisfactory to the EPA.
• To help answer these questions, NACAA has created a 465-page report, Implementing EPA’s Clean Power Plan: A Menu of Options, summarizing technologies, policies and programs states can implement to reduce greenhouse gas emissions. For each listed strategy, the report provides a description, associated costs, examples of implementation, GHG reduction potential, co-benefits, and additional resources.
• In addition, to assist states and expedite the development of their compliance plans, NACAA is developing model state plans that will provide regulatory language for easy incorporation. NACAA will release these models within one month of the Clean Power Plan's finalization.
• Becker acknowledged that there has been an effort by some to persuade states to refuse to draw up plans, but he warned that if states do not do so, the federal government will step in and implement a federal plan that will probably not be as suitable to the state's specific circumstances. Also, refusing to present a compliance plan will show a complete and total disregard for the tens of thousands of hours that state officials have already put into developing their plans.
• Multiple times throughout his presentation, Becker stated that the most impactful way Congressional offices can assist in making the Clean Power Plan a success is by appropriating funds for the states to help them develop their compliance plans.
• Becker concluded by stating that implementation of the CPP is going to be challenging, but that state and local level agencies are already working hard to lay the groundwork for compliance, and he believes that the documents NACAA is preparing will greatly assist states in developing their compliance plans.
• David Terry, Executive Director, National Association of State Energy Officials (NASEO), opened by stating that regardless of how the CPP is modified or altered by the time it is finalized, NASEO’s focus will remain on ensuring states have maximum compliance flexibility, are able to pursue least cost compliance, and that electricity systems maintain reliability, affordability and sustainability.
• Terry noted that NASEO has not taken a position regarding the legality of the Clean Power Plan.
• In attempting to capture the least-cost approaches for compliance, Terry believes the most logical place to begin is by taking advantage of public and private investments in energy efficiency, voluntary programs, successful technologies, and various energy efficiency programs already in place.
• Repeatedly during his presentation, Terry emphasized the importance of including reductions associated with energy efficiency programs in compliance efforts. Approximately $50 billion is spent on energy efficiency per year in the United States, and the EPA should provide states the opportunity to take advantage of this investment in their clean power plans. Specifically, EPA should allow the use of both ratepayer efficiency programs and public and private non-ratepayer approaches (e.g., Energy Savings Performance Contracts, Superior Energy Performance, CHP, building energy codes, ENERGY STAR, C-PACE, Weatherization…).
• As Energy Offices prepare to work towards the goals outlined in the CPP, Terry remarked that electricity systems are already undergoing dramatic changes, such as the shift to natural gas generation, dramatic improvements in energy efficiency, and the emergence of building technologies like net-zero energy buildings. These trends are already posing challenges to the grid.
• Terry also warned that it is critical to find the right balance between meticulous evaluation, verification, and measurement of energy efficiency programs in order to ensure compliance with the CPP, but not make evaluation so difficult that states are unable to incorporate energy efficiency measures in their plans.
• Capitalizing on the immense amount of effort and investment being poured into implementing different energy efficiency strategies across the country, NASEO has been working closely with state energy offices to track the success of these projects and develop case studies highlighting successful compliance programs. NASEO plans to finish these case studies and submit them to the EPA within the next few months in order to help states determine which energy efficiency strategies may be most effective.
• Additionally, NASEO is working on the development of a national energy efficiency registry that would give communities, states, and governments the ability to enter their projects and record their verifiable energy savings, thereby facilitating comparisons and encouraging best practices.
• In closing, Terry stated that NASEO is coordinating meetings between EPA regional offices, the DOE, state energy offices, utility providers and regulators, and other stakeholders to ensure that all affected parties are able to have their issues addressed, and obtain the assistance they need in order to comply with the Clean Power Plan.
• Charles Gray, Executive Director, National Association of Regulatory Utility Commissioners (NARUC), began by stating that many possible strategies for CPP compliance will need approval from state utility regulatory commissions.
• One example of such a strategy is Combined Heat and Power (CHP), which provides a great solution for reducing emissions, but also presents challenges for state regulatory commissions due to interconnectedness issues, and the need to set fair utility "buy back" prices for the electricity produced in CHP plants.
• Additionally, another strategy, retiring aging power plants, may pose an issue to utility regulators because if plants are closed before their useful life is over, then there may be stranded cost recovery issues that would need to be considered by regulatory commissions.
• Gray stated that similarly to NASEO, NARUC has not taken a position on the legality of the Clean Power Plan, and acknowledged the fact that there are NARUC members who strongly oppose the Plan, as well as those who strongly support it.
• Once the rule is finalized, NARUC members will be responsible for maintaining the reliability and affordability of U.S. electricity systems. Gray said that NARUC members have already been working closely with FERC to address potential reliability issues over the past few months, resulting in a letter that FERC sent to the EPA on May 15 requesting that the agency adopt some type of contingency plan in case CPP compliance causes reliability issues.
• Gray noted that NARUC has seen a growing interest in assessing what a multistate or regional compliance plan would look like, and there are now 41 states in regional groups exploring this option.
• The best known regional compliance plan is the Regional Greenhouse Gas Initiative (RGGI), a cap and trade program involving nine northeastern states. Gray said it is likely other states will join RGGI (Pennsylvania and Virginia are considering doing so), or will use RGGI as a model to set up similar cap and trade programs.
• Due to this interest, NARUC released a report, funded by DOE, on how states can get together to develop a regional plan. NARUC believes regional plans are important because electricity grids are interstate, and the market is interstate, so it makes sense for compliance plans to follow suit. Additionally studies have shown that multistate compliance plans can reduce costs, increase reliability, and improve operational efficiency. The only question is whether states will have enough time to develop regional compliance plans within the given timeframe.

 

This briefing was the second in a series examining the Clean Power Plan and its implications. Find out more about the first event at www.eesi.org/040815cpp.