At first glance the plan seems to favor renewable energy over natural gas, say experts.
After a year of being pummeled by opponents, Obama’s final carbon reduction plan emerged this week with an even stronger push for renewable energy.
Wind and solar energy are centerpieces of the Clean Power Plan, the United States’ first ever rule to reduce carbon dioxide from power plants.
The rule not only makes renewables one of the plan’s three central building blocks, but also creates special incentives to spur communities to build renewables more quickly than required.
The revised version of the rule comes after a year of review, hundreds of meetings and 4.3 million public comments delivered to EPA. It requires that states come up with plans to cut carbon pollution from power plants by 870 million tons, or 32 percent below 2005 levels, in 2030.
“The valuable feedback we received means the final Clean Power Plan is more ambitious yet more achievable, so states can customize plans to achieve their goals in ways that make sense for their communities, businesses and utilities,” said EPA Administrator Gina McCarthy.
Over the year the EPA realized that clean energy is making its way into the U.S. economy faster than expected, she said. The nation uses three times more wind and 20 times more solar energy than it did in 2009, and the solar industry added jobs 10 times faster than the rest of the economy, according to the agency.
The plan strives to make renewable growth happen even faster.
“Time and again, when there’s a market signal — whether it’s from consumers, from states, or from EPA — markets respond. There is no reason to think the Clean Power Plan should be any different,” said Malcolm Woolf, senior vice president for policy and government affairs for the Advanced Energy Economy.
In addition to cutting carbon emissions, the plan is expected to reduce other power plant pollutants: sulfur dioxide by 90 percent and nitrogen oxide by 72 percent lower, compared to 2005 levels.
The Specifics: BSER
In creating the final plan, the EPA relied on three building blocks or best system of emissions reduction (BSER). The first considers power plant heat rate, the second switching to natural gas, and the third the development of renewable energy.
The draft plan also had included energy efficiency as a BSER, but the EPA dropped it as it tried to make the plan more bullet proof from legal challenges.
In calculating carbon reduction requirements, the EPA upped the amount of renewable energy over what it included in last year’s proposed rule. This is because new data revealed “greater availability of clean generation than was evident at proposal,” the EPA said.
The agency attributed the more ample renewable energy supply to “reductions in the cost of clean energy technology, as well as projections of continuing cost reductions.”
Renewable Energy Verses Natural Gas
In the market struggle between natural gas-fired generation and renewables, the plan seemed to tip the scale more toward renewables, according to industry observers who are still pouring over the extensive material released by the EPA. The rule’s preamble, alone, is 1,560 pages.
“One thing that really stuck me was the extent to which the plan really tries to push toward renewables and decrease the emphasis on natural gas,” said Paul Gutermann, a partner with Akin Gump in Washington, D.C. “Natural gas has had this love hate relationship with environmentalists. It has gotten much more support in recent years because it has really helped the economy and reduced greenhouse gas emissions. But the new plan seems to go much harder in favor of renewables, not necessarily over natural gas, but there is a different emphasis on renewables, promoting their development and increasing the incentives for renewables.”
For example, the plan includes incentives for renewables not found in the draft proposal. Called the Clean Energy Incentive Program (CEIP), the program rewards states for early investments in renewables and energy efficiency, with special emphasis on low-income communities.
States that reduce carbon emissions during 2020 and/or 2021 can receive the incentives, allotted in the form of extra emission rate credits. The EPA says that the credits are specifically designed for “early reductions from zero-emitting wind or solar power projects” as well as energy efficiency.
Jacob Hollinger, previously with EPA and now a partner with McDermott Will & Emery, noted that states must choose to participate or not in the CEIP; it is a voluntary program.
“For the next two or three years, states will make the choice as they design plans. That is something renewable energy developers want to think about as they participate in the state planning process,” he said.
He also noted that the EPA also released a proposed federal model rule Monday. The rule would kick in for those states that do not create their own compliance plan, likely those who oppose the Clean Power Plan. The renewable energy community now has an opportunity to weigh in on the federal plan, which is important because several states have signaled they may resist the rule, Hollinger said.
The EPA also changed the timing for compliance, giving states more time to comply. The draft rule had called for state plans to be filed within 13 months of release of the final rule, with carbon emissions reductions starting in 2020. In an effort to give states more flexibility, the final rule gives them until September 6, 2018, as long as they file an extension. Otherwise, the plans are due September 6, 2016.
Industry Reactions Renewable energy and environmental advocates praised the plan.
“Solar energy is the most sensible compliance option for states under the Clean Power Plan. Solar works in all 50 states, has zero carbon emissions, creates more jobs per megawatt than any other technology, and can be deployed cost-effectively and quickly – all while improving grid reliability,” said Rhone Resch, president and CEO of the Solar Energy Industries Association.
The American Wind Energy Association said that wind power, alone, could provide the majority of the power the states need to comply with the new regulation.
“Low-cost wind energy reduced carbon emissions by five percent in 2014, and we’re capable of doing a lot more. We can build a more diverse, reliable, cleaner energy mix for America, while creating jobs and keeping money in consumers’ pockets,” said Tom Kiernan, CEO of the American Wind Energy Association.
Meanwhile, 365 private companies and investors expressed support for the plan in letters sent to more than two-dozen governors. Organized by sustainability advocacy group Ceres, the letter writing campaign drew such industry giants as General Mills, Mars, Nestle, Staples, Unilever and VF Corporation.”
Legal experts say the Clean Power Plan will undoubtedly be challenged in court. A key issue being watched is whether the courts will ‘stay‘ the plan or let it go forward as litigation is resolved.