When the Environmental Protection Agency (“EPA”) released its widely anticipated Clean Power Plan (the “CPP”), a Final Rule regulating carbon dioxide emissions from the nation’s existing electric generating facilities, the agency predicted consumer savings of $85/family/year. Not everyone agrees. Even the EPA predicts that compliance with the CPP will initially raise electric prices by 4%, and finds that the $85 savings will kick in when anticipated investments in energy efficiency (“EE”) begin to pay off (in 2030). Put simply, the only way for consumers to save money is to find ways to reduce their energy use.
If fully implemented, the CPP will reduce carbon emissions from electric generation plants (to 32% below 2005 levels by 2030) by requiring states to meet specific targets based on the mix of in-state generating sources affected by the rule. Accordingly, the economic impact of the CPP will vary from state to state. States which currently rely on coal-fired generation will see increased electricity prices; ratepayers in fully regulated states which comply with the CPP by replacing coal with natural gas plants will cover the cost of building new plants and the necessary infrastructure. Transmission investments will be necessary for states that choose to rely on out-of-state renewables (or Canadian hydro). “Early adopter” states, which already phased out fossil resources and subsidized renewables and EE, get no credit for significant expenditures made for facilities operating before 2020, and most of these states are now being asked to invest more.
Whether CPP compliance is achieved via state subsidies or through private investment, the end users of electricity will pay higher rates; large energy users and low income families will be hit the hardest. While EPA is requiring financial assistance programs, and recommends subsidizing EE measures for low-income communities, the CPP does not offer programs for most commercial and industrial electric customers. For large energy users, now is the time to consider what options are available to reduce your consumption from the grid and hedge your exposure to higher energy prices. Options worth considering include:
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Reducing energy consumption through demand-side reduction and EE programs will be a key element of state compliance strategies. An important first step is conducting an energy audit to identify measures that can be implemented at your facility.
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Lower cost measures can be customized to improve the EE of major building systems such as heating, ventilation, air conditioning and lighting.
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Energy Savings Performance Contracts may be available to your company. These EE projects are self-funding and budget neutral.
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States may provide assistance to commercial and public entities to implement EE or renewable energy development through grants and/or low-interest loans, particularly in low- and moderate-income areas during the early stages of CPP compliance.
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In response to the CPP, we expect states to implement or expand renewable energy credit programs. Renewable energy developers in these states will look for large energy consumers that can purchase the output of wind and solar arrays sited on the consumer’s rooftops, vacant lots and carports.
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States may look to adopt or expand community solar programs that offer energy savings to those energy consumers that are unable to install solar facilities on their own property.
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The pairing of intermittent renewable generating resources with energy storage devices holds the promise of providing reliable around-the-clock renewable energy. Large energy consumers should look for government subsidies for such storage technologies, particularly those supporting critical facilities.
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States will look to stakeholder groups for input and feedback as they develop new programs and attempt to balance federal requirements with local ratepayer interests and economic development.
