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THE CLEAN POWER PLAN

Advanced Energy Economy

December 9, 2015 - NCSL

1

45 states have entered the Clean Power Plan

legal battle

Washington

Oregon

California

Nevada

Idaho

Montana

Wyoming

Colorado

Utah

New MexicoArizona

Texas*

Oklahoma

Kansas

Nebraska

South Dakota

North Dakota Minnesota

Wisconsin

Illinois

Missouri

Arkansas

Louisiana

Alabama

Tennessee

Michigan

Pennsylvania

New York

Florida

Mississippi

Kentucky

South

Carolina

North Carolina

MarylandOhioDelaware

Georgia

Iowa

Hawaii

New Jersey

Alaska

Connecticut

Maine

Vermont

New

Hampshire

West

VirginiaVirginia

Massachusetts

Rhode Island

Indiana

Filed suit

against CPP

Filed in support

of CPP

Not involved in

litigation

Status of CPP State Litigation

November 24, 2015Analysis by Advanced Energy Economy

2

Even among the 27 states that are suing

EPA, many are already working on plans

Washington

Oregon

California

Nevada

Idaho

Montana

Wyoming

Colorado

Utah

New MexicoArizona

Texas

Oklahoma

Kansas

Nebraska

South Dakota

North Dakota Minnesota

Wisconsin

Illinois

Missouri

Arkansas

Louisiana

Alabama

Tennessee

Michigan

Pennsylvania

New York

Florida

Mississippi

Kentucky*

South

Carolina

North Carolina

MarylandOhioDelaware

Georgia

Iowa

Hawaii

New Jersey

Alaska

Connecticut

Maine

Vermont

New

Hampshire

West

VirginiaVirginia

Massachusetts

Rhode Island

States that filed suit against CPP

Indiana

*Current Kentucky Governor preparing compliance plan with term ending this

year. Governor-elect Bevin plans not to comply.

Analysis by Advanced Energy Economy

Considering

compliance

options

Still reviewing

final rule, no

action

announced

Will not or

threatened not

to develop plan

Not pursuing

litigation

November 24, 2015

3

Regulations

Aging

Infrastructure

The energy system has been changing in the

face of many pressures over the past decade

Picture Source: EPRI

Shifting

Consumer

Demands

Changing Business

Models

4

Technologies to address these challenges

are evolving rapidly

Demand

Response

AMI

Natural Gas

Combined Cycle

Renewable Energy

Energy Efficiency

Nuclear Power

5

State regulators have many of the same

resources available for CPP compliance

Heat rate

improvements

BSERRenewables

(onshore wind,

utility-scale solar

PV and CSP,

geothermal, hydro)

Coal-to-

existing

NGCC

switching

New and incremental

nuclear

Carbon capture and

sequestration

T&D efficiency(VVO, CVR, smart grid)

CHP, WHP, and cogeneration

Demand response*

End-use energy efficiency

ESCOs, behavioral programs,

appliance replacement, building

energy codes, appliance codes

Other grid-connected renewables

(offshore wind, DG, biomass, wave

and tidal power)

Zero-emitting fuel cells

Energy storage**

*Eligible to the extent it reduces net MWh end-use.

**Cannot receive explicit credit but its benefits can be recognized in plans.

OTHER OPTIONS

6

EPA developed the Clean Energy Incentive

Program (CEIP) to meet certain goals

Encourage states to

submit plans early

Incentivize generators and project developers to act early

Boost RE and EE as compliance

options

Minimize rate impacts

for low-income

communities

The CEIP adds flexibility and helps states earn extra

credit for early work.

7

What is the CEIP, and what projects can

participate?

The CEIP is an optional program that allows qualifying

projects to earn early credits – both from the state

and free matching credits from EPA

To participate, a project must:

Be located in a state participating in CEIP

Fall under one of two categories:

Renewable energy (solar or wind)

Demand-side energy efficiency implemented in

low-income communities

8

So the next step for most states is ‘no

regrets’ analysis and planning

Planning Benefits

Planning needs to happen no matter what

happens in pending litigation

Puts state in driver’s seat when it comes to

implementation rather than the feds

Allows states to optimize their approach for

meeting a variety of needs in the state

CEIP planning allows for market certainty and

helps the state receive matching credits – which

reduces the state’s work

9

Legislators can help ensure that regulators

have all options at their disposal

Keep all options on the table

Involve all stake-

holders

Capture Opportunities

Air regulators are responsible

for drafting and submitting a

compliance plan

Legislators can help by:

Ensuring all options are on the

table

Enabling stakeholder processes

Setting complementary policy

goals

10www.aee.net / @aeenet / Washington DC San Francisco Boston / powersuite.aee.net

Questions?

Malcolm Woolf

Senior Vice President, Policy and Government Affairs

Advanced Energy Economy

mwoolf@aee.net

(202) 391-0678

11

Appendix

12

150m.

short

tons EE

equiv.

300m. short

tons RE

equiv.

190 TWh per year of RE*

76 GW of new RE

Equivalent to 19 GW added

annually from 2017 through 2020

94 TWh per year of EE*

Equivalent to nearly 4 times the

total savings from all EE programs

in 2013 (24.3 TWh)

EPA is giving away the equivalent of 300M

short tons RE or 150M short tons EE

*Based on EPA analysis using 0.8 short tons per MWh. Sources: CPP p. 867; ACEEE 2014 EE Scorecard

13

Natural gas is not the only technology

that is beating expectations

Sources: Actual data are from Interstate Renewable Energy Council, and SEIA/Greentech Media, and include PV and CSP. Solar Industry Projected are SEIA/GTM projections from 2011 and 2015 Solar Market Insight (SMI) Reports, and include PV and CSP. Solar actual and industry data were converted from DC to AC using a factor of 0.77 for utility-scale and 0.87 for residential and commercial. AEO Projected data are for the EIA Reference Case.

Actual vs. EIA AEO Projected U.S. Solar Capacity

14

Wind power is a very similar story

Sources: Wind Actual data are from AWEA, Wind Projected data are from Navigant Consulting, US Wind Market Outlook

presentation, May 2015. AEO Projected data are from the Reference Case for each year shown.

Actual vs. EIA AEO Projected U.S. Wind Capacity

15

CEIP projects are subject to a different

timeline than other compliance measures

Must be installed after 2012.

No early action credits.

Start generating

credit in 2022.

Must commence construction (RE) or operation (EE) after state submits plan or

Sept. 2018, whichever comes first.*

Start generating credit in 2020 when CEIP

begins.

Applies to all eligible measures:

Applies to Clean Energy Incentive Program measures:

*The CEIP commence construction/operation date for all Federal plan states is Sept. 2018.

16

The EPA matching credits are “free” but

states must account for state CEIP credits

States may set aside allowances from the state emission

budget (mass) or may “borrow” early action ERCs (rate) to

credit early projects

State CEIP

credits

EPA matching credits

Total CEIP

credits

available

Mass budget,

first step period

17

Eligible projects receive credits from the

state, and matching credits from EPA

State voluntarily participating in CEIP sets aside

early allowances or generates early ERCs*

1 ERC or equivalent allowance

1 ERC or equivalent allowance

2 ERCs or equivalent allowance

2 ERCs or equivalent allowance

EPA matches ERCs or allowances from fund

equivalent to 300 million short tons CO2

2 MWhgenerated

2 MWhsaved

EE receives double

credit for emission

reductions under

the CEIP

M&V is required

*Participation is mandatory, not voluntary, for states under the Federal plan.

18

Matching credits from EPA are allocated to

states on pro-rata basis

States whose EGUs must achieve greater reductions are eligible to

receive a greater share of the EPA matching credits.

Washington

Oregon

California

Nevada

Idaho

Montana

Wyoming

Colorado

Utah

New MexicoArizona

Texas

Oklahoma

Kansas

Nebraska

South Dakota

North Dakota Minnesota

Wisconsin

Illinois

Missouri

Arkansas

Louisiana

Alabama

Tennessee

Michigan

Pennsylvania

New York

Florida

Mississippi

Kentucky

South

Carolina

North Carolina

MarylandOhioDelaware

Georgia

Iowa

Hawaii

New Jersey

Alaska

Connecticut

Maine

VermontNew

Hampshire

West

VirginiaVirginia

Massachusetts

Rhode Island

+900

601 – 900

301 – 600

0 - 300

Final CO2 Emission Rate Reduction, 2012-2030

(lbs CO2/MWh)

Indiana Greater share of

CEIP credits

19

If EPA splits the 300 million short tons 50-50,

how much RE and EE can CEIP support?

300M short

tons RE

equiv.

150M

short

tons EE

equiv.

Single credit

per MWh

Double credit

per MWh

150M short tonsequiv. EE

150M shorttons equiv. RE*

150M short ton state match

150M short ton state match

150. shorttons from EPA

150M short tons from EPA

EPA matching

credit pool

*EPA uses 0.8 short tons per MWh for calculation purposes; the final equivalency is still to be determined.