It’s been two months since the Environmental Protection Agency (EPA) released the Final Rule for the Clean Power Plan (CPP). Even if you haven’t read all 1560 pages yet, you probably know the gist of it by now. At its core, the CPP identifies three building blocks in setting the goal for each state: (1) lowered heat rates at coal-fired steam plants, (2) increased utilization of existing natural gas combined cycle plants, and (3) increased deployment of utility-scale non-emitting renewables. Most notably, energy efficiency (EE) is missing from that list, which is a change from the 2014 proposal. However, while the CPP building blocks set the emissions reduction goals for states starting in 2022, they don’t dictate how those goals will be achieved. That independence of goal-setting and compliance is key to the CPP’s flexibility.
Even though energy efficiency was removed as the fourth building block, it remains an acceptable compliance mechanism for achieving the CPP goals and is in fact, the fastest, easiest and most cost-effective compliance mechanism to reduce greenhouse gases from power plants. EPA encourages EE by including it in the proposed federal plan if a state chooses not to develop its own plan, or if a state submits a proposal the EPA cannot approve within the required deadline. In addition, EPA encourages EE by proposing double-crediting for early action in low-income communities and allowing trading of energy efficiency credits or allowances. For example, the voluntary Clean Energy Incentive Program (CEIP) will provide bonus credits to EE projects newly implemented in low-income communities that are operational before the CPP emission standards go into effect in 2022. Renewables will also be eligible for bonuses under the CEIP, but they will be credited at half the rate accorded low-income EE investments.
Though it’s no longer one of the CPP building blocks, by implementing EE through their CPP plans, states can deliver financial benefits to consumers, cleantech companies, utilities, and citizens. However, if states are to maximize EE as the most cost-effective tool for compliance, all stakeholders will need to equitably share the costs and benefits. And that means aligning incentives so that the EE solutions get financed and deployed as efficiently as possible.