The Obama Administration’s final Clean Power Plan (CPP) is an attempt to curb climate change and, at the same time, will create a new pipeline of opportunities for developers, sellers and purchasers of renewable energy (RE).
If fully implemented, the Clean Power Plan will reduce carbon emissions from electric generation plants (to 32 percent 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. States may achieve these targets through a combination of measures, including improved performance at existing plants and increased RE capacity. All plans must take into account electric reliability, and the rule includes a reliability “safety valve” to address unanticipated circumstances.
Role of Renewables
The most notable change from the draft CPP (released in 2014) is the increased role of renewables and reduced emphasis on natural gas. Whether natural gas was seen as the preferred, cleaner replacement for coal or simply a bridge fuel to a fossil-free future, the EPA has clearly changed course. The final rule raises the nationwide target for carbon emissions reductions from 30 to 32 percent, and the expectation is that RE will be largely responsible for meeting this higher target. The White House estimates that, by 2030, RE will account for 28 percent of generating capacity.
The final rule also establishes the optional Clean Energy Incentive Program (CEIP) to encourage the early deployment of wind and solar resources. Advertised by the EPA as “incentives to follow through on planned investments” in advance of 2022, the CEIP is also an incentive for states to submit implementation plans and to do so early, as the only RE investments eligible for the program are those for which construction begins after the home state has submitted its final plan. The details of the CEIP are yet to be established, but, in essence, the EPA will grant “extra credit” toward meeting state emission-reduction goals for eligible projects that start generating in 2020 or 2021 in participating states.
The CPP must get past congressional attempts to stop it, as well as myriad legal challenges. Assuming it clears these hurdles, each state will have to submit to the EPA either a final plan or an extension request by September 6, 2016. But there will be much to do in the meantime – for both the RE industry and the consumers of RE.
- The solar and wind industries crave regulatory certainty and have – so far – flourished in states with strong renewable portfolio standards (RPS) and renewable energy credit (REC) programs. Hence, even though the CEIP appears to create a disincentive to place projects in service before 2020, it may in fact incent states to strengthen their subsidy programs now to encourage continued investment at home before the federal program kicks in.
- State regulatory agencies already expect a rush of projects to be built in time to qualify for the expiring federal investment tax credit in 2016, evidence that strong subsidies have been key to the growth of the RE industry. Look for pressure on Congress to extend the credit through 2020 – which can serve as a bridge to the CEIP implementation date.
- Beyond RPS and REC programs, states will likely enact and expand consumer-oriented programs, such as community solar and net metering. These can be used to build broad public support for renewables by offering investment – and energy savings – opportunities to homeowners and businesses.
- States will look to stakeholder groups and RE advocates for input and feedback as they develop new programs, extend and enhance existing programs, and attempt to balance federal requirements with ratepayer interests and economic growth.
- Likewise, the EPA will gather public input as it designs the details of the CEIP.