April 7, 2016

Energy Efficiency & The EPA’s Clean Power Plan

Today We’ll Discuss

• Overview of the Clean Power Plan (CPP)

• Role of energy efficiency in the CPP

EPA’s Clean Power Plan

EPA proposing to regulate carbon emissions from existing power plants under section 111(d) of the Clean Air Act.

17% reduction in GHG emissions by 2030 relative to 2012 levels, or 30% reduction by 2030 relative to 2005 levels

Individually tailored state targets

Allows for flexible approaches including demand-side (energy efficiency)

Establishes interim and final carbon dioxide emission performance rates

• 1,305 lbs/MWh for existing fossil fuel-fired electric steam generating units (generally, coal fired power plants)

• 771 lbs/MWh for existing natural gas combined cycle units

State Options & Flexibility maximized

Rate Based Goals measured in pounds of CO2 per megawatt hour (lbs/MWh)

Mass Based Goal measured in total short tons (i.e. 2,000 lbs) of CO2 emissions

Best System of Emission Reduction (BSER)

Consistent with previous BSER determinations in 111(d) rulemakings, strategy types already in use were considered.

Four Building Blocks of the Proposed Rule:

Building Block 1 – increasing the operational efficiency of existing coal-fired power plants.

Building Block 2 – shifting electricity generation from higher emitting fossil fuel-fired steam power plants (generally coal-fired) to lower emitting natural gas-fired power plants.

Building Block 3 – increasing electricity generation from renewable sources of energy like wind and solar.

Building Block 4 – Energy Efficiency removed from final rule

Apparently to keep the final rule legally defensible (remaining building blocks are “inside the fenceline”)

What Can be in a Compliance Plan?

The kitchen sink!

Maybe not quite….

The 3 building blocks as EPA suggested

The 3 building blocks in greater or lesser amounts than EPA suggested

Activities beyond the 3 building blocks if the activity reduces CO2 from

existing power plants

Demand Side Energy Efficiency!

The multiple benefits of energy

efficiency as a compliance option

Under Mass-Based Approach

EE automatically “counts” toward compliance because it displaces

fossil generation and emissions under the cap

No limit to use of EE Programs and Projects

States can auction allowances and use portion of revenue to support

EE programs

Under Rate-Based Approach Enables states to get Emission Rate Credits (ERC’s) for EE projects

installed after 2012

There will be a market for these credits

Comparing the costs of some

compliance options

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Energy Efficiency Natural GasCombined Cycle

Nuclear Solar PVRa

ng

e o

f L

eve

lize

d C

os

ts (

ce

nts

pe

r k

Wh

)

Source: Energy efficiency program portfolio data from Molina 2014; All other data from Lazard 2013.

Strategies for Increasing Efficiency

Elements in Compliance Plans

State Policies & Initiatives

Adopt State-level building codes & compliance plans

Tackles new construction efficiency

Provide comparative use reporting

Benchmarking, rating, and disclosure practices

Owners can’t improve what they’re not aware of

Strengthen government facility efficiency to lead by

example

Strategies for Increasing Efficiency

Elements in Compliance Plans

Ratepayer Funded Efficiency Programming

EPA very comfortable with RFEP’s

Tackles both new and existing building efficiency

Expansion of program reach

Leveraging new funding

Enhancing Rate Payer Funded

Efficiency Programming

Maximize Participation

Incentivize Program Administrators to target

traditional “hard to reach” customers

Multifamily residential

Low Income (CEIP)

Renters

Small commercial customers

Local Government

Enhancing Rate Payer Funded

Efficiency Programming

Leveraging New Program Funding

CPP as new funding source for programs

Temporarily & Ongoing

Clean Energy Incentive Program

(CEIP)

Temporary Potential EE Funding Source

2020-2021 Early Action Program

Targets “Low Income” Properties

Clean Energy Incentive Program

Includes 300,000,000 ton “giveaway” to reward investments in renewables and energy efficiency in low-income property.

Assuming:

1) Half of the allowances go to EE (which gets double credit from the EPA); and

2) Allowances trade for $4 a ton (conservative estimate)

That’s $1.2 billion of investment in low income communities in just 2 years with great potential for even more through 2030.

Enhancing Funded Efficiency

Programming

CPP as Ongoing Funding Source

States can auction their allowances and award to

EE programming

A percentage of allowances can be awarded to EE

projects and then sold to coal and gas plants

Under rate-based compliance states can earn

Emission Rate Credits (ERC’s) to be sold to gas and

coal plants

Enhancing & Promoting Existing Non-

Rate Payer Programs/Incentives

Property Assessed Clean Energy (PACE) Programs

Utilizes tax assessments to pay for EE and renewable energy projects

25 States currently allow

10/15/20 year assessments

Longer term payback improvements fit

Can be “bundled” allowing hard-to-reach customers to participate

Commercial & Residential models

Enhancing & Promoting Existing Non-

Rate Payer Programs/Incentives

CPP will promote support of long term

extension of 179D Federal commercial tax

deduction

Retroactively renewed 2011-2015

Extended to 2016 last December

Creating Similar Tax Incentives on State Level for

“hard to reach” customers

Questions?

Thank You!