The Regulatory Assistance Project (RAP)®

Frontline Perspective on theClean Power Plan (CPP): Energy Efficiency

and Implementation

SEE Action Executive Group MeetingCarnegie Library, Washington, DC

Presented by Ken Colburn, Principal

October 1, 2015

• The Regulatory Assistance Project (RAP) is a global, non-profit team of energy experts, mostly veteran regulators, advising current regulators on the long-term economic and environmental sustainability of the power and natural gas sectors. (www.raponline.org)

– Foundation-funded; some contracts

– Non-advocacy; no interventions

• Ken Colburn is a Principal at RAP. His experience as an air quality regulator came as Air Director for the State of New Hampshire and as Executive Director of NESCAUM.

Introduction

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www.raponline.org/document/download/id/7501www.raponline.org/document/download/id/7491

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Reliability Standards, Safety Valves, and the State Clean Power Plan Compliance

Obligation

Carl Linvill, John Shenot, Mike Hogan, Dave Farnsworth, Ken Colburn

May 2015

Introduction

In!its!April!2015!assessment!of!the!proposed!Clean!Power!Plan!(CPP)!111(d)!rule,1!the!North!American!Electric!Reliability!Corporation!(NERC)!recommended!that:!“[t]he!U.S.!Environmental!Protection!Agency!(EPA)!should!include!a!formal!reliability!assurance!mechanism!in!the!final!rule!that!provides!the!regulatory!certainty!and!explicit!recognition!of!the!need!to!ensure!reliability!during!both!the!plan!development!and!the!implementation!period!through!2030—and!potentially!beyond.”!NERC’s!recommendation,!alluding!to!the!"safety!valve"!concept!put!forward!in!other!similar!proposals,!suggests!that!such!a!mechanism!could!“include!timing!adjustments!and!the!granting!of!extensions!to!an!entity’s!implementation!of!and!compliance!with!its!CPP!implementation!plan!where!there!is!a!demonstrated!reliability!need.”!

NERC!is!right!to!assert!that!proposed!state!plans!for!complying!with!the!111(d)!regulations!must!not!jeopardize!bulk!power!system!reliability.!However,!NERC!errs!in!placing!the!burden!for!specifying!a!mechanism!to!ensure!reliability!on!EPA!within!the!111(d)!regulation.!EPA!is!giving!states!flexibility!in!defining!their!compliance!plans!and!it!is!reasonable!for!EPA!simply!to!require!that!states!present!plans!that!safeguard!reliability.!EPA!only!needs!to!consider!a!“reliability!assurance!mechanism”!after!a!state!proves!to!EPA!that!it!has!fully!explored!all!combinations!of!carbon!reduction!measures!available!to!it!and!that!it!is!unable!to!comply!in!a!manner!that!meets!wellWdefined!standards!for!reliability.!!

Given!the!number!of!carbon!reduction!tools!available!and!the!compliance!flexibility!the!proposed!rule!offers,!it!seems!unlikely!that!states!will!be!unable!to!comply!in!a!manner!that!protects!reliability.!It!is!nevertheless!worth!considering!what!EPA!should!do!if!a!state!is!legitimately!unable!to!present!a!CPP!compliance!plan!that!maintains!compliance!with!existing!reliability!standards.!A!reliability!assurance!mechanism!that!includes!a!“safety!valve”!could!be!established!in!concert!with!NERC!to!address!this!exceptional!situation!and!it!is!worth!considering!how!such!a!safety!value!might!be!designed.!

EPA Should Require States to Present a Compliance Plan that Meets Reliability Standards

NERC’s!recommendation!that!EPA!should!provide!a!safety!valve!is!sound!in!its!intended!purpose.!Some!sort!of!mechanism!is!warranted!to!ensure!that!state!plans!for!complying!with!the!111(d)!regulations,!as!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1!For!links!to!the!proposed!Clean!Power!Plan!and!other!relevant!information,!see!http://www2.epa.gov/carbonWpollutionWstandards/cleanWpowerWplanWproposedWrule.!!

Overall, Final CPP Reflects Masterful Solutions

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From the States:Good News and Bad News for EE

Bad:• Disproportionate clarity for

EE in rate-based (ERCs & use)

• EE won’t “happen automatically” in mass-based

• Not clear how some EE efforts can “play” (e.g., ESCOs)

• Clarity, certainty highly valued– “Tilt” toward rate for that reason?

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Greater Clarity for Rate-Based, ERCs

?It’s quite possible that air regulators will lean toward paths that are

better delineated

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From the States:Good News and Bad News for EE

Bad:• Disproportionate clarity for

EE in rate-based (ERCs & use)

• EE won’t “happen automatically” in mass-based

• Not clear how some EE efforts can “play” (e.g., ESCOs)

• Clarity, certainly highly valued– “Tilt” toward rate for that reason?

Good:• Mass-based cheaper, more future

flexibility; more states leaning?

• NASEO “Hub”, EE Registry efforts

• Premium on multi-pollutant strategies

• Good examples and opportunities for state leadership– RGGI: proven, nearly self-implementing,

self-enforcing, jobs/economic benefits, revenue stream, etc.

– But… bad “marketing”

– GIS, GATS, WREGIS, M-RETS analogue?

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EE = Least-Cost Approach(Levelized Cost of Energy ($/MWh), Lazard, Version 8, 2014)

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If EE isn’t prominent in your state’s CPP plan, your state

doesn’t have a least-cost plan.

More Stringent Ozone Standards(EPA, Ozone Concentrations, 2010)

EPA announcing new NAAQS for ozone in the 60-70 ppb range

(vs. 75)

today?

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• Good CPP choices can help air quality; good air quality choices can help CPP compliance

• Ditto for increasing water concerns

• Integrated multi-pollutant, multi-media approach can lower cost, risk (see RAP’s IMPEAQ paper)

Energy Efficiency

Energy and Demand Resource Management

Combined Heat & Power

Wind, Solar, Tidal

Low- and Zero-Emission Vehicles

Carbon Capture & Storage

Flue Gas Desulfurization

(Scrubbers)

Three-Way Catalysts (Petro)

Diesel Particulate Filters

Uncontrolled Fossil Fuel

Combustionin Stationary and Mobile Sources

Increase in “Uncontrolled” Diesel

Biofuels

Biomass

Buying Emissions Credits Overseas

www.raponline.org/document/download/id/6440

Multi-Pollutant Reductions + Water Savings

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AuctionAllowances?

EE Set-Asidein Allocation?

Allocation in Vertical Mkts?

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Private EE (ESCOs) [How-to] [How-to] [How-to] …

Industrial EE Actions [How-to] [How-to] [How-to] …

Building Codes [How-to] [How-to] [How-to] …

Appliance Standards [How-to] [How-to] [How-to] …

Rate Design [How-to] [How-to] [How-to] …

IRP Plans [How-to] [How-to] [How-to] …

RTO Actions [How-to] [How-to] [How-to] …

… … … … …

What’s Needed Now: Detailed “How-to” Ways for States to Include EE in Mass-Based

About RAP

The Regulatory Assistance Project (RAP) is a global, non-profit team of experts that focuses on the long-term economic and environmental sustainability of the power sector. RAP has deep expertise in regulatory and market policies that:

Promote economic efficiency Protect the environment Ensure system reliability Allocate system benefits fairly among all consumers

Learn more about RAP at www.raponline.org

Thank You for Your Time and Attention

Ken Colburn: kcolburn@raponline.org

617-784-6975