EPA 111(d) Clean Power Plan Could Increase Energy Efficiency Impacts, Net Benefits, and Total Value
Article Abstract: David Pickles, Bill Prindle, Chris MacCracken, Steven Fine, and Phil Mihlmester
The release of EPA’s much anticipated Clean Power Plan proposal starts the clock on what will be a multiyear process of review, analysis, planning, and implementation for states, affected sources, and other stakeholders. Depending on the outcome of this process and the methods by which states choose to comply, nationwide annual expenditures on utility energy efficiency programs could increase threefold, and the net electric system benefits from these programs could increase as much as $12.1/MWh or approximately 15 percent by 2030 solely due to their compliance value. These benefits would not only reduce the total cost of compliance but also reduce power prices. Inclusion of efficiency in Clean Power Plan compliance would make efficiency programs more cost effective and also would increase efficiency’s risk management value to utilities.
The draft EPA rule sets a wide range of state targets. Electricity markets vary greatly across the United States. As a result, the impact of efficiency will vary significantly by state and utility, depending on a host of factors, including the carbon-intensity of the current and planned generation mix, scale of current energy efficiency programs, and cost and availability of other compliance alternatives. Many considerations remain to be resolved, including evaluation, measurement, and verification requirements, regulator and customer response to rate impacts, impact on shareholder incentives, utility compared with third-party administration of programs, integration with existing energy efficiency resource standards, and the scale and cost of achievable efficiency potential. This analysis suggests that energy efficiency may become an increasingly important tool for utility resource planners.
This white paper takes a novel, nationwide approach to estimating an overall impact on emissions and cost. It sheds light on the role that energy efficiency can play as a compliance mechanism.