Guidance for Comments on the Proposed Federal Plan and Model Rules for the Clean Power Plan to Protect Voluntary Action

 

The EPA has proposed two Federal Plans for the Clean Power Plan (CPP), one for a rate-based target and one for a mass-based target. The EPA may adopt a single Federal Plan, for either a mass-based or rate-based target, to be determined following stakeholder comment. States that do not submit their own plan will be required to follow the Federal Plan. The two proposed plans are also proposed as Model Trading Rules,[1] which can be used by states when developing their own plans. The EPA will ultimately provide either a single Model Rule (for either a mass-based or a rate-based target) or two Model Rules (one for a rate-based target and one for a mass-based target), to be determined following stakeholder comment.

Additional elements are needed in the proposed Federal Plan and Model Rules in order to avoid negative impacts to voluntary demand for and private investment in renewable energy (RE). The voluntary RE market represents 26% of all non-hydro renewable generation nationally, equivalent to 58% of all new Renewable Portfolio Standard (RPS) renewable generation.[2] The CPP could negatively affect the voluntary market by reducing the impact of renewable energy purchased by businesses and households nationwide. The good news is that there are proven regulatory mechanisms that have already been implemented in California and the Regional Greenhouse Gas Initiative (RGGI) in the Northeast U.S. to support and enhance the existing voluntary RE market and deliver actual emissions reductions for voluntary investors.

To support continued investment in and growth of voluntary RE, the proposed CPP Federal Plan and Model Rules should include the following:

  1. A rate-based Federal Plan and Model Rule should include a mechanism to retire ERCs on behalf of the voluntary RE market (an ERC set-aside, where voluntary RE is issued ERCs), rather than allowing them to be used for compliance by (to adjust the rates of) affected electric generating units (EGUs).
  2. A mass-based Federal Plan and Model Rule should include a set-aside of allowances for voluntary RE that is structured similarly to California’s Voluntary Renewable Electricity Reserve Account [3] and/or the RGGI’s voluntary RE market set-aside provision[4].

 

Comments on the EPA’s Proposed Federal Plan and Model Rules for the CPP are due January 21, 2016. Instructions on how to comment can be found here: http://www2.epa.gov/cleanpowerplan/how-comment-proposed-federal-plan-clean-power-plan.

 

Background

Thousands of businesses and organizations along with millions of individuals across the country purchase green power in the U.S. voluntary RE market.[5] These individuals and organizations, including over 1,300 that participate in the EPA’s Green Power Partnership and some of the largest Fortune 500 companies, voluntarily use billions of kilowatt-hours of RE annually.[6] Many do this as part of their commitment to reduce their greenhouse gas (GHG) footprint. These commitments to RE and avoided greenhouse gas emissions on the grid currently go beyond that which is attributed to state or federal policy. In order to maintain strong participation in the voluntary RE market, it will be important to ensure that these commitments to investing in RE and avoided greenhouse gas emissions continue to go beyond what is attributable to state and federal policies.

The voluntary RE market is important in every state—either to supply the voluntary market or as a source of demand for voluntary RE.[7] According to the latest report from the National Renewable Energy Laboratory (NREL), using 2014 data, voluntary retail sales of RE totaled 74 million MWh per year, growing at 10% per year.[8]

Where RE that is sold into the voluntary market is included in CPP compliance—meaning it gets issued an ERC for use in a rate-based state or is located in a mass-based state without a set-aside of allowances for voluntary RE—these voluntary actions to purchase and develop RE will no longer go beyond what is required by law for GHG emissions from existing units. These purchases will support state CPP compliance, making it easier for fossil units to comply by increasing the supply of ERCs and/or reducing mass emissions. But, the actions of voluntary purchasers will no longer be surplus to regulatory requirements of a state (“regulatory surplus”) with regard to GHG emissions reductions at affected units since they get factored into the reductions that a state reports to EPA.

Existing voluntary markets for RE value regulatory surplus for GHG emissions. Companies and individuals willing to go beyond compliance levels can continue to drive global GHG emissions reductions—provided that the Federal Plan and Model Rules are properly structured. Without such provisions, demand for renewable energy in voluntary markets will likely decline. The result is not just negative impacts on the growth of RE investments, but also the elimination of the CPP compliance contributions that strong voluntary RE markets offer. Experience with Renewable Energy/Portfolio Standards demonstrates that both compliance and voluntary markets are more successful when they are designed to operate on a side-by-side basis. Our recommendations for the Federal Plan and Model Rules would ensure that voluntary actions continue to deliver incremental emissions reductions—and not simply reduce the costs of CPP compliance for regulated entities.

 

Endorsements

The recommendations for comments on the Federal Plan and Model Rules outlined above are endorsed by the following individuals and organizations:

3Degrees, Inc.
Ian McGowan; Senior Manager, Strategy and Analysis

Center for Resource Solutions
Jennifer Martin, Executive Director

Natural Resources Defense Council (NRDC)
Pierre Bull, Policy Analyst

Pace Energy and Climate Center
Karl Rabago, Executive Director

Renewable Northwest
Kelly Hall, Washington Policy Coordinator
Dina Dubson Kelley, Chief Counsel

Solar Energy Industries Association (SEIA)
Rick Umoff, Counsel and Regulatory Affairs Manager, State Affairs

Union of Concerned Scientists (UCS)
Jeff Deyette, Asst. Director, Energy Research and Analysis
 

If you would like to add your name and organization to this list of endorsements, please contact Todd Jones, Senior Manager, Policy and Climate Change Programs, at todd.jones@resource-solutions.org.

Additional Resources

 

Previous Comments on Voluntary Renewable Energy Set-Aside Mechanisms

 

Notes

[1] The regulatory text of each federal plan and corresponding model trading rule is mostly identical (see p.17, Sec. I.A, of the Proposed Rule).

[2] Based on figures from O’Shaughnessy, E. et al. (October 2015). Status and Trends in the U.S. Voluntary Green Power Market (2014 Data). National Renewable Energy Laboratory (NREL). Technical Report NREL/TP-6A20-65252. Available at: http://www.nrel.gov/docs/fy16osti/65252.pdf.

[3] See title 17, CCR, section 95841.1.

[4] See Section XX-5.3(d) of the RGGI Model Rule, 12/31/08 final with corrections.

[5] O’Shaughnessy, E. et al. (October 2015). Status and Trends in the U.S. Voluntary Green Power Market (2014 Data). National Renewable Energy Laboratory (NREL). Technical Report NREL/TP-6A20-65252. Available at: http://www.nrel.gov/docs/fy16osti/65252.pdf.

[6] For more information about the importance and impact of voluntary green power purchasing, visit http://www.epa.gov/greenpower/. Also see NREL’s market analysis at http://www.nrel.gov/analysis/market_green_power.html.

[7] See NREL market analysis (http://www.nrel.gov/analysis/market_green_power.html) as well as the 2014 Green-e Verification Report, available at http://green-e.org/docs/2014%20Green-e%20Verification%20Report.pdf.

[8] O’Shaughnessy, E. et al. (October 2015). Status and Trends in the U.S. Voluntary Green Power Market (2014 Data). National Renewable Energy Laboratory (NREL). Technical Report NREL/TP-6A20-65252. Available at: http://www.nrel.gov/docs/fy16osti/65252.pdf.