Our new analysis includes three important updates to our February 2016 analysis that examined the economic benefits of strengthening Illinois clean energy policies, as proposed in the Illinois Clean Jobs Bill:
As with our earlier analysis, we assume Illinois will comply with the CPP under all policy scenarios. We do not include Dynegy’s recent announcement to retire 2,800 MW of existing coal capacity, but do include other announced coal plant retirements as of October 2015.
Here are five key findings from our new analysis:
Fixing the existing RPS and adopting the 18.5 percent by 2025 EEPS would generate $7.4 billion in new capital investments in wind, solar, and energy efficiency, while saving homeowners and businesses $3.8 billion on their electricity bills between 2016 and 2030.
A typical Illinois household would save an estimated $84 per year (8%) on their electricity bill by 2030. It would also result in $10 billion in public health and economic benefits by reducing CO2, SO2, and NOx pollution. Strengthening the RPS to 35 percent by 2030 and EEPS to 20 percent by 2025, as proposed in the Clean Jobs Bill, would result in even greater benefits.
Renewables and efficiency increase to 27 percent of Illinois electricity generation in 2030 under the fixed RPS/stronger EEPS case and 32 percent under the Clean Jobs Bill case.
Coal and natural gas generation are lower by 2030 to comply with the CPP emission reduction targets, while nuclear generation stays flat (see more below). Both cases result in net exports of electricity from Illinois staying at or near current levels through 2030.
Recent studies by UCS and others show that the federal tax credits extension could result in record-setting levels of new wind and solar development in the U.S. over the next five to seven years. The development is likely to be concentrated in states with strong renewable energy policies.
Other Midwest utilities have already announced plans to ramp up wind and solar to take advantage of the tax credits. For example, Xcel Energy in Minnesota is planing on adding 800 MW of wind and 400 MW of solar by 2020 to capture the benefits of the tax credits, which they claim will save $202 million.
In April, MidAmerican Energy announced plans to add 2,000 MW of wind in Iowa, a $3.6 billion investment that would increase wind power to over 40 percent of Iowa’s electricity. In contrast, Illinois has experienced very little wind and solar development in recent years because of the broken RPS, and only met 60 percent of its RPS target in 2014. This trend is expected to continue unless the RPS is fixed.
Despite Exelon’s claims that Clinton and Quad Cities are uneconomic and will be retired early without significant subsidies from the state, our modeling shows it is economically viable to keep these and other existing nuclear plants operating through at least 2030 due primarily to projected increases in natural gas prices.
Our results are consistent with recent modeling by the Energy Information Administration (EIA). EIA’s latest Annual Energy Outlook projects wholesale natural gas prices to increase from $2.62 per million Btu in 2015 to $4.40 per million Btu by 2020 and nearly $5 per million by 2030 (see figure). Like our analysis, the increase in natural gas prices appears to provide enough of a long-term incentive to keep existing nuclear plants operating. While EIA is projecting somewhat lower natural gas prices than last year (our analysis uses EIA’s projection from last year), they still project nuclear generation to stay near current levels over time at the national level.
A price on carbon, which Exelon supports and could help reduce carbon emissions under the CPP, also increases the competitiveness of nuclear plants vs. coal and natural gas, providing an additional incentive to keep Clinton, Quad Cities, and other existing plants operating through 2030.
Our analysis shows that increases in renewables and efficiency could replace 82 percent of the retired nuclear generation under the fixed RPS/stronger EEPS case, and more than all of the retired nuclear generation under the Clean Jobs Bill strengthened RPS/EEPS case.
Electricity bill savings for a typical household are $60 per year (6%) in 2030 under the fixed RPS/stronger EEPS case with the Clinton and Quad Cities plants retired, compared to $84 (8%) without the retirements. However, this does not include Exelon’s proposed subsidies to keep the plants running. While these subsidies are still under negotiation, Exelon has publicly stated that they may need $250 million next year, and $170 million on average over the next 6 years. They claim their proposed bill would cost a typical household 25 cents per month ($3/year). Other groups estimate the costs could be much higher.
While the regular legislative session ended on May 31, we expect conversations will continue throughout the summer. To become a national leader in developing clean energy, our analysis shows that Illinois should at least fix the state’s current 25 percent by 2025 RPS law by transitioning to a full non-bypassable wires charge to create a stable pool of funds for renewables procurement.
Illinois should also extend the proposed increases in energy efficiency to all investor-owned utilities so that all businesses and households in the state can benefits from lower energy bills. In addition, Illinois should maintain its net metering policy and oppose efforts to adopt a mandatory residential demand charge so consumers can fully capture the benefits of installing rooftop solar and so Illinois can attract new jobs in the rapidly growing solar industry.
Last week at a Youth Summit in St. Paul, Governor Dayton promised to veto any legislation blocking or slowing efforts related to the Clean Power Plan.
Dayton addressed questions from 75 high school and college students, also stating that he would “like to see Minnesota’s dependence on coal eliminated” as soon as possible. The summit was focused on advocating for a strong and just Clean Power Plan. Youth also met with their legislators to voice their ideas around equitable implementation of the plan.
Governor Dayton also spoke highly of the Clean Power Plan in the annual State of the State address on March 9. He addressed the Supreme Court stay but noted that developing clean energy to help address the impacts of climate change—which are already being seen by Minnesotans—is too important to put on hold. Decreased snow fall hurting the winter tourism industry, unpredictable growing seasons for farming, and air and water pollution—these are just the beginning of the impacts that Minnesotans have started to see from the effects of burning dirty fossil fuels.
Not only is Minnesota pledging to continue working on the Clean Power Plan, but it is acting on its pledge as well. In February and March the Minnesota Pollution Control Agency held eight Clean Power Plan listening sessions across the state to get input from residents about their priorities in shaping Minnesota’s compliance plan.
Each listening session had around 50-100 Minnesotans present, many of them testifying in support of the Clean Power Plan and clean energy development. At the Duluth session, almost the entirety of the audience supported action on climate—in fact, many commented that the plan should go further, faster. Attendees at the Bemidji session questioned the cost of the complying with the Clean Power Plan, while others argued that coal generation will be phased out over time with or without the Clean Power Plan due to market factors like low natural gas prices and the declining costs of wind and solar.
Analysis released by the Union of Concerned Scientists last month shows that Minnesota stands to make major economic gains from the Clean Power Plan, especially when accompanied with increases in the renewable energy standard (RES) and energy efficiency standard (EERS). Prioritizing renewable energy and energy efficiency in Minnesota’s Clean Power Plan compliance plan will maximize the full range of benefits for all Minnesotans.
Our analysis found that combining the Clean Power Plan with a stronger state renewable electricity standard of 40 percent by 2030 and an energy efficiency resource standard that reduces electricity demand by 2 percent per year for all utilities would result in the greatest economic and public health benefits for Minnesota.
For example, this approach would inject more than $5.6 billion in new investments in wind, solar, and energy efficiency projects in Minnesota’s economy between 2016 and 2030, while reducing electricity expenditures for residents and businesses by $745 million.
In a required filing released earlier this week, the Pollution Control Agency and Department of Commerce explain how they continue to work on Clean Power Plan planning in order to ensure that Minnesota is well-positioned for any litigation outcomes of the Supreme Court ruling.
Sent to energy committee chair leaders and minority chairs, the filing highlighted the extensive technical stakeholder engagement and robust public outreach that Minnesota is already engaging in. It also mentioned that Minnesota is primarily considering trading-ready approaches and expects to participate in the Clean Energy Incentive Program.
While 19 states have indicated that they are moving forward with Clean Power Plan planning, very few are as far along as Minnesota.
Minnesota’s comprehensive and inclusive process with strong public engagement provides an excellent model for other states to replicate. We applaud Governor Dayton and Minnesota regulators for the hard work and dedication to move forward on the Clean Power Plan in order to most effectively plan for Minnesota’s clean energy future.]]>
The tax credit extension provides greater certainty for the renewable energy industry to develop new projects, secure financing and expand U.S. manufacturing capacity. It also allows them to build on recent gains in transitioning the U.S. to a clean energy future, while providing a bridge for states to meet their CO2 emission reduction targets under EPA’s Clean Power Plan (CPP).
NREL examined the impact of the tax credit extensions under two different natural gas price futures—a base price forecast and a low price forecast—based on Energy Information Administration (EIA) projections. All scenarios include current policies and regulations as of January 1, 2016, including state renewable electricity standards, state and regional carbon emissions policies, and the CPP.
Federal tax credits along with state renewable electricity standards have been primary drivers of renewable energy development in the U.S. over the past two decades. Between 2010 and 2015, new renewable capacity grew at an average rate of nearly 11.6 GW per year. In 2015, the U.S. added 16.6 GW of new renewable capacity, which was slightly below the U.S. record of 17.6 GW added in 2012.
NREL’s analysis shows that the tax credit extensions will accelerate renewable development (primarily wind and solar), resulting in 48-53 GW of additional capacity by 2022 (Figure 1). With base natural gas prices, NREL projects:
With base natural gas prices, NREL projects total renewable capacity (from wind, solar, geothermal, hydro, and biopower) to more than double over the next 15 years, reaching ~450 GW by 2030 (18 GW/year on average), with or without the tax credit extensions (Figure 1). The vast majority of this new capacity is wind and solar (Figure 3). While the tax credits accelerate deployment through the early 2020s that result in greater reductions in natural gas and CO2 emissions (see below), other factors drive the renewables deployment in the mid to late 2020’s that result in similar levels by 2030. These factors include continued reductions in the cost of renewables, increasing natural gas prices, and compliance with the CPP and state renewable electricity standards.
As expected, overall growth in renewable capacity is lower with lower natural gas prices. By 2030, total renewable capacity is projected to reach 356 GW, or 11.3 GW per year on average, with the tax credit extensions (Figure 1). This growth rate is slightly below the annual average levels achieved in the U.S. between 2010 and 2015. Like the base gas price case, the tax credit extension accelerates renewable deployment in the early years under the low gas price case, resulting in 48 GW of additional capacity by 2020. But unlike the base gas price case, renewable capacity is considerably higher (36 GW) by 2030 with the tax credit extension and low gas prices. This is mainly because zero emissions renewables are displacing more coal generation, which results in about twice the emission reductions per unit of electricity than shifting to natural gas to meet the CPP targets.
The additional deployment of renewables due to the tax credit extensions displace coal and natural gas generation, resulting in a reduction in power sector CO2 emissions. From 2016 to 2030, the tax credit extension results in a cumulative net CO2 reduction of 540 million metric tons (MMT) under the base gas price case, and 1,420 MMT under the low gas price case (Figure 6). The two main reasons why emission reductions are greater under the low gas price case are: 1) the ratio of coal to gas generation displaced by renewables is much higher (coal plants are less competitive with lower gas prices) and 2) the incremental level renewable generation is higher over the entire 2016-2030 timeframe.
NREL’s analysis shows that the tax credit extension will help states get an early start in meeting their emission reduction targets under EPA’s Clean Power Plan, even as the legal issues around the CPP get resolved. The additional ~540-900 MMT cumulative reduction in CO2 emissions achieved by 2025 due to the tax credit extension will also help the U.S. meet its pledge under the Paris Climate Agreement to cut economy-wide emissions 26-28 percent below 2005 levels by 2025.
The results of NREL’s analysis are consistent with another analysis released this week by the Rhodium Group. This new analysis builds on an analysis Rhodium completed last month using EIA’s National Energy Modeling System (NEMS) that found the tax credit extensions provide a bridge to the clean power plan and change the game for CPP compliance by replacing the need to rely more heavily on natural gas combined cycle plants.
However, their initial analysis used EIA’s pessimistic cost assumptions for renewable energy that are significantly higher than recent industry and NREL estimates. This is something I and my UCS colleagues have blogged about several times. Rhodium’s new analysis uses the same assumptions as NREL with capital costs that are 43 percent lower for solar PV and 24 percent lower for onshore wind by 2020 compared to EIA. Like NREL, they also analyzed scenarios with lower natural gas prices.
The results are eye opening. Using EIA’s more pessimistic renewables and natural gas assumptions, Rhodium found that new wind and utility scale solar capacity would be highest under a scenario that combines the tax extenders with the CPP (142 GW by 2025) compared to the tax extenders without the CPP (92 GW), and the CPP without the tax extenders (60 GW). However, when they used the more realistic and updated assumptions for renewables in the tax extender only case, new wind and solar capacity increased to 250 GW with EIA’s base natural gas prices and 163 GW with lower gas prices (Figure 4).
While the Rhodium group analysis clearly shows the best case scenario for renewables is the combination of the tax extenders and the CPP, it also clear that the tax extenders will drive significant deployment of renewables on their own, particularly in the near-term. Which is why they conclude “in all but the low gas price case [and pessimistic renewables costs], the future is bright for wind and solar.”
Over the past two decades, Congress has allowed the tax credits to expire several times–followed by short-term extensions–that have created a boom/bust cycle for the wind industry. The recent 5-year extension combined with implementation of the CPP through 2030 provides much greater certainty for the U.S. renewable energy industry. This will allow U.S. to expand its global leadership in advancing clean energy technology, create new jobs, and further drive down costs. It will also help states avoid an over-reliance on natural gas that could save consumers money, while continuing to make progress in reducing CO2 emissions that will help meet the CPP targets and the Paris Climate Agreement. This provides a compelling reason for other states to join the 16 states that have already announced they will move forward with crafting their compliance plans while they await resolution of legal challenges to the CPP.
Sandy shut down or damaged at least 165 electric substations, several large power plants, 7,000 transformers, and 15,000 electrical poles. Storm surge and coastal flooding were major contributors to the damages and subsequent outages. Hospitals had to evacuate patients. Homes and businesses were without power for days and even weeks.
And Sandy wasn’t an isolated incident. Hurricanes Katrina, Rita, and Wilma in 2005, and Gustav and Ike in 2008, also wreaked havoc on the grid. Each knocked out power to one to three million customers and damaged 200 to 500 substations, according to the U.S. Department of Energy.
Despite our growing reliance on electricity, our power grid is increasingly susceptible to failure due to old age and poor condition, and the rate of outages from severe weather has been rising.
The new UCS analysis, Lights Out? Storm Surge, Blackouts, and How Clean Energy Can Help, shows how major power plants and substations are exposed to storm surge flooding from various categories of hurricanes now and in the future in five metropolitan regions: the Delaware Valley, southeastern Virginia, South Carolina Lowcountry, southeastern Florida, and the central Gulf Coast.
Building off three recent UCS reports (Power Failure, Encroaching Tides, and Stormy Seas), the report also highlights the need to better evaluate and plan for these risks, as well as increase investments in protecting the grid and deploying clean energy solutions that will make the grid more resilient AND reduce carbon emissions.
Here are some of our key findings:
Most coastal infrastructure is designed to meet 100-year flood protection standards based on the Federal Emergency Management Agency (FEMA) flood hazard zones. Unfortunately, these standards are based on historical data that do not incorporate future sea level rise. State and local governments can increase the stringency of these standards, but few have conducted vulnerability assessments to inform that change.
With electricity infrastructure lasting 40 years or more, and sea levels projected to rise by more than a foot by 2050, storm surge could eventually submerge equipment where no such flooding had ever been experienced or was ever expected.
Fortunately, some forward-looking policies and tools are emerging at the local, state, and federal levels to address this problem. Lights Out points to examples from New York, Maryland, Massachusetts, and elsewhere.
The report recommends that utilities consider adding more protective measures, such as natural and artificial buffers, modifying existing infrastructure, such as elevating substations and using submersible equipment—or retiring or moving facilities away from the coastline.
Resilient power offers a system that is flexible, can respond to challenges, can quickly recover, and remains available when we need it most. Developing resilient power means shifting away from a centralized electricity system to a more decentralized one designed to meet critical needs even during extreme weather.
When the power goes out, critical facilities typically rely on backup diesel generators until the main electric grid can be restored. However, backup diesel generators present a host of challenges, including being heavily polluting and prone to failure due to infrequent use.
In contrast, clean energy technologies are an attractive alternative to make the grid more resilient while reducing carbon emissions. Some of the most promising clean energy solutions include:
Lights Out points to programs in Florida, Massachusetts, New Jersey, and New York that are deploying these technologies.
The increasing threat of climate-related sea level rise and storm surge to our coastal electricity infrastructure is cause for serious concern. As the single largest contributor to U.S. global warming emissions—representing nearly one-third of total emissions in 2013—the power sector has a critical role to play in ensuring that we avoid the worst impacts of climate change.
While some initial steps have been taken at the local, state, and federal levels to protect the grid and deploy clean, resilient power systems, the investments are not yet up to the scale of the problem. Strong state and federal policies are needed to achieve deep cuts in carbon emissions to limit the severity and cost of future climate impacts.
Implementing the EPA’s Clean Power Plan to reduce carbon emissions from existing fossil power plants—along with adopting and strengthening state renewable energy and efficiency standards and extending federal tax credits—are all important steps for keeping the lights on.]]>
After moving to Massachusetts in 1997 to start working at the Union of Concerned Scientists (UCS), my Dad would often send me articles about all the good things Minnesota was doing to advance clean energy to grow the state’s economy and protect the environment.
Fortunately, my job at UCS has given me the opportunity to come back to my home state many times over the past 18 years to help advance the clean energy policies that have made Minnesota a national leader. Xcel Energy’s announcement October 2 proposing to cut its carbon emissions 60 percent below 2005 levels by 2030—by retiring two units at the state’s largest coal plant (Sherco) in 2023 and 2026 and replacing them with more wind, solar, energy efficiency, and natural gas—continues this legacy.
Xcel’s plan is affordable
In contrast, Xcel’s original plan filed in January would have reduced emissions 40 percent below 2005 levels by 2030. Xcel’s new plan, described in comments filed with the Minnesota Public Utilities Commission (PUC), aligns with other parties’ comments that much more carbon emission reduction was possible now at low cost.
Xcel’s initial rough estimate is that the revised proposal would likely raise electricity rates by a modest 2-3 percent. They go on to say that including a relatively low value for reducing carbon emission at $21.50 per ton of CO2 (after 2019) would result in rate impacts near the low end of the range.
An alternative “Clean Energy Plan” developed by several state Clean Energy Organizations (Izaak Walton League of America, Sierra Club, Fresh Energy, Wind on the Wires, and the Minnesota Center for Environmental Advocacy) – using the same computer model as Xcel but with more realistic assumptions – found that similar emissions cuts as Xcel’s revised plan could be achieved at the same cost as Xcel’s original, higher carbon, plan.
They also assumed Xcel could achieve slightly higher levels of cost-effective energy efficiency savings that are still below the levels being achieved in other leading states. Xcel’s new plan agreed and committed the company to meet the state requirement of 1.5 percent per year energy savings. This will help lower customer electricity bills.
Xcel’s plan prioritizes renewables
Xcel’s revised proposal would accelerate investments in renewable energy by adding 800 MW of wind power and 400 MW of solar power before 2020, and a total 1,800 MW of wind and 1,700 MW of solar by 2030. According to Xcel, they are doing this to take advantage of lower costs and replace coal:
Advancing renewables benefits our customers in that we can capitalize on favorable market pricing and anticipated tax credits. The acceleration also brings replacement generation online to ensure reliable service for our customers during the Sherco transition.
Figure 1 below from Xcel shows that these new investments would more than double the contribution of wind and solar from about 15 percent of Xcel’s electricity mix in 2015 to 33 percent in 2030. The increase in renewables would make up for some of the decline in coal generation, while most of the rest would come from increased natural gas generation. In fact, Xcel’s supply today is long on capacity through the middle of the next decade, so the utility does not need a 1-to-1 replacement for the first unit retirement at Sherco.
Increasing clean energy is good for Minnesota’s economy
Over the past 15 years, employment in Minnesota’s clean energy sector has more than doubled from 8,600 in 2000 to 15,300 in 2014, according to a 2014 report from the Minnesota Department of Employment and Economic Development. The 78 percent growth in this sector during this time far outpaced the 11 percent growth of the entire state economy, including maintaining steady growth through the recession.
A UCS analysis released earlier this year shows that Minnesota could go even further than Xcel’s proposal and produce 40 percent of its electricity from renewables by 2030, with significant benefits for Minnesota’s economy. Achieving these targets, as proposed in a bill that was introduced last legislative session, would result in more than $6 billion in new capital investments, $14 million in tax revenues for local communities, and $9 million in payments to landowners that host wind farms. We also found that these benefits could be achieved at a cost of roughly 12 cents per month for a typical household.
According to Xcel, jobs at the Sherco plant would decline from 310 employees currently to 150-160 workers after the two older coal units are retired and replaced with a new natural gas plant and a 50 MW solar array at the site. At least 35 percent of those workers will reach retirement age in the next few years, and the company is examining transitioning other workers to the new plants and to other Xcel positions.
Xcel’s plan is “the right thing for our customers”
Chris Clark, president of Xcel’s Minnesota regional operations, summed it up best in a recent interview:
This is really a business decision about what we think is right for the future…I think we are going to be industry leaders, but we are really doing this because we think it is the right thing for our customers. It provides certainty to our community and our employees about what our plan is.
As one of Xcel’s former customers, my Dad would agree. While he passed away in March, he would be very proud of Minnesota’s continued leadership to increase clean energy and address climate change that will allow me to enjoy fishing with my kids for many years to come.]]>
The report highlights six state-level programs (Connecticut, New York, Pennsylvania, Kentucky, Iowa and Massachusetts) and one international program (Germany) that have successfully leveraged private-sector funding to strengthen clean energy investment. These programs range from all-encompassing “green banks” to more discrete efforts focused on a particular clean energy market sector.
State green banks are institutions that provide financial products to assist homes, businesses, and institutions with developing clean energy by leveraging low cost, private-sector capital. Financing costs for these programs are typically lower because the state backing lowers their risk. States have been innovating in this way because of challenges to implementing traditional financing programs. For example, direct incentives programs such as grants and rebates, while effective, can sometimes be difficult to scale up because of cost concerns and administrative complexities. The private sector also has a strong interest in getting in on the economic opportunity afforded by clean energy investments.
While investments in renewables and efficiency have rapidly increased over the past decade, further increases will be required to meet the growth in energy demand and to limit the worst consequences of climate change. For example, a 2012 National Renewable Energy Laboratory (NREL) study estimated that reaching targets of 30 percent of U.S. electricity generated from renewable energy by 2025 and 80 percent by 2050 will require investment on the scale of $50-$70 billion annually over the next decade.
To spur investments in renewables and efficiency, states can adopt a number of proven clean energy market-development mechanisms. The most popular to date have included renewable electricity standards, energy efficiency resource standards, public benefits funds, tax and incentive policies, utility rebates, building-energy codes, net metering, and carbon cap-and-trade programs.
The states highlighted in this report have also used green banks and other financing initiatives to help secure funding for clean energy investments without the need for substantial direct incentives from state coffers. These initiatives complement existing policies, and can also help make renewables and efficiency more competitive, especially as existing policies change, expire, or become less effective. With the costs of renewable energy falling dramatically in recent years, this is also an attractive opportunity for private sector investors looking to participate in the rapidly growing clean energy economy.
These financing programs have also been effective at addressing key market barriers such as high upfront costs, the relative small scale of projects, financiers’ limited understanding of the technology and performance risks, and limited customer access to low cost capital.
While some programs have a lengthy history of success, others are in their early proof-of-concept stages. Regardless, all seven programs have made impressive progress:
As the above programs show, states can use these programs and other existing policies to demonstrate commitments to renewables and efficiency—with quantifiable costs, fossil fuel savings, and carbon emissions reductions-—that can be used to meet EPA’s criteria for complying with the Clean Power Plan. Renewable energy and energy efficiency are two “building blocks” identified by EPA to quantify each state’s emission reduction targets and to demonstrate compliance. States are free to combine any of these building blocks in a flexible manner to meet their targets.
State clean energy financing programs have been able to successfully engage diverse stakeholders to help mobilize capital. Collaborative efforts have included:
State agencies have also learned important lessons for administering these programs. This includes using in-house energy expertise to reduce the financial risks of private-sector loans that have enabled a broad array of individuals, businesses, and institutions to achieve savings from clean energy projects.
These seven case studies clearly demonstrate that clean energy financing programs offer a cost-effective approach to help states achieve their Clean Power Plan emissions-reduction targets, while lowering consumer energy bills and generating local economic benefits. By leveraging private-sector capital and reducing the need for taxpayer or ratepayer dollars, these programs have also helped attract bipartisan support.]]>
1) Renewables make the biggest contribution to Clean Power Plan (CPP) compliance
After a short-term increase in natural gas use to replace retiring coal plants, EIA’s analysis shows a big shift to renewable energy—mostly wind and solar—to comply with the CPP (see Figure 4). By 2030, EIA projects non-hydro renewables will provide 19 percent of U.S. electricity generation under its base CPP policy case. That’s more than twice as high as what the EPA projected for renewables in its CPP modeling last year and more than triple today’s levels.
Wind and solar provided the vast majority of new capacity additions in nearly every case (see Figure 8). EIA’s base CPP policy case that achieved carbon reductions of 34% below 2005 levels by 2030 resulted in an additional 170 gigawatts (GW) of wind and solar capacity through 2040, or double the levels projected in EIA’s reference case without the CPP. EIA’s scenario extending the CPP to achieve national emissions reductions of 45% below 2005 levels by 2040 (CPPEXT) resulted in the most additional wind and solar capacity (248 GW), followed by EIA’s high economic growth scenario (CPPHEG).
Even under EIA’s optimistic high oil and gas resource scenario (CPPHOGR) with significantly lower natural gas prices, wind and solar provided more than half of new capacity. And under EIA’s optimistic nuclear scenario (CPPNUC), wind and solar provided 7.6 times more new capacity and nearly three times more new generation than nuclear.
2) Renewables and efficiency make the Clean Power Plan affordable
EIA’s analysis shows that the overall electricity price impacts from the CPP are modest and decline significantly over time as the shift to renewables takes hold.
National average retail electricity prices are 4.9% percent higher in 2020, 4% higher in 2030, and 2.6% higher in 2040 under the base CPP policy scenario compared to EIA’s reference case. The impact on consumer electricity bills is even smaller primarily because of the benefits energy efficiency provides in reducing electricity demand. In fact, electricity bills nationwide are only 1.3% higher by 2030 and slightly lower (0.3%) by 2040. That’s a tremendous long-term value for curbing power plant carbon emissions by 34 percent below 2005 levels by 2030.
Higher natural gas use and prices due to coal-to-gas fuel switching appears to be driving near-term electricity price increases in EIA’s analysis (see Figure 27). CPP scenarios with more renewables, lower natural gas use, and lower natural gas prices–like the high economic growth (CPPHEG) case and the high oil and natural gas resource (CPPHOGR) case—had much lower prices.
EIA noted that if states shift to renewables sooner, it could keep electricity prices down even more earlier on by reducing the need for natural gas fuel switching. Energy efficiency can also be deployed much more quickly and extensively than EIA assumes (see more below).
3) Greater national cooperation results in more renewables and lower costs
EIA’s analysis also showed that giving regions more flexibility to trade and cooperate with other regions would result in more renewable energy and lower compliance costs. Under this scenario, national average retail electricity prices are only 2.8% higher in 2020 and 2.7% higher in 2030, while electricity bills are only 0.9% higher in 2030 and 1.7% lower by 2040 compared to the reference case.
With more zero-carbon renewables and less natural gas generation compared with the base CPP policy case, there were also 12 GW fewer coal plant retirements in this case by 2030. Because renewables like wind and solar do not emit carbon, they achieve twice the emission reductions per unit of electricity than natural gas in replacing coal. This is also true for energy efficiency.
Using and expanding on existing regional renewable energy credit tracking systems for state compliance would also prevent double counting and lower compliance costs, as discussed in our technical comments to the EPA.
1) EIA overestimates the cost of complying with the CPP
EIA has historically overestimated the costs and underestimated the potential contribution of renewables and efficiency, as discussed in a recent UCS blog and elsewhere. EIA’s cost for renewables are often much higher than real-world data and lag a few years behind market trends. With the cost of generating electricity from wind and the capital cost of solar falling by more than 60% since 2009, a few years lag can make a big difference.
While it appears EIA made some improvements in wind and solar costs for the version of the model used in this analysis (see slides 8 and 9 here), they have not published their Annual Energy Outlook 2015 assumptions document, so it’s not entirely clear what they assumed. However, EIA’s capital costs appear to be 10-20% higher for onshore wind and utility-scale solar PV costs than used in DOE’s recent Wind Vision study and other recent estimates by Lazard, Bloomberg New Energy Finance (BNEF), and the Solar Energy Industries Association (SEIA).
EIA also uses pessimistic assumptions for potential cost reductions and increases in wind capacity factors over time assuming its mature technology. In fact, EIA increases wind capital costs by up to 100% as the best wind sites are used up over time. In contrast, the DOE Wind Vision study estimates that technology innovations and economies of scale will lower the all-in (levelized) cost of generating electricity from wind power by an additional 24% by 2020 and 33% by 2030.
And EIA uses outdated wind resource potential estimates that don’t fully capture advanced technologies such as taller towers, longer blades, and improved electronics that will open up vast new areas in the Southeast and other parts of the U.S. to potential development according to DOE.
Using updated assumptions would increase the contribution from renewables and lower the costs of compliance. For example, the DOE wind vision study found that producing 20% of U.S. electricity from wind power by 2030 would increase average consumer electricity prices by 0.3%. Using similar assumptions, a 2014 UCS analysis found that strengthening of EPA’s renewable building block to provide 23 percent of U.S. electricity sales from renewables by 2030 would increase electricity prices by a maximum of 0.3%, while lowering power sector natural gas prices by 9%.
2) EIA greatly underestimates the potential for energy efficiency
EIA’s base CPP policy case only included 81 terawatt-hours (TWh) of savings from efficiency programs by 2030. In contrast, the EPA’s assumption that states could ramp up investments in efficiency to achieve an annual 1.5% reduction in electricity use per year based on what’s already being achieved in leading states resulted in 5 times more efficiency (424 TWh). Analyses by UCS, ACEEE, and NRDC all show that even higher levels of efficiency—ranging from 600 to 925 TWh by 2030—are achievable while significantly lowering consumer electricity bills.
Lawrence Berkeley National Laboratory (LBNL) data on the costs of implementing energy efficiency programs in 36 states show considerably lower costs than what EIA assumes in their analysis.
3) EIA overestimates electricity price impacts in certain states
EIA’s outdated assumptions for renewables and efficiency result in particularly misleading price increases in certain states and regions that EIA’s analysis says will rely almost entirely on coal to gas fuel switching for CPP compliance.
This is especially true in the Southeast, which has huge untapped potential for efficiency and renewable energy. EIA also greatly underestimates the near-term potential to minimize price increases in states like Texas, Oklahoma, New Mexico, and Arizona that could deploy more of their excellent, low-cost wind and solar resources, instead of further increasing their reliance on natural gas.
1) The EPA should adopt stronger emission reduction targets
EIA’s analysis found that the U.S. could affordably achieve carbon reductions of at least 36 percent below 2005 levels by 2030. These levels could be even higher if the EIA included updated assumptions for efficiency and renewables. EIA also doesn’t include public health or environmental benefits from reducing carbon and other emissions, which EPA estimated at $49-$84 billion in 2030. These benefits greatly exceed compliance costs and justify much higher targets.
2) States should prioritize renewables and efficiency in their compliance plans
States can keep rate increases to a minimum and help avoid an over-reliance on natural gas by implementing or strengthening policies to ramp up renewables and efficiency in the near-term, such as renewable electricity standards, energy efficiency resource standards, and carbon caps.
3) Congress should pass a multi-year extension of federal tax credits to allow renewables to continue its recent momentum, drive down costs even further, and help states meet their CPP targets.
Luckily, doing these three things would mean we tackle climate change faster too.]]>
On February 5th, state Senate Republicans passed a bill to roll back Colorado’s renewable energy standard (RES), which has helped make the state a national leader in clean energy. Rolling back the RES is precisely the wrong direction for Colorado to go at this time. In addition to providing important benefits to Colorado’s economy, increasing renewable energy use is one of the most cost-effective strategies for complying with the EPA’s proposed power plant carbon standards.
The current standard requires investor owned utilities (IOUs) to supply 30% of their electricity from renewables by 2020, and sets a lower standard of 20% by 2020 for large rural electric cooperatives and 10% by 2020 for smaller co-ops and municipal utilities. The Senate bill (SB 44) proposes to roll back the existing standard for IOUs and large co-ops to 15% by 2020.
Here are 5 reasons why Colorado should stop the rollback and increase its renewable standard instead:
Colorado was the first state to pass an RES by popular vote in 2004 through a ballot initiative. Since that time, the Colorado legislature has amended the RES three times, significantly increasing the targets.
Because of this leadership, non-hydro renewables have increased from 0.6% of Colorado’s electricity generation mix in 2004 to 15% in 2013, according to EIA data (see figure). Wind alone provided 13.8% of Colorado’s electricity and 19% of Xcel Energy’s power in 2013. Xcel, the largest retailer provider of wind in the country, also broke a U.S. record on May 24, 2013 when wind provided more than 60% of its electricity demand in Colorado.
At the end of 2014, Colorado ranked 10th in the country for installed wind capacity, with 2,593 MW (according to AWEA), and 8th for installed solar capacity, with 376 MW (according to SEIA). Colorado is a national leader in community solar, with 19 projects installed or under development (see map and policy details from Vote Solar). The Interstate Renewable Energy Council (IREC) also gave Colorado an “A” for its well-designed net metering policy.
The recent increases in renewables and efficiency to meet Colorado’s energy efficiency resource standard (EERS) have played a key role in replacing generation from retiring coal plants and preventing the state from becoming overly reliant on natural gas. While Colorado is still dependent on coal to provide nearly two-thirds of its electricity (see figure above), the market share of coal has been declining over the past several years.
Xcel, which serves more than half of the state, is on pace to exceed the 30% standard ahead of schedule. In 2012, Xcel procured 80% more renewable energy than it needed, because of its cost-effectiveness—just $1.44 per month for an average residential customer, according to a 2014 NREL report. Black Hills Energy has also had no difficulty meeting the targets at a modest cost of $2.04 per month for an average homeowner. According to current law, the cost of the RES cannot exceed 2% of annual customer bills.
Many co-ops are also on track. Tri-State Generation and Transmission Association, a wholesale electricity supplier serving 44 electric cooperatives in Colorado and three other states, will be on track to meet its renewable target (the non-distributed generation portion) through 2022, following the completion of the 150 MW Carousel Wind Farm in Kit Carson County.
One of the main reasons why the cost to consumers has been so low is because utilities have been able to buy wind power at lower prices than new natural gas power plants. For example, Xcel recently signed two wind power purchase agreements (PPAs) with an average “levelized” cost of $35/MWh over 25 years vs. $61-87/MWh for a new natural gas combined cycle plant, according to Lazard and EIA. In 2013, Xcel also received bids for utility scale solar PV projects that were competitive with new natural gas plants. Nationally, the cost of wind and solar has fallen by more than 60% over the past five years, according to the U.S. Department of Energy and SEIA.
By signing long-term fixed price contracts for wind and solar, Xcel also sees these resources as providing a valuable long-term hedge against rising and volatile natural gas prices (see slide 30 here). In fact, the Colorado Public Utilities Commission estimates that one of Xcel’s recent wind projects will actually save ratepayers $100 million over 25 years.
Xcel also worked with the National Center for Atmospheric Research (NCAR) in Boulder to develop a state-of-the-art wind forecasting system that has reduced forecast errors by more than 38%, saving customers more than $25 million in fuel costs at coal and natural gas plants.
Colorado’s RES has also been successful in creating jobs and attracting new clean energy businesses to the state. A new Solar Foundation report ranks Colorado 11th in country for employing 4,200 workers in the solar industry in 2014, up from 3,600 workers at over 360 companies in 2013.
The wind industry made the following contribution to Colorado’s economy in 2013, according to AWEA:
Colorado is also home to one of the world’s leading renewable energy research institutions, the National Renewable Energy Laboratory (NREL), with 1,721 full-time employees and 678 visiting researchers.
As my colleague Jeff Deyette has written, Colorado is well-positioned to meet and even exceed the EPA’s proposed target of reducing the state’s power plant carbon emissions rate 35% below 2012 levels by 2030.
To meet the state’s current RES targets, Lawrence Berkeley National Lab projects that renewables will provide nearly 20% of Colorado’s total electricity use by 2020. (These levels represent an average due to differences in targets for IOUs and co-ops and other provisions such as extra credit multipliers for certain projects.)
An October 2014 UCS analysis found that by continuing to increase Colorado’s RES targets after 2020 at rates slightly below the deployment levels achieved between 2008 and 2013 to reach 32% by 2030 (see figure), the state could achieve deeper emission reductions than the EPA’s proposed standard with little to no impact on electricity prices.
In addition to reducing carbon emissions, renewable energy sources like wind and solar save water and can help make the state more resilient to heat, drought, wildfires and other climate impacts.
It’s clear that Colorado should stop the ill-conceived effort to roll back the state RES. The effort is sponsored by several state senators with ties to the fossil fuel-funded American Legislative Exchange Council (ALEC), including the group’s state chair, who want to turn back the clock on Colorado’s progress on clean energy. ALEC has tried to roll back renewable energy standards in more than a dozen states in recent years, and failed in nearly every one because the benefits of clean energy are so compelling.
Instead, Colorado should consider increasing the RES to maintain its national leadership in developing a clean energy economy and to play a primary role in cost-effectively complying with the EPA power plant carbon standards.
Urge your state representative to keep Colorado moving forward on renewable energy. The bill will be considered at a committee hearing in the Colorado House on March 2.]]>
A: They all told EPA that renewable energy should play a strong role in reducing emissions from existing power plants under its proposed Clean Power Plan.
In fact, many of these groups explicitly endorsed the “Demonstrated Growth Approach” that UCS proposed in our comments to the EPA, which would increase non-hydro renewable energy sources to 23 percent of U.S. electricity sales by 2030—or nearly double EPA’s proposed renewable energy target. Recent UCS analysis shows that achieving these levels is affordable and would result in additional reductions in U.S. power plant carbon emissions from EPA’s estimated 30 percent below 2005 levels to 40 percent. (For more details, see my October blog.)
Google’s comments to the EPA called for stronger renewable energy targets, indicating that both of EPA’s approaches resulted in “modest” levels of renewable generation. Google also identified many of the same concerns with the EPA’s methodology that we highlighted in our comments, including:
Because of these and other anomalies in EPA’s methodology, Google concluded:
“For all these reasons, we believe EPA underestimates the demand and opportunity presented by renewable energy over the next 10-20 years. Accordingly, the renewable energy goals in the final rule should better account for the full range of renewable energy opportunities in states and, at the least, should certainly be no less stringent than the additions of generation already required.”
As a major user and investor in renewable energy, Google executives clearly know what they’re talking about. They have signed contracts for 1,040 megawatts (MW) of renewable energy—enough to provide 35 percent of Google’s electricity use in 2013, the equivalent of powering more than 300,000 U.S. households. Google’s long‐term goal is for renewable energy to provide 100 percent of their electricity needs. In addition to being a large consumer of clean zero-carbon electricity, they have invested more than $1.5 billion in 17 renewable energy projects that will add 2,500 MW of new capacity to the grid.
The main reason why Google is so bullish on renewable energy is because it’s good for their bottom line:
“For example, using renewable energy helps Google diversify our power supply, provide protection against fuel price variability, and support business innovation and economic growth in the regions in which we operate. We are seeking affordable, reliable power that reduces our carbon footprint and meets the technology needs of our business…Today, renewable energy is more cost-effective in more regions of the country than ever before, and prices continue to decline.”
Like Google, 223 other businesses sent a letter to the EPA, emphasizing the important role that renewables and efficiency can play in reducing emissions and saving money as part of the Clean Power Plan. The letter was signed by 40 companies with over $100 million in annual revenues, including several Fortune 500 companies. This includes companies such as Kellogg’s, Starbucks, IKEA, Nike, Levi Strauss, Mars, and Nestlé that have recently made significant investments in renewables. For example:
Organized by the Business for Innovative Climate & Energy Policy (a project of Ceres) in coordination with CDP and the Climate Group, the letter stated:
“Clean energy policies are good for our environment, the economy, and companies. Increasingly, businesses rely on renewable energy and energy efficiency solutions to improve corporate performance and cut costs…60 percent of the combined Fortune 100 and Global 100 companies have set a renewable energy goal, a greenhouse gas reduction goal, or both. Today’s rules will help spur investment and provide the long-term certainty necessary for our businesses to thrive and to meet these goals.”
On December 9, eleven U.S. Senate Democrats from CA, NJ, HI, MA, MD, OR, RI, and VT sent a letter to the EPA calling for stronger renewable energy, energy efficiency, and state emission reduction targets:
“For the Clean Power Plan to be a success, it must achieve the level of emission reductions that the science calls for to avoid the most dangerous impacts of climate change. Maximizing the deployment of cost-effective renewable energy and energy efficiency will be the key to achieve the necessary emissions reductions.”
In addition to supporting the EPA’s legal authority to regulate carbon emissions from existing power plants under section 111(d) of the Clean Air Act, the Attorneys General from 12 states (CA, CT, MA, ME, MD, NM, NY, OR, RI, VT, WA), Washington DC, and New York City also specifically endorsed our approach for strengthening the renewables building block:
“Other methodologies for determining potential renewable generation on a state-by-state basis, such as that proposed by the Union of Concerned Scientists, have confirmed that increased renewable generation is feasible and cost effective at even higher rates of adoption than projected by EPA…Thus, the States prefer an approach to the renewable energy building block that results in a target that aggressively captures the technical feasibility and market potential of renewable energy. Based on such an approach, the States also believe that there is a demonstrated basis for strengthening state-specific targets for some states.”
More than 25 national and state non-profit organizations also supported the UCS Demonstrated Growth approach and several other options for strengthening the renewable energy targets in their comments to the EPA. This included major renewable energy business groups like the American Wind Energy Association, the Solar Energy Industries Association, and Advanced Energy Economy. It also included public health and environmental justice groups like the U.S. Climate & Health Alliance and WE ACT for Environmental Justice, and consumer groups such as Public Citizen, Consumer Action, and Ohio Partners for Affordable Energy.
In addition, many national, regional, and state environmental organizations supported our approach and other alternatives, such as the Sierra Club, Natural Resources Defense Council, Environmental Defense Fund, Environmental Law and Policy Center in Chicago, Southern Alliance for Clean Energy, Southern Environmental Law Center, several Minnesota organizations, and Utah Clean Energy.
As the EPA weighs the millions of comments it received on the Clean Power Plan, this diverse and comprehensive support sends a strong signal to the EPA to strengthen the state renewable energy and emission reduction targets when the final rule is released next June.
When combined with stronger targets for energy efficiency, renewable energy allows states to affordably deliver the much deeper emission reductions that are needed to avoid the worst consequences of climate change.]]>
To establish emission rate reduction targets for each state, the EPA proposed four “building blocks” to identify cost-effective ways to reduce emissions from existing power plants. In addition to increasing renewable energy, these building blocks included improving efficiency at existing coal plants, fuel switching from coal to natural gas, increasing energy efficiency in homes and business, and including the generation from new and “at-risk” nuclear power plants. Importantly, the EPA gives the states flexibility in deciding how much of each building block to include, with some limitations.
Unfortunately, the EPA’s proposed approach for renewables — based on averaging the 2020 targets of existing state renewable electricity standards (RES) within each of six regions nationwide — resulted in very modest targets.
Our analysis shows that the EPA’s targets include less renewable energy than what the Energy Information Administration (EIA) projects will occur by 2020 under a business as usual scenario (i.e. without the carbon rule), and only slightly more by 2030 (Figure 1).
The EPA’s proposed approach also produced several counter-intuitive results at the state level. For example, seven states had less renewable generation in 2030 under EPA’s targets than they have today. And 17 of the 29 states with RESs have lower targets under the EPA’s approach than what is required to meet their existing laws. The EPA’s approach also does not capture any of the recent or projected growth in renewables between 2012 and 2017.
UCS’s modified approach for setting state renewable energy targets — which we’re calling the “Demonstrated Growth Approach” — improves on the EPA’s approach in several ways. To determine each state’s 2017 baseline generation levels, we use EIA renewable generation data from 2013 and add projected generation from wind and utility-scale solar projects known to be under construction through 2016. To calculate state targets through 2030, we use the four following steps:
Our approach results in more renewables in every region of the country and nearly every state than the EPA’s approach (Figure 2). The largest increases occur in the Upper Midwest and West – in states where renewables have already experienced rapid growth and in states that have made strong commitments to deploy more renewables in the future. Our assumption that states fully comply with the existing RESs has the greatest impact on the Northeast and Mid-Atlantic states. While the Southeast has the lowest overall target of 14 percent by 2030, they would experience a similar percentage increase in renewables over current levels compared to other regions.
Using the National Renewable Energy Laboratory’s Regional Energy Deployment System (ReEDS) model, we analyzed the impacts on electricity and natural gas prices of achieving the state renewable energy targets under the UCS approach compared with business as usual (BAU).
Our analysis included updated technology cost and performance assumptions that are consistent with what we used in our May 2014 Game Changer analysis of a more ambitious set of climate and clean energy policies, which found that the U.S. could reduce power plant carbon emissions 60 percent below 2005 levels by 2030 (about twice the levels included in the EPA’s proposal) at a net savings (see more details here).
We found that diversifying the electricity mix with renewables would have minimal impacts on electricity prices and help restrain the growth in natural gas prices. Under the UCS approach, national average consumer electricity prices were a maximum of 0.3 percent higher per year than BAU through 2030. As a result, a typical household (using 600 kWh per month) would see an increase of no more than 18 cents on their monthly electricity bill. Under the UCS approach, the national average price of natural gas in the electricity sector would be 9 percent lower than BAU by 2030 (see figure).
Previous studies by UCS, EIA, and LBNL have shown that reducing natural gas in the electricity sector can also help reduce consumer natural gas prices for heating and manufacturing. These benefits are not captured in our analysis, which uses an economic model that focuses only on the power sector.
Our findings are also consistent with a recent NREL and LBNL study that found that between 2010 and 2012 the actual cost of complying with RESs in 25 states ranged from a net savings of 0.2 percent of retail rates to a net cost of 3.8 percent, with a weighted average cost of 0.9 percent.
Our analysis is a reasonable approximation of the incremental cost impacts of increasing renewables under the Clean Power Plan. We did not analyze the full impacts of implementing the entire draft rule, but focused exclusively on the renewable energy building block. In addition, these results assume national trading of renewable energy credits (RECs). If there are any restrictions on trading, experience shows that REC prices would likely be higher in some regions and lower in others.
The modeling also showed that our proposed approach would reduce power sector CO2 emissions by an additional 10 percent by 2030 at the national level, with renewables displacing mostly natural gas. Therefore, using our approach in setting state emission reductions targets could increase the total CO2reductions achieved by the Clean Power Plan from the EPA’s estimated 30 percent below 2005 levels by 2030 to nearly 40 percent. If more coal were displaced, total emissions reductions could increase above these levels. Improvements in energy efficiency and other building blocks could further increase the total level of emissions reductions.
To fully harness the power of renewable energy to affordably reduce carbon emissions, the EPA should revise its renewable energy building block methodology and adopt stronger targets that better reflect growth rates already being achieved by leading states. The EPA should also better reflect the recent and projected near-term growth in renewable energy and incorporate full compliance with existing state RES laws.
The UCS proposal provides a powerful framework for expanding the use of renewable energy and putting us on a path toward a clean, affordable, and low-carbon electricity system.]]>