Ohio's Electricity Grid Operator: Cutting Carbon With Clean Energy and Regional Cooperation Can Bring Financial Benefits to the State

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Many political strategists on both sides of the aisle know the road to the White House leads through Ohio. That's because no Republican has ever resided at 1600 Pennsylvania Avenue without winning this bellwether state. With all of the rumors swirling around Governor Kasich's potential run for the White House, implementing a clean energy plan that reinvigorates Ohio's economy is the clearest path to success in Kasich's own state, as well as the most provocative thing he could do to up his national profile at this critical time.

Anyone who has been paying attention to Ohio's ever-changing energy landscape over the last year knows that this path to success is through energy efficiency and renewables. But don't take our word for it--the operator of the largest electricity market in the world just released a report that illuminates Ohio's path forward.

Earlier this month, PJM-- the regional authority that ensures reliable and low-cost power across the electric grid in 14 states, including Ohio--released its economic analysis of the EPA's Clean Power Plan (CPP), which delivers the first-ever limits on climate-change causing carbon pollution from the oldest and dirtiest power plants.

The CPP will task the power industry with cutting carbon emissions by 30% from 2005 levels by 2030. It crafted individual state targets based on four building blocks that are already industry standards for cutting carbon--ramping up coal plant efficiency, boosting natural gas plant dispatch, growing renewables and increasing system-wide efficiency. But one of the key elements of the CPP is that states can chart their own course for reducing emissions--they can use any combination of the four blocks, or turn to other approaches.

While there remain many unknowns with how the CPP will play out in Ohio until the final targets are released this summer, PJM's recent report offers some remarkable state-level insights that make one thing crystal clear--cooperating with neighboring states and doubling down on efficiency and renewables is the cheapest way forward.

This confirms similar findings from NRDC since the draft rules were released last year, and is further proof that investing in energy efficiency and renewable wind and solar power should be a fundamental part of Ohio's strategy to cut carbon.

PJM footprint. Source: PJM.

While my colleague Starla Yeh provides a more in-depth technical overview of PJM's methodology, in brief the findings are encouraging:

  • Regional cooperation leads to lower compliance costs

The CPP provides states the option to pursue partnerships with other states to reduce pollution, and it provides them additional time for this cooperation to take place. Regional or multistate approaches present a number of potential advantages over a single-state plan, such as consumer savings, reduced compliance costs, increased flexibility, and avoided electricity market distortions. This has been confirmed by PJM's analysis, which concluded that a regional approach would result in lower compliance costs and less capacity at-risk for retirements than state-by-state approaches. Ohio has the opportunity to partner with other heavy electricity-producing states like Pennsylvania, and not only see strength in numbers, but also cut carbon and protect human health at low cost.

  • Relying on clean energy to reduce emissions is the smartest and cheapest strategy

PJM found that in Ohio--as well as all the other states in the grid operator's footprint--energy costs dip when efficiency and renewables are brought in as the heavy artillery to fight carbon pollution.

In its modeling, PJM translated each state's emissions reduction target into a carbon price per ton. In Ohio, PJM projected carbon prices in the state above the regional average, indicating that it would be a purchaser of credits. However, prices decreased when renewables and energy efficiency were taken into account.

It's also notable that while PJM's analysis shows a direct correlation between clean energy deployment and reduced cost, PJM's assumptions actually underestimate the degree to which Ohio has committed in state policy to invest in these zero-emitting resources. As NRDC found in our analysis of the connection between CPP compliance and the state's efficiency and renewables standards--if Ohio lifts the current clean energy freeze--we can get to the carbon target years ahead of schedule. By 2030, the clean energy standards would yield nearly twice as much generation than the EPA assumed was possible.

Thus, we can presume that the projections for Ohio in PJM's study would be even more favorable if the scenarios reflected current policies, rather than the limited view of renewables and energy efficiency present in PJM's modeling. And these findings fly in the face of scare tactics from special interest groups that follow the big polluter agenda by telling everyone that cutting pollution will be too costly. As PJM's analysis has proven, this is far from the truth.

  • Regional compliance improves electricity system flexibility, mitigating concerns surrounding legacy fossil plants

The PJM study also found that coal- and oil-fueled power plant retirements could be reduced by the addition of renewables and energy efficiency. These zero-carbon generators would lower the average carbon emission rate of a given state, allowing more fossil-fueled plants to stay online.

While it is in the best interest of Ohioans to retire outdated, uneconomic coal plants in the coming years, PJM's findings offer a welcome counter to claims that the CPP is forcing too much too soon. The analysis indicates that when a coal-heavy state such as Ohio invests in efficiency and wind and solar, this spreads out any fossil-fuel retirements over time, as market conditions change.

This is consistent with NRDC's finding last year that Ohio could rely on efficiency and renewables and opt to not seek carbon reductions from its coal fleet or from an increase in its lower-emitting natural gas generation. Rather, Ohio could--and should--renew its commitment to its clean energy policies and use these carbon-cutting tools to get to the 2030 CPP target. Efficiency and renewables offer unprecedented flexibility for Ohio to reduce pollution, and PJM's analysis underscores this fact.

The irony of these findings is that they come right as Ohio is embarking on the first year of the freeze of its clean energy standards. Unfortunately, Ohio enacted SB 310 last year, which froze its renewable and energy efficiency portfolios for two years, grinding progress to a halt on the state's clean energy economy and throwing in the balance the health of Ohioans.

But Ohio has a chance to right the ship.

The study committee tasked with determining the fate of the standards is meeting on March 18th and will hear testimony from PJM. Presumably--hopefully--the above findings will come to light. This is an opportunity for Ohio's leaders to take a hard look at the damaging impacts of the freeze, and to use PJM as a key technical resource to chart a path forward for the state that ends carbon pollution but that also protects the economy and our health.

These important items need their time in the spotlight. We just hope Ohio is paying attention.