What's in the Clean Power Plan? Ohio's Game-Changer

The historic Clean Power Plan was finalized this week, our nation's first-ever limits on carbon pollution from the electric power sector--the single biggest source of climate change pollution in America. While there are limits on dangerous emissions like sulfur and mercury from power plants, there are none on harmful carbon emissions--until now.

The Clean Power Plan is a game-changer for Ohio--a state that uses nearly 70% coal-fired electricity. It's an incredible opportunity to step out from the past, modernize the electric grid and ensure we have an ongoing supply of clean, affordable, and reliable power needed to grow our economy and protect our health and the health of our children.

But What's in the New Rule?

The final rule was released barely three days ago. But we already know that cutting emissions the right way--by focusing on clean energy--is going to the lower cost of electricity in Ohio, protect public health, and grow the economy.

Here are some of the key elements of the new rule that have already come to the surface, with many more to come:

The Rule is Stronger and Treats States More Fairly

The final Clean Power Plan rule requires a 32 percent reduction in carbon pollution from our nation's electric sector from 2005 levels by 2030, which represents a nine percent increase over the draft rule. In beefing up the environmental benefits of the rule, EPA hopes to accelerate the adoption of carbon-free energy, such as clean, renewable energy sources and energy efficiency.

Like the draft rule, the final Clean Power Plan gives states the flexibility to chart their own course to carbon reductions and does not dictate a specific approach to reducing carbon emissions. Even more flexibility has now been provided than before: streamlined opportunities for states to include proven strategies like trading and demand-side energy efficiency in their plans, and allows states to develop "trading ready" plans to participate in "opt in" to an emission credit trading market with other states taking parallel approaches without the need for interstate agreements. All low-carbon electricity generation technologies, including renewables and energy efficiency, can play a role in state plans.

As noted in my previous blogs, Ohio would reap the most financial and clean energy benefits by establishing a simple carbon allowance system in-state that would allow for a simple state plan now, but leave open the potential for cross-state trading--and financial rewards--later.

Ohio Now Has More Time and an Easier Glide Path

Ohio now has a full three years to submit its state plan, and compliance starts two years later than originally proposed in the draft rule. The compliance averaging period begins in 2022 instead of 2020, and emission reductions are phased in on a gradual "glide path" to 2030.

These provisions give Ohio and utilities companies more time to prepare a customized plan that works best for the state's own resource mix and to plan for the deployment of the lowest-cost clean energy resources.

Ohio Will be Rewarded for Early Action on Energy Efficiency and Renewables

EPA added a brand-spanking-new program to the final Clean Power Plan package to encourage states to start investing in renewable energy like wind and solar and energy efficiency and help cut energy bills even further even before they're required to start demonstrating their emissions reductions. The "Clean Energy Incentive Program" has two components: it gives states credit for generating power from wind and solar in 2020 and 2021, and further incents investment in communities that need it the most by providing double credits to energy efficiency projects in low income neighborhoods. State participation in the program is optional, but why would a state pass this up?

It's also important to note that, in addition to this explicit crediting system on early action in the 2020-2021 period, Ohio will see even deeper benefits if it continues to invest in efficiency and renewables--starting now. EPA set the state targets using 2012 as the baseline year, and assuming that states would reduce emissions from that point through 2030. If Ohio presses the "restart" button on its clean energy policies (which were frozen last year by SB 310), the state's investments in efficiency and renewables today will continue to reduce Ohio's emissions across the system, and as a result will get included in the final calculation. Though Ohio will not have to demonstrate compliance until 2022, the state will be able ahead of the game if it starts now and will be able to immediately call upon the prior years of investments to deliver even more cost-effective emissions reductions.

Energy Efficiency Remains a Critical "Not-So-Secret Weapon"

The rule also removes energy efficiency from EPA's calculation in determining state targets. To recap the basic structure of the rule, US EPA based emissions targets on a set of conservative "building blocks" composed of four best practice tools that are already being used to reduce emissions: making coal plants more efficient, ramping up use of existing natural gas plants, increasing renewable energy, and increasing energy efficiency. EPA applied these blocks to each state's energy mix and developed carbon intensity targets (i.e. the amount of carbon produced for each unit of power generated). EPA has now restructured how these blocks are calculated, and energy efficiency has been removed from the target-setting.

But regardless of how EPA does its calculations to set targets, energy efficiency remains an incredibly important and powerful tool for reducing carbon emissions. Now more than ever it's the "not so secret" weapon in Ohio's arsenal to get this done. To be sure, EPA affirmed their commitment to efficiency as a key carbon-cutting tool in developing incentives for early action in the Clean Energy Incentive Program. EPA confirmed this week that "thanks to their low costs and large potential in every state and region, demand-side EE programs will be a significant component of state compliance plans under the Clean Power Plan. The CPP's flexible compliance options allow states to fully deploy EE to help meet their state goals."

The continued emphasis on efficiency should come as no surprise to Ohioans. After all, energy efficiency programs have delivering savings and lowering power prices in Ohio for years. As I've blogged about extensively, Ohio's utility-led energy efficiency programs have been wildly successful, having created thousands of jobs and saving customers over $1 billion on energy costs statewide.

What Comes Next?

Ohio has options to meet the challenge of reducing carbon pollution; though there are some that will say over the coming days and weeks that it's too costly and it will hurt the state's economy if we go down this road.

The Clean Power Plan comes at an important time as we're deciding in the General Assembly the future of Ohio's energy landscape. But with the newly minted rules of the Clean Power Plan, it's no longer and "if" but a "when" will Ohio take the next steps to achieve results that are needed to spur tens of thousands of new clean energy jobs across the state, save consumers a billion dollars over the next ten years through increased gains in efficiency, and put the state on the path to compliance with federal law.

And with the flexibility and extraordinary discretion provided in the Clean Power Plan, there's no reason why Ohio can't develop our own plan that takes advantage of policies already on the books. If done right, it can be achievable, cost-effective, and make the system more resilient.

We're already ahead of the game, because Ohio has clean energy standards just waiting to be leveraged. While those have unfortunately been ground to a halt in the aftermath of last year's unfortunate legislation, we can get back on track simply by pressing the restart button on them.

And we should do it as soon as possible.