Clean Power Plan Means Lower Energy Bills in the Southeast

Co-authored with Katie Southworth, Consultant

In August 2015, President Obama and the U.S. Environmental Protection Agency announced the Clean Power Plan, an historic step aimed at reducing carbon pollution by placing federal limits on carbon emissions from existing power plants. The Clean Power Plan establishes carbon pollution goals for each state, and is projected to achieve a 32 percent cut in U.S. carbon pollution from power plants by 2030 compared with 2005.

The Clean Power Plan gives states considerable flexibility to design their compliance plans, taking into account their unique circumstances and priorities. As a result, stakeholders are considering how to optimize state plans. Some forward-thinking states are also examining ways of going beyond the Clean Power Plan, recognizing the need for deeper carbon reductions.

Without any changes in the way we produce and use electricity, the nation’s current business-as-usual trajectory would cause the electricity bills of a typical Southern household to rise by about 23.2 percent over the next 15 years, while the typical U.S. household will see bills increase by 18 percent. But a new report by Georgia Tech has found that states implementing smart policies and least-cost options under the Clean Power Plan will cut household costs. According to Dr. Marilyn Brown, the report’s principal author, "One of the key takeaways from this study is that there is a significant dividend for electricity consumers, particularly in the South, if states embrace energy efficiency and clean energy investments associated with state implementation of the Clean Power Plan.”

A June 2016 report by the Georgia Institute of Technology examines two key questions about the Clean Power Plan:

• How can states reduce carbon pollution in the most cost-effective way?
• What is the effect of different compliance options on energy bills?

Georgia Tech evaluated a range of carbon-reduction approaches available to states—including increased reliance on natural gas, renewable energy, and energy-efficiency. It concluded that the least-cost pathway would set carbon-reduction goals for both existing and new power plants, and would motivate households to purchase more efficient air conditioning units, appliances, lighting, and other equipment, as well as improved building shells.

The Georgia Tech analysis found that:

• The average Southern household could cut its electricity bill in 2030 by $209 (or 12.1 percent) and could save a total of $2,131 over the next 15 years, if the Clean Power Plan pathway described above were adopted. [1] (See figure above.)
• Across all of the South’s households over the next 15 years, this would represent a cumulative electricity bill savings of $107.7 billion.
• Energy bill savings are expected to be greatest for single-family homes, but occupants of apartments and mobile homes would save as well. (See figure below.) In addition, natural gas bills would be lower.
• If policy makers adopt the least-cost clean power pathway, the South’s household electricity bills would increase very little, if at all, while its CO2 emissions would be cut significantly.

These findings should be considered significant to both state and local policy makers in the region, as the South is home to the 4 cities in the U.S. with the highest low-income energy burdens, based on ACEEE rankings, which include: Memphis, New Orleans, Birmingham, and Atlanta. Energy burden is the percentage of household income that is spent on energy bills. With energy burdens ranging from 18-26 percent for their low-income households, this is substantially higher than the 7.2 percent median energy burden for low-income households across the country. Georgia Tech’s analysis shows how the CPP can encourage investments which will reduce energy bills in the South by embracing energy efficiency and clean energy.

Analysis based on Marilyn Brown, Alexander Smith, and Gyungwon Kim, 2016. The Clean Power Plan and Beyond, Georgia Institute of Technology, School of Public Policy Working Paper #89 (June); and Ariel Drehobl and Lauren Ross, Lifting the High Energy Burden in America’s Largest Cities: How Energy Efficiency Can Improve Low-Income and Underserved Communities, American Council for an Energy-Efficiency Economy, April 20, 2015.