States leaning toward mass-based CPP compliance, regional cooperation

Dive Brief:

  • Most state regulators at a conference convened by the Great Plains Institute this week appeared to lean toward a mass-based approach to Clean Power Plan compliance, EnergyWire reports, largely due to its easy applicability to emissions trading schemes and the potential for more liquid carbon markets.
  • An Edison Electric Institute lawyer echoed those sentiments on trading at a conference in Washington, D.C., but cautioned that most state regulators are still busy evaluating both compliance strategies, and that most have not yet made a decision.
  • Several analyses show states will have an easier path to compliance if they band together regionally, indicating a mass-based approach could lead to simpler trading and lower costs.

Dive Insight:

Momentum appears to be growing behind a mass-based compliance approach to the federal government's Clean Power Plan, with regulators focused on its relative simplicity and potential for greater participation. At an event organized by the Bipartisan Policy Center and Great Plains Institute in Little Rock, Ark., EnergyWire writes that the bulk of regulators appear to favor the mass-based approach.

"It's an easier way of quantifying the emissions reduction. And because it's easier and because more folks are likely to choose it, it's something that will be traded on a regional basis, which makes the costs lower for consumers," said Sandra Byrd, vice president of Arkansas Electric Cooperatives and a former regulator in the state.

A mass-based approach sets a specific cap from a state's existing power plants, while a rate-based approach would look at emissions per MWh and is generally more complicated to trade. Byrd said that the rate-based approach more easily open the door to economic development and demand growth. Some experts say states like South Carolina and Georgia, which are adding nuclear power, could benefit from the more complicated scheme.

But at this point, most states are still studying the issues at hand in both strategies, knowing they will soon need to make recommendations to their governors on the proper path, Emily Fisher, general counsel at the Edison Electric Institute, told Utility Dive at the Distributed Sun New Energy Summit in Washingtion on Tuesday.

Joe Goffman, senior counsel at the EPA and one of the Clean Power Plans authors, said the agency has no preference as to which approach states take, but observed that emissions trading based on mass-based compliance is in the "muscle memory" of utilities across the country due to previous experience with other EPA emissions rules.

A growing number of studies has found regional compliance options are the most likely to save consumers money. The Southwest Power Pool, PJM Interconnection and the Midwest Intercontinental System Operator (MISO) have all released analyses showing states will save billions of dollars if they work together.

SPP estimated an almost 40% savings using a regional approach, lowering costs from $3.3 billion per year to less than $2.4 billion. MISO pegged the savings at about $3 billion annually. 

States in the PJM Interconnection have been in talks since June to discuss regional compliance in a working group that parallels the Midcontinent States Environmental and Energy regulators organizations, EnergyWire reports. 

Furthermore, a recently-published Acadia Center study points to the Regional Greenhouse Gas Initiative (RGGI) from the Northeast and mid-Atlantic regions as a blueprint for mass-based CPP compliance.

EEI's Fisher welcomed efforts at regional cooperation, but warned that stakeholders should avoid the creation of "balkanized" regional markets without emissions trading between them. If that happens, she said, it would be harder for states facing steep emissions cuts to trade with states with easier compliance trajectories, raising costs for utilities and consumers. 

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Filed Under: Generation Regulation & Policy
Top image credit: Flickr; Jan Tik