On July 14, 2016, the Center for Clean Air Policy hosted and facilitated a meeting of the Climate Policy Initiative dialogue. This meeting explored key topics related to Clean Power Plan design, particularly as it relates to nuclear energy, and also looked at recent developments on retail pricing of distributed energy resources (DER) and supporting participation of DER in wholesale energy markets. Featured speakers included Joe Goffman, Associate Assistant Administrator for Climate and Senior Counsel to the Assistant Administrator for Air and Radiation at EPA, Steve Wemple, Director of Con Edison’s Utility of the Future team, and Melissa Lavinson, Vice President, Federal Affairs and Policy and Chief Sustainability Officer at PG&E Corporation.
Some of the key takeaways from the meeting are as follows:
Clean Power Plan (CPP) compliance costs may be much lower than initially projected. In fact, recent modeling suggests the Clean Power Plan may not be binding during much of the interim compliance period. This means that allowance and emission reduction credit prices may be zero (on average) during much of that time frame. The plan becomes binding by 2030, but allowance and ERC costs remain low as compared with earlier runs and estimated values for the social cost of carbon. This raises questions on whether the Clean Energy Incentive Program will encourage additional energy efficiency and renewable energy. Also, under certain scenarios, there may be a smaller price effect to support continued operation of at-risk nuclear generation.
Clean Power Plan emissions impacts after 2030 differ across the three trading-ready options. After 2030, the mass scenario covering both existing and new sources maintains emissions reductions while the other scenarios may result in an increase of CO2 emissions by 100-300 million tons. The dual rate approach is again projected to become non-binding.
In New York, payments to existing nuclear energy at a level that factors in the social cost of carbon lead to a lower societal cost than allowing retirements to proceed on an economic basis. Without the nuclear generation, current customers served by the nuclear power would need to buy power from more expensive fossil resources that could make it more difficult to meet the state’s Clean Power Plan mitigation goals.
PG&E’s agreement to retire the Diablo Canyon nuclear plant was made on the basis that the power would no longer be needed after 2025. This is due to planned growth in renewables and efficiency to meet existing mandates and the resulting need for flexible load-following power (natural gas). Growth in community choice aggregation also contributes to reduced future demand.
Moving to a system that values the specific benefits of DER can support a level playing field across distributed and conventional energy technologies. (This would be in place of one-size-fits-all net metering that would over- or under-compensate any given DER resource.) Some values are location-specific and others are not. For utilities, a key benefit of DER is the ability to defer capital investments.
Wholesale markets are already encouraging important amounts of demand response, reducing peak demand levels by 9-10% in some power markets. In California, wholesale markets could similarly drive deployment of distributed generation.
Countries are moving quickly to sign and ratify the Paris Agreement, which involves raising mitigation ambition every five years.
CCAP is planning the next meeting of the CPI dialogue for September 2016.