Obama's clean power plan will actually lower consumer energy bills

Obama's clean power plan will actually lower consumer energy bills

A new study from researchers at the Georgia Institute of Technology examines how states can reduce carbon pollution cheaply while also keeping household energy prices low. Titled Low-Carbon Electricity Pathways for the U.S. and the South, the report found that reducing greenhouse gas emissions from power plants a requirement of the EPAs proposed Clean Power Plan could be done cost effectively through a combination of renewable energy and energy efficiency policies as well as a modest carbon price.

To minimize costs, the country needs to reduce its coal consumption more rapidly, continue to expand its gas-fired power plants, but temper this growth with aggressive policies to increase energy efficiency and renewable energy, Marilyn Brown, the projects lead researcher and the Brook Byers Professor of Sustainable Systems in the School of Public Policy at Georgia Tech, told ThinkProgress.

The researchers also found that complying with the Clean Power Plan, which aims to reduce emissions from U.S. power plants by 30 percent from 2005 levels by 2030, would produce substantial collateral benefits. These include lower electricity bills, greater GDP growth, and significant reductions in SO2, NOx, and mercury emissions.

The strong push on energy efficiency also enables GDP to rise above the business-as-usual forecast, said Brown. The U.S. increases its exports and decreases its imports as a result of being more competitive.

The Obama Administrations final Clean Power Plan rule is expected in early August. This study is the second one in a number of days to spell out how complying with the rule could end up saving customers money on their energy bills. Another study published by the energy research firm Synapse Energy Economics last week found that energy bills in 2030 could be $35 per month lower under a Clean Energy Future scenario as compared to business-as-usual. These studies are significant not only for their research value, but also because they push back on the oft-employed talking point that the Clean Power Plan and renewable energy deployment in general will cause electricity rates to skyrocket.

As energy is used more efficiently, non-competitive power plants can be retired, construction of new coal plants can be deferred, and transmission and distribution infrastructure investments can be delayed, all of which would lower rates and therefore lower the energy bills of all consumers, Brown said. This is a counter-intuitive finding to some who keep hearing from critics that have claimed that it will significantly increase the electricity bills of American families.

The Clean Power Plan allows for state-level flexibility in meeting the carbon reduction targets, which vary according to state. In the proposed rule, Washington needs to cut its emissions by 72 percent in 2030 compared to 2012, while Kentucky only needs to reduce power plant emissions by 18 percent. This variability is meant to reflect both the potential reduction options available to the state as well as reductions expected from existing policies.

With the compliance flexibilities woven into the CPP, states have an array of options before them, the authors of the Georgia Tech report write. On the supply side, they need to assess opportunities to shift the mix of fuels used to generate electricity in their state. On the demand side, they need to consider options for decreasing electricity consumption through energy-efficiency programs and policies.

The researchers modeled the ways that options could be combined to achieve the desired pollution cuts without increasing electricity prices. Brown said they used a state-of-the-art analysis tool called the National Energy Modeling System (NEMS) that the U.S. Energy Information Administration (EIA) also uses.

It is arguably the most influential energy modeling tool in the U.S., she said. Its a bottom up model with lots of resolution about specific supply- and demand-side technologies.

Brown and her small team of researchers found that the combination of lower renewable energy costs, a $10 to $20 price metric per ton of CO2 emissions, and integrated energy efficiency policies could curtail emissions growth substantially from the power sector but that in isolation, none of these would achieve the desired cuts.

The current carbon price per metric ton in California, where a statewide carbon market was recently set up, is $12.67. France introduced a domestic carbon tax in 2014 that started at $7.69/metric ton, but will rise to around $16 by 2020 for large emitters.

While none of these steps on their own will achieve the desired outcome, the researchers found that reduced capital costs for renewables and additional carbon costs from fossil fuel emissions will create a synergistic force for driving growth in renewable energy.

This force will cause large increases in renewable energy generation when compared to the reference case by 44 percent in the United States overall and 76 percent in the South. This is not true of all forms of renewable energy, such as hydropower and nuclear, but specifically applies to wind, biomass, and solar.

For modeling purposes the studys researchers did detailed solar cost analysis and determined that by 2030, installed costs of solar would be approximately $1.75/Watt for utility-scale PV, $2/Watt for commercial-scale PV, and $2.50/Watt for residential-scale PV in 2010 dollars.

When it comes to energy efficiency, the authors used a reference case in which electric power generation will grow at an annual rate of 0.8 percent between 2012 and 2030, increasing 17 percent overall during that period. Interestingly, they found that in the absence of a carbon price or stronger energy efficiency measures, growth in solar power could actually cause electricity use to increase more than the reference case over that same time period.

This phenomenon underscores the oversimplification of simply seeking to cut energy consumption, they write. To the extent that the energy consumed is solar or other renewable resources with limited environmental or other externalities, net social welfare would also increase with greater consumption.

However, the researchers found that the combination of a small carbon price, energy efficiency policies, and cheaper solar costs could allow the South to achieve an 18 percent reduction in energy demand and the overall United States a 16 percent reduction by 2030. They also found that this approach would lower electricity bills significantly, causing rates to rise only 5 or 6 percent over the time period as compared to the projected 7 to 13 percent.

Energy efficiency programs and policies need to be revved up, along with monitoring and verification schemes and energy benchmarking, said Brown. States need to prepare for a future where solar energy plays a much stronger role, both rooftop systems and solar farms, with a wide array of different financing and ownership schemes.

Source: Climate Council

SMART GRID Bulletin March 2017

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