# CLEAN POWER PLAN

Meeting State Goals

June 26, 2014

# Outline

► 

### Overview of Proposal

► 

### CAA Section 111(d) State Plan Process

► 

### Potential Approaches for State Plans

► 

### State Plan Pathways

► 

### Illustrative Example: Rate

- Based Emission Limits

► 

### Illustrative Example: Mass

- based Emission Limits

► 

### Illustrative Example: Portfolio Approach

► 

### Evaluating the Sufficiency of Plans

► 

### State Plan Components

► 

### Timing of State Plan Emission Performance

► 

### State Plan Considerations

► 

### Treatment of Existing State Programs

► 

### Monitoring and Verification for EE/RE

► 

### Treatment of Interstate Emission Effects

2

# Overview of Proposal

► Proposal sets an interim (2020

- 2029) and final goal (2030) for affected EGUs in each state to reduce carbon pollution

► Rate

- based performance level (lb CO 2 /MWh)

► Goal based on analysis of best system of emission reduction (BSER) and application of BSER to state

- specific data

► Analysis looks at what states are already doing to improve energy efficiency and encourage reliance on low

- carbon energy

► Goal is a target level of affected EGU performance state plans have to meet on average in 2020

- 2029 and by 2030

► EPA is not prescribing measures states need to implement to meet the goal

► States have flexibility to choose what goes into their plan

– how and when to get the necessary reductions, provided the goals are met in established timeframe

► Choose form of goal (rate or translate to mass)

► Choose what works best in a state, tailored to state needs and policy objectives

► Opportunity to build on existing energy efficiency and renewable energy programs

► Flexible over time and place

– states can look across the electricity system to achieve reductions from affected EGUs, and have 10 years to meet the interim goal on average basis

► Option to work with other states through multi

- state plan, which can lower costs

► Fits into existing state and utility electricity sector planning processes

3

# CAA Section 111(d) State Plan Process

► 

### Under CAA Section 111(d), as applied in this context:

► 

### The state develops emission standards that implement its BSER



### derived goal and establishes those standards in its plan, along with implementing and enforcing measures

► 

### The state applies those emission standards to the appropriate entities

► EPA recognizes the need for accountability and verifiability of attaining CO 2 emission reductions

► 

### EPA recognizes states’ requests for both flexibility and specificity

► States can choose to meet rate

- or mass

- based goal

► EPA proposal allows and encourages multi

- state and regional plans

► EPA proposal supports building off existing state programs

► 

### EPA recognizes states’ concerns regarding timing for submission of plans

► Opportunity for phased plan submittals

4

# Potential Approaches for State Plans

► 

### Multiple approaches might be taken for state plans

► 

### These may include emission reduction measures identified in BSER building blocks and other approaches

► States not limited to measures considered by EPA to be BSER
► 

### Approaches that EPA anticipates include the following, alone or in various combinations:

► Direct emission limits on EGUs (rate or mass)

► Regional emission reductions agreements, such as multi

- state emission budget trading programs

► State programs and requirements to deploy new, lower

- or non

- carbon

emitting generation capacity, such as renewable energy (RE) sources (e.g., solar and wind), nuclear, and new natural gas combined cycle (NGCC)

► End

- use energy efficiency (EE) and renewable energy ( RE) deployment
programs

► Legislation or regulations establishing EE resource standards (EERS) and/or renewable portfolio standards (RPS)

► Integrated Resource Plan (IRP)

- type approaches for reducing utility fleet CO 2 emissions

► 

### Seeking feedback on how t ribes that don’t have affected EGUs, but implement EE/RE and other programs that reduce CO 2 

### emissions from affected EGUs might play a role

5

# State Plan Pathways

► 

### Two basic state plan approaches:

► 

### Emission Limits

► 

### Portfolio Approach

► 

### Four state plan pathways under these two approaches:

► 

### Rate

- based CO 2 

### emission limits applied to affected EGUs

• May include adjustment or tradable credits for non

- or low

- emitting resources (e.g., EE/RE)

► 

### Mass

- based CO 2 

### emission limits

• EE/RE could be a state strategy for meeting limit at lesser cost, but complementary to the plan

► 

### Portfolio Approach

• Includes emission limits and other enforceable measures (e.g., EE/RE requirements applicable to non

- EGU entities) necessary to achieve performance level



### • Could be “utility

- driven” or “state

- driven” depending on electricity regulatory structure in a state (vertically integrated or restructured)

6

# Illustrative Example: Rate

- Based Emission Limits

► 

### State implements rate

- based emission limits that apply directly to affected EGUs

► Limits are sufficient to achieve the state goal

► Could include averaging or trading, at discretion of the state

► 

### Affected EGUs are responsible for achieving required level of emission performance

► 

### M easures that avoid EGU emissions, such as EE/RE and other low

- or non

emitting generation, are incorporated through recognition of avoided emissions or generation

► Used to adjust the CO 2 emission rate of affected EGUs;

• EPA taking comment on how to make this adjustment, based on avoided CO 2 emissions or avoided MWh of generation (numerator or denominator adjustment)

► Requires evaluation, measurement, and verification (EM&V) for energy savings and energy generation related to EE/RE

• May also require provisions for assessing avoided emissions related to EE/RE

measures and process for tracking emission reductions

► 

### EE/RE measures are enforceable components of state plan

► Necessary to provide assurance that sufficient emissions reductions from EE/RE

measures are available to enable EGU compliance with rate limits

► Necessary to assure proper EM&V conducted for EE/RE measures

7

# Illustrative Example: Mass

- based Emission Limits

► 

### State implements mass

- based limits that apply directly to affected EGUs

► 

### Limits are sufficient to achieve the state goal

► 

### Affected EGUs are responsible for achieving required level of emission 

### performance

► 

### M easures that avoid EGU CO 2 

### emissions, such as EE/RE, are :

► 

### Complementary programs that help the state achieve the mass emission limit at lower cost

• Not included in the state plan



### • No need for special EM&V and tracking of these program effects on avoided CO 2 emissions

► 

### EE/RE measures (i.e., complementary measures) are not enforceable components of a state plan

► 

### May be part of state strategy for meeting state plan emission goal at lower cost, but do not need to be included in a plan

► 

### Assurance of plan performance based on enforceable emissions budget

• States assess need for complementary measures as part of budget setting

8

# Illustrative Example: Portfolio Approach

► 

### A portfolio of requirements and programs are used to reduce affected EGU CO 2 

### emissions

► Could take a rate

- based or mass

- based approach

► Includes emission limits that apply to affected EGUs, but these limits alone are not sufficient to achieve the state goal

► Also includes other enforceable measures, such as RPS, EERS, utility EE/RE deployment programs, etc.
► 

### Mix of entities is responsible for achieving the required level of emissions performance

► Affected EGUs

► EE/RE program administrators (if responsibility assigned by state); distribution utility required to meet EERS or RPS or administer EE/RE deployment programs; other

► 

### State

- driven approach more likely in states with restructured electricity sector, where state regulated utilities do not own EGUs

► 

### Utility

- driven approach more likely in vertically integrated, “cost

- of

service” states, where state regulated utilities own affected EGUs

► Same company takes actions that apply directly to affected EGUs it owns, and is also responsible for other enforceable actions

► Portfolio of measures likely developed through Integrated Resource Planning (IRP )

- type process and approved by state PUC

9

# Evaluating the Sufficiency of Plans

► 

### The EPA will evaluate the sufficiency of each plan based on the plan addressing the twelve required plan components (next slide) and on four general criteria to determine whether a state’s plan is 

### “satisfactory” under CAA section 111(d)(2)(A).

► 

### Four general criteria

1. 

### A state plan must contain enforceable measures that reduce CO 2 

### emissions from affected EGUs.

2. 

### M easures in the plan must be projected to achieve emission 

### performance equivalent to or better than the applicable state

specific CO 2 

### goal on a timeline equivalent to that in the emission guidelines.

3. 

### EGU CO 2 

### emission performance under the state plan must be quantifiable and verifiable.

4. 

### The state plan must include a process for state reporting of plan implementation (at the level of the affected entity), CO 2 

### emission performance outcomes, and implementation of corrective measures, if necessary.

10

# State Plan Components

► 

### Emission guidelines include a list of 12 components that must be included in a state plan:

► 

### Identification of affected entities (affected EGUs and other responsible 

### parties)

► 

### Description of plan approach and geographic scope

► 

### Identification of state emission performance level

► 

### Demonstration that plan is projected to achieve emission performance
level

► 

### Identification of milestones

► 

### Identification of corrective measures

► 

### Identification of emission standards and any other measures

► 

### Demonstration that each emission standard is quantifiable, non

duplicative, permanent, verifiable, and enforceable (recognizing non

traditional nature of some potentially affected entities)

► 

### Identification of monitoring, reporting, and recordkeeping requirements

► 

### Description of state reporting

► 

### Certification of hearing on state plan

► 

### Supporting material 11

# Timing of State Plan Emission Performance

► Timing of emission reductions can vary, depending on a state's situation

► Some states have existing programs that are achieving results

► Some measures are more easily implemented and/or may obtain reductions promptly; others may require longer to implement and/or realize reductions

► New multi

- state programs (or additions to existing multi

- state programs) would need time to achieve goals

► State plans must be designed to achieve and maintain affected EGU emission performance consistent with interim 2020

- 2029 goal and final 2030 goal

► Goal represents the average CO 2 emission rate of all affected EGUs in a state (adjusted to reflect the potential to achieve emissions reductions by avoiding fossil generation); a state may translate its rate goal into a mass

- based goal

► Interim emission performance goals apply during the years 2020

- 2029 on a 10

- year average rate basis (or cumulative tonnage basis, if applicable), as states ramp up programs
to meet their final goals

• This 10

- year interim performance period provides timing flexibility for states to recognize specific implementation differences ; milestone requirements and emissions reporting are proposed to track interim progress and enable corrective action if necessary

► States must achieve and maintain final goal after 2029; a three

- year rolling average period (beginning with 2030

- 2032 ) is proposed for demonstration that final goal is achieved

► States must maintain the final

- goal level of performance over time

• Preamble takes comment on alternate mechanisms for maintaining performance

12

# 10

- year State Plan Performance

13

# State Plan Considerations

► 

### Key State Plan Considerations include:

► 

### Enforceability for measures that apply to non

- EGU affected entities

► 

### Treatment of existing state programs

► 

### Monitoring and verification of actions implemented by non

- EGU entities (e.g., evaluation, monitoring, and verification of EE/RE measures)

► 

### Process for adjusting CO 2 

### emission rate, based on non

- emitting or
low

- emitting resources (e.g., EE/RE)

► 

### Treatment of interstate emission effects

► 

### Process for converting from a rate

- based goal to a mass

- based goal, 

### and projecting EGU emission performance that will be achieved under a plan

14

# Treatment of Existing State Programs

► 

### Existing state requirements, programs, and measures could be recognized in a state plan

► 

### Only the emission reductions from these existing programs occurring during a plan period would be recognized (i.e., emissions reductions occurring as of 2020)

► 

### Actions taken under existing state programs from the date of the proposal of the emission guidelines (June 2014) could be recognized during a plan period

► 

### For example, emission reductions in 2020 from energy

- efficient refrigerators installed under a utility EE program in June 2014 could be recognized

► 

### Allows states to get a “rolling start” in meeting emission goals and recognizes states that have already taken action to reduce emissions

► 

### Note: the June 2014 start date limitation does not apply to renewable
energy measures

► 

### RE generating capacity installed prior to June 2014 could be recognized if reducing emissions in 2020 and subsequent years

► 

### Treatment recognizes construction of building block #3

15

# Monitoring and Verification for EE/RE

► 

### EPA’s proposal builds from current state EM&V practices

► 

### Rigorous and transparent Evaluation, Measurement, and Verification (EM&V) is an important element of state plans that incorporate demand

side energy efficiency (EE) and renewable energy (RE) requirements,
programs, and measures

► 

### Current practice with EM&V in the U.S. is primarily defined by state public utility commission (PUC) requirements

• Leading states have decades of experience with EM&V



### • States getting started can leverage industry

- standard approaches, resources, and infrastructure already in place



### • Significant ongoing effort to enhance EM&V consistency among states with EE programs

► 

### EPA’s proposed EM&V approach seeks to:

• Build from and leverage current practices and existing resources



### • Establish a clear and consistent EM&V path for including EE/RE in state plans



### • Appropriately consider and balance key criteria (e.g., accuracy, cost, flexibility, etc.)

16

# Monitoring and Verification for EE/RE

► 

### Proposed EM&V approach

– four key provisions :

► 1. EM&V Guidance: EPA is proposing to develop guidance that specifies acceptable EM&V approaches and minimum requirements

► Applies to states and other entities with enforceable obligations under a state plan

► 2. EM&V Plan: EPA is proposing that state plans that include enforceable EE/RE measures must include an EM&V plan

► Explains how EE/RE impacts will be determined during plan implementation

► Specifies the methods, assumptions, and data sources that will be used

► Is subject to EPA review and approval

► 3. Eligible EE/RE Programs: EPA is proposing not to limit the types of EE/RE programs and measures that can be included in a state plan

► All EE/RE measures in a state plan must be evaluated per EPA’s EM&V guidance

► Accommodates differences among EE/RE programs and measures:

• Implementation history and experience

• Existence of applicable EM&V protocols and methods

• Nature and type of program oversight (e.g., PUC review)

► 4. Impacts Reporting: EPA is proposing reporting and recordkeeping requirements for entities implementing enforceable EE/RE measures in a state plan

► 

### EPA is seeking comment on key aspects of each of these EM&V provisions

► For details, see discussion in Section VIII.F.3

- 4 of the Preamble and in State Plans Considerations TSD

17

# Treatment of Interstate Emission Effects

► 

### For Energy Efficiency (EE) programs and measures:

► A state may take into account in its plan only those CO 2 emission reductions from affected EGUs occurring in the state that result from demand

- side energy efficiency programs and measures implemented in the state

► States participating in multi

- state plans would have the flexibility to attribute the CO 2 emission reductions from EE programs among states in the multi

- state area

► States could jointly demonstrate CO 2 emission performance by affected EGUs through a multi

- state plan in a contiguous electric grid region, in which case attribution among states of emission reductions from demand

- side energy efficiency measures would not be necessary
► 

### For Renewable Energy (RE) programs and measures:

► Consistent with existing state RPS policies, a state could take into account all of the CO 2 emision reductions from affected EGUs due to renewable energy programs and measures implemented by the state, whether they occur in the state and/or in other states

► States participating in multi

- state plans would have the flexibility to attribute the CO 2 emission reductions among states in the multi

- state area.

► States could jointly demonstrate CO 2 emission performance by affected EGUs through a multi

- state plan in a contiguous electric grid region, in which case attribution among states of emission reductions from renewable energy measures would not be necessary
► 

### See discussion in State Plan Considerations TSD for more information

1819 

# Regional Contacts

Region Name Email Phone

1 Shutsu Wong wong.shutsu@epa.gov 617

- 918

- 1078

2 Gavin Lau lau.gavin@epa.gov 212

- 637

- 3708

3 Mike Gordon gordon.mike@epa.gov 215

- 814

- 2039

4 Ken Mitchell mitchell.ken@epa.gov 404

- 562

- 9065

5 Alexis Cain cain.alexis@epa.gov 312

- 886

- 7018

6 Rob Lawrence lawrence.rob@epa.gov 214

- 665

- 6580

7 Ward Burns burns.ward@epa.gov 913

- 551

- 7960

8 Laura Farris farris.laura@epa.gov 303

- 312

- 6388

9 Ray Saracino saracino.ray@epa.gov 415

- 972

- 3361



### 10 Madonna Narvaez narvaez.madonna@epa.gov 206

- 553

- 2117