From: Vasu, Amy 

Sent: Monday, July 6, 2015 11:41 AM 

To: Frey, Nathan J. 

Subject: Excerpted text 

Nathan, 

Here is the text on the clean energy investment pool (Section VIII.B.2 of the preamble). 

Thank you. 

 

Amy 

 

~~~~~~~~~~~~~~~~~~~~~~~ 

Amy B. Vasu 

U.S. EPA / OAQPS 

Sector Policies and Programs Division 

email: vasu.amy@epa.gov 

phone: 919.541.0107 

<< Investment pool_070215 draftI.docx >> 
 *** E.O. 12866 Review – Draft – Do Not Cite, Quote or Release During Review *** 

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Section VIII.B.2 of the 7/2/15 Clean Power Plan Preamble 

B. Timeline for State Plan Performance and Provisions to 

Encourage Early Action 

2. Provisions to encourage early action 

 Many commenters supported providing incentives for states 

to deploy CO2-reducing investments, such as RE and demand-side EE 

measures, as early as possible. The EPA recognizes the value of 

such early actions, and in this final rule is providing states 

with discretion to recognize these activities, in the context of 

both mass-based and rate-based plans. States will be able to 

take advantage of the impacts of early investments that occur 

prior to the beginning of a plan performance period and realize 

CO2 emission reductions during the interim and final plan 

periods: from 2022 onward. Under a mass-based plan, those 

impacts will be reflected in reductions in the reported CO2

emissions of affected EGUs during the plan performance period. 

Under a rate-based plan, states may recognize early actions 

implemented after 2012 by crediting MWh of electricity 

generation and savings that are achieved by those measures 

during the interim and final plan performance periods. These 

provisions are addressed in section VIII.K.a. 

 Other commenters pointed out that to the extent that states 

and utilities would benefit from greater availability of lowcost RE and other zero-emitting generation options during the 
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interim and final plan periods, the EPA should include 

provisions in the final emission guidelines that accelerate 

deployment of RE and other zero- and low-emitting resources. In 

order to encourage early investments in RE and demand-side EE 

before the start of the interim performance period in 2022, the 

EPA is establishing a clean energy investment pool as part of 

the emission guidelines. Through this pool, the EPA intends to 

make additional ERCs and allowances available to qualified 

providers that make investments in RE and demand-side EE before 

2022. 

 The clean energy investment pool will be administered by 

the EPA and, recognizing that low-income communities are often 

under-represented in RE and demand-side EE investment, will 

place particular emphasis on these communities by including a 

sizable community reserve to drive these types of investments in 

low-income communities. The EPA will make awards based upon a 

demonstration of quantified and verified MWh of zero-emitting 

generation or energy savings realized before 2022. An affected 

EGU may use these ERCs or allowances to demonstrate compliance 

with its emission standard, regardless of whether the state in 

which the EGU is located is implementing a state plan, or the 

EPA is implementing a federal plan on behalf of the state. 

 The EPA intends to conduct a future rulemaking and 

associated outreach process to seek comment on potential 
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features of the clean energy investment pool. Features about 

which the EPA may solicit comment include whether to limit the 

size of the investment pool and what an appropriate limit might 

be; the appropriate size of the community reserve, and whether 

there should be a mechanism to increase the size of the 

community reserve if it is oversubcribed; the procedures and 

requirements for distributing ERCs and allowances from the clean 

energy investment pool; the types of RE and demand-side EE 

projects that might qualify for the investment pool; and the 

priorities and concerns the agency should focus on in 

distributing the community reserve. 

 The clean energy investment pool will provide a number of 

benefits. First, the investment pool will provide affected EGUs 

and states with additional resources to help them achieve their 

state plan obligations. Second, the pool will improve the 

liquidity, in the early years of the program, of the ERC and 

allowance markets we expect to emerge for compliance with the 

requirements of these guidelines. In addition, the clean energy 

investment pool will provide incentives designed to reduce 

energy bills early in the program through earlier and broader 

application of demand-side EE, and help ensure that these 

benefits are shared with low-income communities. Finally, the 

EPA believes that stimulating or supporting early investment in 

RE generation technologies could accelerate the rate at which 
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the costs of these technologies fall over the course of the 

interim performance period. 

 The clean energy investment pool will enable qualified 

providers to earn ERCs or allowances in exchange for investments 

in RE and demand-side EE made during the years following the 

promulgation of these emission guidelines and before 2022 that 

result in quantified and verified MWh of zero-emitting 

generation and energy savings during those years. A qualified 

provider might include an affected EGU, a state, or an 

independent investor in an RE or demand-side EE project, among 

others. 

 In the case of qualified provider that has invested in a 

state implementing a rate-based state plan approach, the EPA 

would award MWh from the investment pool, which may be converted 

into ERCs according to the formula outlined below, to the 

provider. An affected EGU or could use these ERCs to demonstrate 

compliance with its rate-based emission standard. In the case of 

a qualified provider that has invested in a state implementing a 

mass-based state plan approach, the EPA would award MWh from the 

investment pool, which may be converted into allowances 

according to the formula outlined below, to the provider. These 

allowances are supplemental to the state’s mass-based CO2

emission goal. An affected EGU could use these allowances to 

demonstrate compliance with its mass-based emission standard. 
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 The clean energy investment pool is designed as a 

transitional mechanism in the early years of implementation of 

the 111(d) emission guidelines. As a result, the EPA is 

considering limiting the size of the investment pool. This 

approach is similar in design to the compliance supplement pool 

(CSP) included in the NOx SIP call, which was also limited in 

size.1 The EPA intends to set aside a portion of the MWh in the 

investment pool in a community reserve, designed to drive 

investments in RE and demand-side EE projects that benefit lowincome communities. 

 Upon such time the EPA distributes the MWh from the 

investment pool to a qualified provider, the EPA may convert 

these MWh into ERCs or allowances, depending on whether the 

project is in a state with a rate-based or mass-based plan. To a 

qualified provider implementing a project in a state with a 

rate-based state plan, the EPA may award one ERC for every two 

MWh of quantified and verified RE or demand-side EE realized 

during the period following the promulgation of these emission 

guidelines and before 2022, as a result of its investment made 

during this period. To a qualified provider implementing a 

project in a state with a mass-based state plan, the EPA may 

award a number of allowances equivalent to the quantified and 

 

1 65 FR 2727 (January 18, 2000), as amended at 71 FR 74795 

(December 13, 2006). 
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verified MWhs realized during the period following the 

promulgation of these emission guidelines and before 2022, 

divided by two and multiplied by the state’s CO2 emission rate 

goal. The EPA intends to solicit comment on this two for one 

distribution requirement in a future rulemaking, including 

whether this requirement might differ for for qualified 

providers implementing projects that demonstrate benefits to one 

or more low-income communities. The EPA intends to distribute 

MWh from the investment pool to qualified providers on a firstcome first-served basis, based upon the date and time that the 

EPA receives the project application. 

 A qualified provider may submit a project application to 

the EPA at any time prior to the implementation of the project. 

The EPA intends to implement a process for project approval that 

is similar to the two-step process for ERC issuance included in 

these emission guidelines. First, an affected EGU will submit a 

project application to the EPA, which includes (1) a 

demonstration that the project meets the eligibility 

requirements defined by the EPA; (2) an EM&V plan that outlines 

how the MWh results of the project will be quantified and 

verified, and which adheres to the EM&V requirements included in 

these final emission guidelines. The project application must be 

reviewed by an accredited independent third party verifier 

before it is submitted to the EPA. 
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 In addition, if a provider wishes to qualify for ERCs or 

allowances from the community reserve, it must demonstrate in 

the project application the benefit the project will have to one 

or more low-income communities. This benefit may be in the form 

of MWh provided to the low-income community, financial proceeds 

from the project primarily benefiting the low-income community, 

or the project lowering utility costs of low-income rate-payers. 

In step two of the ERC issuance process, after the 

qualified provider has implemented the project, it submits to 

the EPA a monitoring and verification report that documents the 

quantified and verified MWh of eligible RE generation or demandside EE savings realized during the years following the 

promulgation of these emission guidelines and before 2022. This 

report must be reviewed by an accredited independent third party 

verifier before it is submitted to the EPA. The EPA would review 

this report and, if approved, award to the project provider a 

number of MWh from the state’s investment pool account, which 

may be converted into ERCs or allowances according to the 

formulas described above. An affected EGU may then use these 

ERCs or allowances to demonstrate compliance with its emission 

standard.