Statement by Kenneth Smith, Polley Director, Arkansas Advanced Energy Association {AAEA) Public Hearing on Clean Power Plan: Regulation 111{d) Environmental Protection Agency, Atlanta, GA July29-30, 2014

Introduction The Arkansas Advanced EnergyAssociation (AAEA), representing over 80 Arkansas companies and institutions, supports the proposed 111(d) rule orClean Power Plan (CPP). AAEA appreciates the rule's flexibility and its approachfor achieving carbon emission reductions on a state-by-state basis. The rule's proposed methodologyfor carbon reduction, a Best Systemfor Emission Reduction or BSER, offers a set of cost-effective, advanced energytechnologies for reducing carbon emissionsthrough heat rate improvement, energy conservation, and greater use of natural gas and renewable energy,

The proposed Clean Power Plan is consistentwith AAEA's principles to guide the developmentof smart, state-led, cost-effective plans for reducing emissions. These are:
• Recognize the Value ofAdvanced Energy.
• Provide Business Certainty.
• EncourageTechnology-Neutral and Market-based Solutions.

EPA's proposed Clean Power Plan, however, underestimatesthe potential

Arkansas Advanced Energy Association www.arkansasadvancedenergy.com into@arkansasadvancedenergy.com (501) 537-0190contribution of renewable energy and energy efficiencytechnologies to emissions reduction and to economic development and jobs. The proposed plan fails to accountfor the continuous improvements in these technologies that will enable greateremissions reduction overtime, and discourages companies from taking early action with advanced energytechnologies.
Specific IssuesTo Be Considered By EPA AAEA believesthe proposed carbon emissions reduction targetforArkansas of 44% by2030from 2012 carbon emissions rates is appropriate as it reflects the business strategies pursued bythe state's electric utilities the last 10years. Arkansas's electric generation and carbon emissions increased 27% and 39% respectively from 2005 to 2013 despite retail electric energy sales rising only 1%. AAEA encourages consideration of thefollowing issues.
1) AAEA believes Option 1, carbon reductions over a ten-year horizon is preferable over Option 2 --a lower carbon target achieved in halfthe time. AAEA reasons that deploying 8SER in Option 1will providethe state and its utilities the needed time to deploycost-effectivetechnologies and programs necessaryto reduce the state's carbon emissions.
2) Each state's carbon reduction target reflects an emissions level that EPA has determined to be "reasonable" based upon application ofa 8SERfor coalpowered plants. In this case, the 8SER is the combination of four emission reduction strategies labeled in the rule as "building blocks (88)." In consideration ofthe building blocks and their potential costs, itappears to AAEAthatthe 8SER will work for Arkansas with the initial and highestcarbon emission reductions coming from the increased deploymentof combined cycle gasturbines (CCGT)

- an emission reduction up to 30%

-- or 68% of the carbon targetforthe state.
3) AAEA believes that if EPA raised its projections for 88s3 and 4, Arkansaswould achieve a higher carbon emissions reduction level and create unprecedented economic development and jobgrowth in the state's advanced energy industry. The key energytechnologies in Arkansas that would lead the waywould be cost-effective investments in renewable energy (up to 15%or more of energy generated); EE with annual savings of 1.5% or more; and full deploymentof Combined Heatand Power (CHP), a technologythat uses waste heatto generate electricity atsites like universities, hospitals, and industrial sites. During August, the Arkansas Advanced Energy Foundation will release its new economic impact analysis of the utility-operated EE programs thatwill document actual employment numbers as well asthe economic benefits of EE. This study has alreadyfound that morethan 700 companies are now offering energysaving services through the utility-operated EE programs -- in essence, an industrythat has largely been built in the past seven years.

CHP systems would helpwith carbon reduction if increased from the current 497 megawatts (MW) of capacity to 1230 MW, the projected industrial CHP capacity in the state. Full-scale deploymentof CHP would provide enough electricity to power nearly600,000 homes and lead to morethan $2 billion in investments, For renewables, companies such as Clean Line Energyare preparing to deliver thousands of MWof wind energyfrom the Great Plains across the Midwestto eastern states. Arkansas could be a significant recipient ofthis new energy source if a planned, 500 MWconverter station is built in Central Arkansas.
4) AAEA recommends that renewable and efficiency programs/projects and other lower carbon emittingtechnology installed between 2014-2020 should be credited for 111 (d) compliance. Failure to do so could cause businesses and utilitiesto delay investment in new advanced energy and carbon reducing projects until 2020.
5) AAEA recommends that Integrated Resource Planning (IRP) currently used bymany electric utilities be incorporated into state carbon reduction plans.
6) AAEA believes a multi-state approach to carbon reductions may be desirable to ensurethat states have opportunityto take advantage of low-carbon technologies generated outside oftheir boundaries.
7) AAEA believesthat EPA should authorize the use of current Renewable Energy Credit (REC) tracking systems for compliance under 111(d). Tools and processesfor these tracking systems, such as the North American Renewables Registry, already exist and are in widespread usefor supporting development and implementation ofstate 111(d) plans and ensuring that each REC is counted only once.
8) AAEA is interested in a comparison of rate-based and mass-based carbon targets forthe states and how a state's regulators and electric utilities could implementcarbon reductions under each approach. We encourage EPA to calculate mass-based targets forthe states.
9) The 2020-2029 averaging period creates compliance uncertainty because the electric utilities and the regulatory officials will not know the amountof reductions needed each year to stayon target. It would be helpful if EPA developed an accounting framework that applies in each statefor making projections and measuring progress toward meeting the targets.
10)As the states develop compliance plans, it would be very helpful if EPA had in place a model plan for the states to follow should they choose to do so. The benefit of such a plan would be thatthe states would most likely meetfederal plan requirements.

### Conclusion Finally, 

### AAEA expresses its appreciation to the 

### EPA team including its consultantswhodrafted the proposed Clean Power Plan. The process of engaging states and stakeholders, incorporating their comments, and incorporating advanced energytechnologies for both inside and outside-thefence solutions is exemplary and should become a model for all federal regulatory agencies tofollow inthe future. 

### EPA is to be congratulated for its efforts and leadershipto reduce global carbon emissions and to protectour society and the environment inwhich it resides.