By: Kevin Steinberger and Starla Yeh, Climate & Clean Air Program
As the D.C. Circuit Court of Appeals prepares to hear challengers’ arguments against the Clean Power Plan on September 27th, the most up-to-date analysis shows that the Clean Power Plan’s goals have become even more readily achievable as the electricity sector is already shifting to clean energy. Many power companies are not waiting for the courts to resolve the legal challenges. Instead, they are accelerating the shift to clean energy, assisted by the rapid cost declines of renewable technologies. This steady and continuing shift in our power sector makes clear that the goals set forth by the Clean Power Plan are eminently attainable.
The power sector is already on track to meet the Clean Power Plan pollution limits.
The Clean Power Plan (CPP)—the centerpiece of U.S. action on climate change—places the first-ever limits on carbon dioxide pollution from power plants, our nation’s largest source of the dangerous pollution that drives climate change. The power sector is well-positioned to meet the carbon-cutting goals of the CPP at modest cost. In fact, the pace of investments in clean energy is accelerating in the power sector, continuing the strong climate progress of the last several years. And, growth in clean energy shows no signs of abating. Several recent studies have projected that renewable energy may double from 2015 levels by 2021. The goals of the CPP are consistent with current trends toward low- and zero-emitting energy, bringing significant public health and climate benefits.
Carbon dioxide emissions from the power sector fell significantly in 2015, reaching their lowest levels since 1993. The drop in 2015 extends the progress made over the past decade. These continuing declines are being driven by multiple factors, including low natural gas prices, rapid renewable energy growth, less energy waste thanks to federal and state energy efficiency programs, and stronger standards for other air pollutants.
The maps below show the dramatic renewable energy progress that has been made across the country over the past several years. In the span of just five years, solar generation in Nevada increased more than seven-fold, and North Carolina has seen its solar generation increase five-fold in the past two years alone. Iowa and Texas, which were already leaders in wind power back in 2010, have both nearly doubled their wind generation over the past five years, and both states are expected to continue their shift to a clean energy future over the next several years.
The Clean Power Plan reinforces and builds on these market trends by embracing the kind of flexible strategies that the industry already employs. The CPP gradually phases in the required emissions limits starting in 2022, and by 2030 is projected to result in carbon cuts of roughly 32 percent below 2005 levels, or 19 percent below 2012 levels. Even though the CPP emissions limits don’t go into effect for another six years, carbon emissions from the power sector have already fallen by more than 5 percent since 2012. That means that in the past three years alone the power sector achieved more than one-quarter of the pollution cuts required by 2030. Progress toward a clean energy future is expected to accelerate between now and 2022.
The clean energy transition is accelerating.
“The fundamentals for the North American renewables business have never been stronger,”according to the CEO of NextEra Energy, one of the nation’s largest wind energy providers. In December 2015, Congress passed multi-year extensions of tax credits for wind and solar technologies, providing important near-term certainty for the clean energy industry. Industry experts expect these tax credits will lead to unprecedented growth in clean energy over the next five years. Bloomberg New Energy Finance projects that wind and solar capacity will grow by 59 percent and 233 percent from 2015 levels, respectively, by the end of 2021, driven by the tax credit extensions, growing demand from state renewable portfolio standards, and rapidly declining costs. With those levels of growth, the U.S. is expected by 2021 to generate roughly 11.6 percent of its electricity from wind and solar, up from 5.5 percent in 2015, and the resulting generation will be equivalent to powering 45 million homes.
The cost of building a new wind farm is falling while the technology is improving: taller wind turbines can take advantage of stronger wind resources. Power companies purchased wind power at an all-time low average of $20 per megawatt-hour (MWh) on average in 2015. Wind power is the cheapest source of new electricity generation in some regions, leading to cost savings for customers—and wind generation costs are expected to steadily decline over the next decade. MidAmerican Energy and Alliant Energy have both announced new, major wind generation projects in Iowa, meaning that wind will provide over 40 percent of the state’s electricity generation. And Xcel Energy recently announced plans to build a new 600 MW wind project in Colorado, a project that it expects will save its customers $400 million over twenty-five years.
At the same time, the costs of generating solar power have declined by 78% since 2009, and many analysts project that solar costs will continue to fall over the next several years. In 2010, the Department of Energy (DOE) launched its Sunshot program, with an ambitious goal of helping the solar industry reach the low cost of $1 per watt by 2020—low enough for solar to compete directly with coal and natural gas. Five years into the program, the industry is already 75% of the way towards that goal, and a recent industry report concluded that thesolar industry will hit the target by 2020. These rapid cost declines are making solar the most cost-competitive resource for power companies in many regions of the country, fromNevada to Texas to Georgia. Already, 10 gigawatts of new projects are under construction and scheduled to come online in 2016 or 2017 alone.
The business community is also making significant commitments to renewables and other efforts to fight climate change. Sixty-nine companies, many with headquarters and/or substantial operations in the United States, have committed to powering 100 percent of their operations with renewable energy as part of the RE100 campaign. And several of the world’s largest investment banks have recently pledged to finance and invest in clean energy projects both here and around the world.
The Clean Power Plan is eminently achievable at low cost and will make sure the power sector keeps pace.
A June 2016 report released by MJ Bradley & Associates (MJB&A) found that the Clean Power Plan’s pollution reductions are achievable at low cost across a wide range of scenarios. As a result of the renewable energy tax credit extensions and continued low natural gas prices, meeting the CPP targets is projected to be even easier than originally expected when the rule was finalized. As one example, in MJB&A’s analysis, the price of allowances under a national trading scenario is now projected to be about one third the price MJB&A originally projected in January 2016, dropping from just under $20 per ton to $6 per ton. Cost-effective resources and compliance flexibility are available in all states to mitigate costs and can minimize impacts for industry and electricity customers.
In a scenario without the Clean Power Plan (the Updated Reference Case), the power sector is still expected to achieve significant emissions reductions close to the CPP’s targets in the early years. As illustrated in the chart above, the CPP ensures that the power sector keeps up the pace in later years. With the CPP limits in place, we can be confident that the power sector will maintain its steady carbon emissions decline.
The Clean Power Plan will bring significant customer benefits if states implement well-designed plans.
The Clean Power Plan can also provide significant benefits for electricity customers. If states maximize investments in cost-effective clean energy resources and services, households and businesses stand to benefit significantly through lower electricity bills. MJB&A reported that by increasing investments in energy efficiency programs, electricity bills decreased by 2-7% on a national average basis. This bill savings estimate could be even higher if the value of pollution allowances is returned to customers through stronger investments in energy efficiency programs or renewable energy.
For example, the nine Northeastern and Mid-Atlantic states that make up the Regional Greenhouse Gas Initiative (RGGI) have committed to auctioning carbon allowances and reinvesting in clean energy and energy efficiency, generating significant economic benefits for the region. Since 2009, RGGI has added about $3 billion in value added to the regional economy, created more than 30,000 new job-years, and resulted in consumer energy bill savings of $395 million, all while helping to cut carbon pollution by more than 37 percent in the region.
The nation’s power sector, our largest source of carbon pollution, is making important progress towards a clean energy future that will protect us and future generations from the dangerous environmental and public health hazards of climate change. But we still have a long way to go. The Clean Power Plan is vital to continued progress in the power sector, and will enable us to make deeper and more ambitious carbon pollution reductions over time. It positions us closer to meeting our long-term climate goals and our international commitments under the Paris Climate Agreement, and it will deliver important economic, public health, and environmental benefits along the way.