March 2018 Edition: EPA’s change of course on the Clean Power Plan
What’s the state of play for the power markets given the EPA’s change of course on the Clean Power Plan? Our experts address high level points of CPP and sources offsetting the potential loss of supply due to the CPP’s effect on coal-fired generation.
The Clean Power Plan (CPP) has been under a stay from the U.S. Supreme Court since 2015. The Environmental Protection Agency (EPA) proposed a repeal of the CPP in late 2017. Any expectation for the loss of supply due to the CPP’s effect on coal-fired generation has been offset by low natural gas prices, continual cost curve decline in renewables, corporate appetite for renewables and consumer adoption of energy efficiency and demand response.
The Clean Power Plan was first proposed by the EPA in June 2014 to lower the carbon dioxide emitted by power generators. The final version of the plan was unveiled by President Barack Obama on August 3, 2015. The 460-page rule (RIN 2060–AR33) titled “Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units” was published in the Federal Register on October 23, 2015.
Though finalized in 2015, the CPP never went into effect due to a stay issued from the Supreme Court. The CPP was expected to have a significant impact on carbon dioxide emissions when compared to the baseline, however a lower than forecasted power demand, lower natural gas prices and a dramatic reduction in the renewable energy cost curve had an impact on carbon emissions even without implementation of the CPP.
In late 2017, the EPA began a process to repeal the CPP and asked for public comment on how the agency should potentially replace the rule. Due to regulatory requirements and likely legal challenges, the process to repeal or replace the plan may take years.
The EPA is a federal government agency created in 1970 to help protect human health and the environment by writing and enforcing regulations based on laws passed by Congress. The agency is led by an Administrator appointed by the President and approved by Congress. The current Administrator is Scott Pruitt.
President Donald Trump’s administration has been working to reshape certain environmental policies and regulations, including the following actions:
There has either been no notable effect, or any effect has been counter-balanced by other factors.
The CPP, which has been under a stay from the U.S. Supreme Court since 2015, is not included in the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2018 Reference case. EIA does continue to forecast that coal-fired electric generating capacity will decrease through 2030 without the CPP, though at a lesser rate of decline than if the CPP were put into effect.
Any expectation for the loss of supply due to the CPP’s effect on
coal-fired generation has been offset by the following:
In addition, the prospect of a carbon tax is another potential market driver for increasing adoption of renewables and continued retirements of coal power plants.
In conclusion, the CPP was intended to reduce carbon dioxide emissions and increase adoption of lower carbon generating sources. The CPP is in the process of being repealed, but the anticipated effects of the plan were minimal due to the forces favoring non-coal generation mentioned above.
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