Since the rule’s proposal in June 2014, Clean Power Plan compliance discussions have been weighing the potential benefits of regional versus single-state approaches, and balancing possible lower program costs and administrative burdens against state concerns over compromising sovereignty. More recently, discussions have focused on “hybrid” state/regional approaches, in which states largely retain their autonomy, but engage to a limited degree with other states – a method the Western Interstate Energy Board calls a modular approach (November 2014) and Duke University refers to as the common elements approach (March 2015).
The genius of the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan proposal is that it is designed to build on clean energy policies that states across the country have adopted and refined, including policies to develop renewable energy, such as state renewable portfolio standards (RPS). Most states use regional tracking systems to facilitate the issuance, tracking, and retirement of renewable energy credits (RECs) for RPS compliance. One natural stepping stone to consider in this context is the potential for existing regional renewable energy markets to serve as a modular connection states might use in developing their compliance plans.
Navigating EPA’s Clean Power Plan for Compliance with Renewable Energy demonstrates how these existing renewable energy compliance practices can provide well-established and suitable approaches for state regulators to demonstrate planning and compliance under the Clean Power Plan—regardless of whether states adopt rate-based or mass-based programs. REC tracking systems, developed out of stakeholder processes involving air and energy regulators, regional transmission operators, generation owners, and utilities, also provide proven and robust platforms that states could use with neighboring states to support compliance.
The use of REC tracking systems has spread across the country because they are an effective and efficient way to track the attributes of electricity generation. Individual certificates can reside in only one account at a time, making it easy to verify who has the right to claim their attributes. This ensures market integrity and prevents double counting.
While EPA appears open to the manner in which states develop their Clean Power Plan compliance plans—including how they demonstrate compliance—in the past, EPA has characterized an acceptable emission standard as “quantifiable, non-duplicative, permanent, verifiable, and enforceable…”
States will be able to meet the quantifiable criterion by using and retiring RECs, and in the case of states with rate-based programs, by adjusting emissions rates to reflect the retired RECs. In the case of mass-based programs, the renewable energy effects are not directly quantified, but their effects are reflected when total mass emissions are measured for compliance purposes. In this way, states will be able to demonstrate that renewable energy and its effects can be reliably measured with technically-sound methods, in a manner that is replicable.
Relying on existing renewable policies, where possible, should not be considered duplicative because EPA has indicated that the use of an RPS or other renewable energy policy may be counted toward Clean Power Plan compliance.
The use of RECs, REC tracking systems, and relevant protocols, including those requiring REC retirement, can help states ensure that avoided tons of CO2 are permanent. Mass-based programs perform a similar function with program allowances.
Avoided tons of CO2 can be deemed as verifiable, because REC tracking systems provide a platform for monitoring, recordkeeping, and reporting, which can be independently measured and evaluated. Mass-based programs require a demonstration that the program has met emissions standards, part of which requires generators to retire allowances in an amount that reflects their total emissions.
States can ensure that renewable energy contributions toward Clean Power Plan compliance are enforceable, by quantifying and verifying renewable energy as described above. RPSs and other state renewable energy policies constitute clearly-defined standards that are practically enforceable, and could continue to be part of a state compliance plan. Rather than focusing on specific energy policies, such as those that promote renewable energy, mass-based programs need only enforce emissions limits.
The ability to track renewable generation is critical to demonstrating compliance with the Clean Power Plan and avoiding double counting. RECs and existing tracking systems provide the necessary mechanisms and protocols for demonstrating claims to the attributes of renewable energy. It is also a sound basis upon which multiple states might engage in a limited, cooperative, “modular” compliance effort, built around the production and consumption of renewable energy.
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