Purple Haze, or Purple Mountain Majesties? How Energy Efficiency Can Reduce Regional Haze

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Tourists visit our national parks to see the majestic vistas, not haze-obscured views. The two images of the Grand Canyon below illustrate this point: In the view on the left, one can see for more than 200 miles, while on the right, visibility is only about 60 miles. That’s because the view in the right-hand picture is obscured by air pollution, which also impairs public health and the environment.

Source: Grand Canyon National Park Webcam, Yavapai Point, Ariz.

This phenomenon is not unique to the Grand Canyon; the US National Park Service operates webcams at many national parks, and they document local visibility every day.

The Clean Air Act regulates lack of visibility due to pollution as “regional haze,” and since 1999 the federal government has required states to reduce it in national parks and wilderness areas. The pollutants that create regional haze come from vehicles, power plants, and other sources: nitrogen oxides (NOx), sulfur dioxide (SO2) and tiny airborne particles. This “particulate matter” (PM) is less than 2.5 microns ­in diameter, small enough to lodge in the lungs and damage them. (By comparison, a human hair is approximately 50 to 70 microns in diameter.) Historically, the power sector has been responsible for a significant portion of NOx, SO2, and PM emissions.

State air quality agencies are charged by the Environmental Protection Agency (EPA) with improving visibility in national parks and wilderness areas. States develop long-term plans to return visibility to natural conditions and have to update those plans soon. Thus far, states have relied primarily on adding pollution control equipment at power plants, which can be expensive and reduces the output of the facility, and each type of control equipment acts on only one or two air pollutants. Energy efficiency, however, can reduce emissions of all pollutants at once—and at a low cost. RAP is working with states to help them employ energy efficiency to meet federal visibility improvement obligations.

Many states are aggressively pursuing energy efficiency to reduce consumer costs, but they may be missing an opportunity to claim the air quality improvements that EE achieves. The potential is immense: One estimate, from the Electric Power Research Institute (EPRI), calculated that EE could save 741,000 GWh of power by 2035, enough to achieve at least a 16 percent reduction in electricity use in the United States, at a cost of less than 5 cents per kWh (about half the cost of generating electricity in parts of the country and about a third in other areas). One GWh is enough electricity to power more than 100,000 homes for a year.

The American Council for an Energy-Efficient Economy ranks states on their EE gains each year, along with those that have most improved their scores. Many states are achieving at least a 1 percent per year reduction in sales of electricity; the leading states are surpassing 2.5 percent per year. These energy reductions can translate into thousands of tons of avoided NOx, SO2, and PM emissions per year, depending on the emissions characteristics of the region’s utility grid. A good tool for quantifying these reductions is the EPA’s AVERT model, which estimates the emissions that can be avoided through energy efficiency and renewable energy. Using the AVERT model with the EE potential in EPRI’s work referenced above, for example, the Southeast states could avoid more than 80,000 tons of NOx, SO2, and PM per year. In the region that includes the Grand Canyon, AVERT suggests that EE could avoid almost 12,000 tons of NOx, SO2, and PM per year. In most states, achieving reductions of thousands of tons provides a good start toward the next phase of visibility improvements.

Along with improving air quality, energy efficiency has many other attributes. EE can reduce or delay the need for upgrades in transmission and distribution system infrastructure, and it provides a host of other environmental benefits, including improved water quality, reduced solid waste from fossil fuel extraction, and less land disruption. These advantages demonstrate why efficiency remains critical, even as renewable energy declines in cost—why RAP continues to emphasize “efficiency first.”

As air quality agencies work to meet their obligations for the next round of regional haze compliance plans, now is the time to explore how additional EE can help—by lowering electricity demand enough to improve visibility, decreasing the need to run high-emitting power plants, and avoiding additional emissions control costs for such units. If state environmental agencies work with their energy office and utility commission counterparts, it may be possible to align utility resource planning with the development of regional haze plans and other air quality improvement plans, as RAP envisions in E-Merge, a streamlined approach integrating energy and environmental regulation.

Please contact RAP if you’re interested in how EE can benefit your regional haze compliance plan. We can help you document how EE has reduced emissions in your state using the EPA’s criteria, as envisioned in its EE/RE Roadmap. We also have already outlined a variety of strategies for linking air quality and EE.

Just as you can see farther on a clear day at the Grand Canyon, taking a “longer view” of air quality management tools—and including energy efficiency—can help states clean up regional haze, meet energy goals, and save consumers money.

Retooling Regulation: Breaking the Trail Forward

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In our prior Retooling Regulation posts, we illuminated the need to integrate energy and environmental regulatory planning processes, spotlighted recommended steps to do so via a process we’ve dubbed “E-Merge,” and considered the legality of such an approach. In this fourth and last post, we look at experience to date with related retooling efforts.

First, recall why retooling regulation is so important today. Changes to utility business models are occurring so quickly that proactively integrating energy and environmental planning and regulation just makes sense. Power sector transformation and beneficial electrification promise significant environmental improvement and lower costs for consumers. Greater integration will help ensure that advances in energy storage, renewable energy technologies, energy efficiency, and big data produce that outcome. Further, integration will reduce public health risks, the risk of stranded investments, and their impacts on consumers.

We developed E-Merge by identifying best practices in energy and environmental planning globally, extending them to cover multiple pollutants, and incorporating other energy-intensive activities, such as transportation and heating. While no jurisdiction has yet undertaken the comprehensive E-Merge process, key initial steps have been taken in parts of the United States. In Europe and China, modeling of policies to improve air quality has also demonstrated the benefits of holistic, multi-pollutant approaches.

Concrete Examples Already Exist

In developing E-Merge, we identified several superb forays into greater regulatory integration:

  • The Bay Area Air Quality Management District’s 2010 Clean Air Plan, which assessed the multi-pollutant benefits of 55 policies across all sectors;
  • Colorado’s Clean Air – Clean Jobs Act, which anticipated and sought to get ahead of new EPA regulations for criteria air pollutants (NOx, SO2, and particulates), mercury, and CO2;
  • New York’s air quality improvement efforts in Applying the Multi-Pollutant Policy Analysis Framework to New York: An Integrated Approach to Future Air Quality Planning;
  • Maryland’s modeling of the impacts of energy efficiency and renewable energy in reducing ambient concentrations of ozone and PM2.5;
  • In China, an economic and environmental assessment of 84 energy saving projects completed across nine industrial sectors, as part of that country’s “Top 10,000” program, found NOX, SO2, and CO2 reductions per facility of up to 400, 1,000, and tens of thousands of tons, respectively. In eight of the nine sectors, immediate economic benefits would accrue to facilities;
  • The International Institute of Applied Systems Analysis (IIASA) conducted “GAINS” (GHG-Air pollution INteractions and Synergies) modeling for European and Chinese clients, which found significant cost savings to achieve public health objectives if end-of-pipe control measures and energy efficiency were implemented together; and
  • Other early work, including the 2004 National Research Council report, Air Quality Management in the United States, and a 2008 multi-pollutant pilot program conducted in Detroit by the Environmental Protection Agency (EPA).

EPA’s Clean Power Plan (CPP) also encouraged groundbreaking dialogue between energy and environmental regulators, setting the stage for greater cross-agency integration. The CPP focused on carbon dioxide, but similar strategies (such as energy efficiency and renewable energy) can also help states reduce criteria and hazardous air pollutants.

Regulation is Ripe for Retooling

When should state and local regulators consider adopting the E-Merge approach? As soon as possible. On top of today’s seismic shifts in the power sector, environmental regulation is also at a crossroads, so the time is ripe. The Supreme Court stayed the CPP (and the new administration may abandon it), but states still face Clean Air Act obligations requiring them to meet existing and future air quality standards. Many jurisdictions, for example, are now developing or revising state implementation plans (SIPs) for ozone, PM2.5, regional haze, and SO2. Tailored state energy plans could help address these multiple requirements. In fact, EPA’s 2015 Ozone Implementation Rule includes an analysis highlighting the ability of energy efficiency and renewable energy programs to help states meet air quality standards. Without these programs, ozone-season NOX emissions would be significantly higher. The same conclusion readily applies to other pollutants as well.

When should state and local regulators consider adopting the E-Merge approach? As soon as possible.

Already, several states have expressed interest in exploring ways to streamline, integrate, and rationalize their regulatory planning processes. They recognize that today’s serial, pollutant-by-pollutant SIP approach is ill-suited to the new challenges facing energy and environmental regulators. And integrated resource plans that fail to include environmental and public health externalities and their costs impose additional risks for utilities and greater costs on consumers. What’s more, regulatory processes that fail to incorporate rapidly evolving clean energy technologies expose ratepayers to greater stranded cost risk.

As with any departure from past practice, some hiccups surely await. States piloting the E-Merge approach, for instance, may need to initially cover their bases by conducting parallel SIP processes to ensure EPA approval—and incurring additional cost in doing so. But regulators can mitigate this risk by working closely with their regional EPA office throughout the E-Merge process. Few pilot programs enjoy perfect outcomes, so process refinements are likely down the road. No surprise, as improving existing processes is the reason to conduct pilot-scale efforts in the first place.

Today’s energy and environmental regulators face unprecedented challenges, and their roles are more inextricably linked than ever. They require processes that can evaluate multiple pollutants, adjust to rapid changes in business models, readily incorporate the electrification of new sectors, such as transportation, space, and water heating, and do all this in a way that promotes economic growth and is federally approvable. Based on the preliminary efforts to integrate energy and environmental regulation that we’ve seen in the U.S. and abroad, we believe E-Merge can meet this test.

A version of this article originally appeared on Utility Dive.

Retooling Regulation: Is Integrating Energy and Environmental Regulation Legal?

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Broad state authority under the Clean Air Act means regulatory reforms would likely be permitted

This is the third of RAP’s four-part series on the merits of greater integration of energy and environmental planning and regulation. The first piece set out the general concept, a process we’ve dubbed “E-Merge.” The second laid out a sample step-by-step process describing how an E-Merge planning process would move forward. Here, we discuss possible barriers to implementing E-Merge, addressing such questions as: Is E-Merge legal? And, if E-Merge is so good, why isn’t it being done routinely?

We developed the E-Merge process to provide a concrete way that energy and environmental policy can be better integrated. Its development centered on the roles and obligations of state utility and environmental regulators, consistent with the perspectives of RAP’s veteran regulators from both camps.

Our initial concept paper (in which E-Merge was first labeled IMPEAQ, “Integrated Multi-Pollutant Planning for Energy and Air Quality”) was then reviewed by a group of about three dozen experts, including current and former state and federal air quality and energy regulators, environmental advocates, and utility officials. The consensus of this group suggested that the E-Merge concept was workable and merited further exploration.

However, the group also advised careful review to ensure that the E-Merge process comports with the legal framework of the Clean Air Act. Although E-Merge’s authors are veteran air regulators, neither of us claims direct legal expertise. Accordingly, we sought an independent assessment of E-Merge’s legality by qualified, impartial, external attorneys.

Is E-Merge Legal?

To address the legality of E-Merge, we asked the Columbia University Law School Center for Climate Change Law to examine state authority under the Clean Air Act to voluntarily implement integrated planning using an E-Merge approach, along with the permissibility of applying a multi-pollutant approach to air quality planning.

Columbia’s analysis (at page 6) found that:

“[T]he [E-Merge] approach would be generally permissible under the Clean Air Act and EPA policy, given the wide discretion states have to develop their air quality plans and to choose the control measures they wish to use in their SIPs. Further, emerging control measures identified through the [E-Merge] process, such as energy efficiency and renewable energy programs, may qualify for SIP credit where the state meets the specific statutory and regulatory requirements for doing so. An open issue—though arguably allowable under the Act—is the degree to which states could opt to allow offsite programs to substitute for site-specific technology controls.”

Columbia’s analysis underscored that states (and, where applicable, local agencies) are in the driver’s seat with respect to implementation of the Clean Air Act. The Environmental Protection Agency (EPA) does prescribe many requirements that states must follow, as well as the timing of such requirements. However, states also have wide flexibility to craft air quality control programs to address local needs. Control measures must meet what is referred to as “RSVP&E” (“real, surplus, verifiable, permanent, and enforceable”) criteria to be approvable by EPA.

Over the past 20 years, EPA has tried to encourage states to incorporate energy efficiency and renewable energy programs into state implementation plans (SIPs), from set-asides for efficiency in the late 1990s NOX budget program to the Agency’s 2012 Energy Efficiency/Renewable Energy Roadmap. However, these efforts have required high transaction costs for comparatively little compliance credit. (The 1990s set-aside program limited the quantity of efficiency that a state could include, and there was a heavy paperwork burden imposed on states. The 2012 roadmap was a step forward, but also imposed a high administrative burden.)

The efforts have continued to be part of mono-pollutant programs rather than a comprehensive strategy to improve public health. As a result, there has been little uptake of these programs by states, which spurs our second question.

If E-Merge is so Good, Why isn’t it Done Routinely?

Despite EPA’s good intentions, institutional, cultural, and technical barriers have impeded the adoption and implementation of E-Merge-like approaches.

Institutional Barriers

Regulatory approaches that are billed as “multi-pollutant” are directionally correct, but they are typically mono-pollutant measures packaged in ways to better sequence the necessary investments by industry. Consider “multi-pollutant” controls on the power sector, which mandate near-simultaneous installation of separate controls to reduce NOX, SO2, and PM emissions. This is not the type of multi-pollutant approach to which E-Merge aspires. This traditional approach is fine in that end-of-pipe emission controls are mature, highly effective, and reliable. However, considering only end-of-pipe solutions in an air quality plan ignores highly cost-effective, demand-side, “root-of-pipe” measures that could help states achieve public health and environmental goals more expeditiously and at lower cost. An emphasis solely on end-of-pipe abatement can also increase CO2 emissions slightly, tends to prolong the use of legacy plants (since businesses will want to operate new control equipment long enough to recover its costs), and generally leads to rate increases to recover its costs. On the energy side, many utility “integrated resource plans” emphasize supply-side investments (i.e., new or upgraded power plants) and do not consider—or give short shrift to—demand-side investments (e.g., energy efficiency, clean demand response). Also, they rarely consider such externalities as public health and environmental burdens associated with the resources evaluated to meet future electricity or natural gas demand.

Cultural Barriers

Humans are creatures of habit; they tend to stick with what has worked for them in the past. Air quality has improved substantially since the 1960s, and most of this improvement can be credited to command-and-control mono-pollutant measures. Similarly, we’ve enjoyed a laudable record of electric system reliability over the past 40 years. But data and technology related to health science, air pollution control, and electricity generation and use have begun to shift rapidly. Changing conditions on the ground demand renewed policy creativity.

A perverse phenomenon nicknamed “NIMTO” (“Not in My Term of Office”) also sometimes retards progress. Energy efficiency and renewable energy programs can take several years to accumulate substantial benefits. Political reluctance to initiating or supporting programs is not surprising if the benefits of their implementation will likely accrue to a future administration.

Technical Barriers

Continuous emission monitoring systems (CEMS) on plant stacks have enabled precise pollutant emissions quantification and regulatory enforcement for over 25 years. An expectation of comparable precision unfortunately extends to the emissions benefits of efficiency programs; there has been a tendency to want to precisely know the avoided emissions achieved by each light bulb or washing machine.

By contrast, there has been little research—and even fewer tools—to quantify the impact of cumulative, interactive exposures to multiple pollutants on public health, or to determine which generating plants are affected by energy efficiency and renewable energy programs. Assessment of the energy savings benefits of these programs is reasonably well developed, but far less so in terms of emissions reduction benefits.

Progress Marches On

Although certainly real, the barriers to adopting E-Merge as described in this post can be addressed and overcome. Concerning institutional and structural barriers, the rate of change in the power sector today should already cause regulators to question their adherence to what are still largely19th century business models.

Wind and solar costs have declined 58 to 78 percent since 2008, and are expected to continue declining. Increased natural gas supplies have led coal generation to significantly decrease, and the closure of several nuclear plants has recently been announced. On the demand side, 17 states now achieve electric end-use efficiency savings of 1 percent or more per year, according to a recent ACEEE report (page 21), and battery storage is moving from a niche to a mainstream technology.

Finally, vehicle electrification is rapidly accelerating. This is good news, because transport sector emissions will decrease. But it does provoke concern about what resources will be used to charge electric vehicles, and during what times of the day or week? These changes alone should motivate serious collaboration between air and energy regulators and spur mutual planning exercises.

The bottom line is that energy and air quality planning practices must keep up with scientific and technology developments. Unless they do, regulators could find themselves unable to fulfill their missions and, perhaps in some cases, even find their roles obsolete.

As to the technical barriers, it’s important to remember that all assessment techniques and models have some degree of imprecision. Air quality and energy regulators are familiar with the uncertainties associated with modeling, and they build in margins of error or safety to ensure that air quality is improved and the lights stay on. As experience with models is gained, their relative accuracy and precision improves. The same process of continuous refinement and improvement will occur regarding the kinds of modeling and assessment we recommend in E-Merge. In the meantime, however, E-Merge can be applied today, rather than allowing the perfect to become the enemy of the good.

As a new concept, the uptake of E-Merge has been limited to date. However, there are examples globally where similar principles and practices have been adopted. Our final post in the “Retooling Regulation” series will highlight such examples and recommend ways for them to gain broader acceptance and use.

A version of this post originally appeared on Utility Dive

Retooling Regulation: a Closer Look at Integrating Energy and Environmental Policy

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Part one of this series described why it is increasingly necessary to integrate energy and environmental planning and introduced one way to do so, the E-Merge approach. Improvements in public health science, detection technologies, and modeling over the last 25 years require parallel improvements in our decades-old regulatory approach for air quality. Likewise, the rapidly transforming electric sector presents equally formidable challenges for energy regulators. And energy efficiency and renewable energy should be considered alongside other measures to improve air quality in any evaluation, due to their breadth and cost-effectiveness.

Many jurisdictions are also considering vehicle electrification programs or policies and the electrification of space and water heating in buildings. Environmentally beneficial electrification offers significant opportunities to reduce emissions, improve renewable energy integration, and provide other services to the electric grid. These opportunities suggest that now is the time to convene E-Merge discussions involving all associated disciplines: air quality, energy, transportation, and buildings to ensure coordinated policy development, reveal potential synergies or constraints, and secure maximum cost savings and co-benefits.

E-Merge Combining the Strengths of Traditional State Air Planning and State Energy Planning

In this post, we discuss the conceptual steps of the E-Merge process. E-Merge seeks to combine the best of integrated resource plans (IRPs) and state implementation plans (SIPs) and to overcome their deficiencies (like inattention to externalities, inadequate appreciation of costs, and serial pollutant-by-pollutant rather than multi-pollutant methods). E-Merge endeavors to address such key questions as:

  • What negative health impacts should be reduced or eliminated, and over what time period?
  • How many tons of pollutants would need to be removed from the airshed to do so, and by when?
  • How could compliance costs be optimized, while satisfying electric reliability and environmental requirements?
  • Would this kind of process also meet federal SIP requirements?

Every airshed has a finite carrying capacity; only a limited amount of pollution can be emitted into it before air quality standards will be exceeded. Carrying capacity also varies from year-to-year based on climate and weather trends, changing levels of economic activity, etc. It can also differ from airshed to airshed, influenced by:

  • Which sectors emit which pollutants in what quantities and when;
  • Population characteristics and local geographic features (e.g., latitude, terrain, waterbodies, etc.);
  • Diurnal weather patterns; and
  • How much pollution is transported into the airshed from other areas and when.

E-Merge Conceptual Process Steps

The first step of the E-Merge process is to establish a goal regarding public health and welfare outcomes. For some jurisdictions, the goal might be as simple as “meet all existing federal requirements.” Other jurisdictions may want to go beyond existing mandates to reduce the risk of encountering future air quality non-attainment problems and the economic sanctions they impose.

The next few steps of an E-Merge process are familiar to air regulators because they echo ones already taken in preparing SIPs.

1. Determine current ambient air quality status using the most recent emissions inventory and monitoring data to identify the airshed’s “design values” for criteria pollutants. Design values reflect whether an area is in attainment with national ambient air quality standards (NAAQS), and serve as baselines against which the results of emission reduction measures can be assessed. The calculation of design values is specified by the Environmental Protection Agency (EPA) and varies for each pollutant.

2. Compare the existing design value for each pollutant that is needed to reach attainment with current (and, if desired, expected future) NAAQS.

3. Conduct air quality modeling to determine the number of tons of each pollutant that must be removed from the airshed to reach current (and/or expected future) NAAQS. Conduct a similar analysis to identify emission reduction targets for toxic pollutants and greenhouse gases. There are no NAAQS for these pollutants, but current emissions can be compared to EPA emission limits to determine compliance requirements.

We emphasize the importance of determining the number of tons of each pollutant to be removed to reduce pollution to below the airshed’s carrying capacity and to account for future economic activity. The “top-down tons” values calculated in step 3 provide the foundation for conversations between air and energy regulators, and with stakeholders and the public once an E-Merge plan is developed.

The next steps of an E-Merge process require coordination between air quality and energy officials:

4. Utilize system dynamics or an optimization model working against a database of potential emission reduction measures (e.g., a cost curve) to achieve the level of “top-down tons” identified along with other specified outcome criteria (e.g., reserve margins, reliability metrics, etc.). The model would be run iteratively until the target emission reductions are achieved by one or more scenarios. This process will identify optimal groups of control measures that achieve the shared goals of clean air and reliable electricity at the lowest cost. As in any modeling exercise, assumptions about variables that influence energy, environmental, and economic systems (such as fuel prices or technology costs) should be chosen to bound potential outcomes. Sensitivity runs are also advisable.

(System dynamics and optimization models are complex, time-consuming, and expensive to construct however. As a result, they may not be available for the first jurisdictions to pursue an E-Merge process. In the absence of these models, energy and air quality regulators could collaborate to identify potential energy supply (or energy savings) scenarios achievable through measures to boost the use of cost-effective, low-emission resources such as energy efficiency, demand response, distributed and utility-scale renewable energy, nuclear energy, etc. over the period contemplated by the plan. Steps 5, 6, and 7 describe the steps of this regulatory collaboration absent the availability of a comprehensive model.)

5. Estimate how much energy would be saved or generated by each resource and when. Local utilities may be able to help in this quest through dispatch and other modeling. For example, utilities could include “top-down tons” values as constraints in the model that must be met, or run their models as they normally do, but compare the results to the top-down ton goals.

6. Translate these energy values (the MWh saved or generated by each resource and when) into associated emission reductions. This too can be a complex endeavor, but several tools can facilitate the task, such as EPA’s Avoided Emissions and Generation Tool (AVERT), an RTO’s marginal emissions analysis, NERC’s regional data or state-specific data, etc. Ultimately, we expect new and better tools to evolve, whether from EPA or sector players like the Electric Power Research Institute (EPRI) or the National Energy Efficiency Registry (NEER) effort, that will enable jurisdictions to make compliance-quality emissions reduction estimates.

7. Add up these emissions reductions reflecting all resources and compare the sum to the “top-down tons” value determined in step 3 above. If the total emission reductions are less than those needed to meet air quality requirements or goals, the analysis should be reviewed to ensure that all cost-effective options are included, and then repeated with additional and/or modified measures as warranted. If additional control measures are needed, additional emissions reductions could be considered from power plants, industrial emissions, area sources, the transportation sector, or other sources.

8. Commence the administrative and/or legislative proceedings necessary to implement the optimal, least-cost suite of measures that reduces emissions enough to achieve the “top-down tons” goals.

Technologies, policies, and opportunities are all moving fast today, so new value is continually being created. Retooling regulation for cleaner air and cleaner energy through an E-Merge approach is one way to recognize and realize new value as it arises. Let’s seize the moment.

This is the second in a four-part series. Subsequent posts will elaborate on:

  • What obstacles states might face in conducting an E-Merge process; and
  • Where efforts similar or related to E-Merge have been undertaken around the globe, and what their results have been.

A version of this post originally appeared in Utility Dive.

Is It Time to Retool Regulation for Clean Air, Clean Energy?

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Looking at the electric power industry today brings to mind the well-known April 1970 dispatch from Apollo 13: “Houston, we have a

Actually, we have several.

Prominent among them is the growing permeation of environmental issues into energy policy and energy issues into environmental policy. On the one hand, for example, the U.S. Environmental Protection Agency (EPA) has been characterized as trying to dictate state and national energy policy in recent rulemakings. On the other hand, the extraction, production, and consumption of energy has been characterized as producing the greatest environmental impact of any human activity. As it’s become more clear that energy and environmental issues are joined at the hip, it’s become less clear how state and federal energy and environmental regulators can integrate the fulfillment of their respective responsibilities to the public.

As it’s become more clear that energy and environmental issues are joined at the hip, it’s become less clear how state and federal energy and environmental regulators can integrate the fulfillment of their respective responsibilities to the public.

To make matters worse, the very regulatory structures underpinning these obligations are showing their age.

The electricity grid—the greatest engineering achievement of the 20th century—is being transformed by 21st century technology from the traditional regulated monopoly using centralized generation, transmission, and distribution to match customer demand, into a transactive system that manages demand as adroitly as supply, with much of its generation coming from distributed resources. The advent of active supply and demand in the electricity sector portends a future of competitive markets, eroding the historical justification for regulated monopolies, and by extension, possibly for energy regulators themselves.

The environmental regulatory framework also faces daunting challenges.

Over the last 40 years, air quality has improved markedly due to the Clean Air Act. According to the Office of Management and Budget, the Clean Air Act’s 22 implementing rules provide most of the benefits of all federal regulation, and some suggest that environmental regulation contributes to American competitiveness.

But here too, scientific and technological advances are straining statutory underpinnings. The Clean Air Act was crafted in an era of dose-response exposure models and limited detection capabilities. Now it’s clear that many pollutants have health impacts all the way to near-zero concentration, so no definitively “safe” level may exist. And sophisticated technologies can now detect pollutants at extremely low levels—parts per trillion—and even trace them back to their source. The Clean Air Act regulates air pollutants individually, yet controlling one contaminant can increase emissions of another. Further, the regulation of non-conventional pollutants like carbon dioxide could multiply the number of sources state environmental agencies regulate. These developments suggest a need to revisit Clean Air Act programs in order to reduce regulatory backlogs and enhance administrative efficiency.

As energy and environmental issues converge, state regulators charged with ensuring public health and welfare remain structurally and statutorily segregated, face greater technological change than ever, and often lack adequate resources. As the regulated community confronts the need for new business models, perhaps their regulators need to do the same.

Ike: Think Big

In circumstances like these, the advice of President Dwight Eisenhower may be helpful. He once said, “Whenever I run into a problem I can’t solve, I always make it bigger. I can never solve it by trying to make it smaller, but if I make it big enough, I can begin to see the outline of a solution.”

Following Eisenhower’s advice, some elements of an outline do take shape:

  • The environmental and health consequences of energy generation cannot be considered valueless “externalities.” But environmental mandates must also take into account energy reliability and cost impacts.
  • Air quality cannot be regulated effectively on a pollutant-by-pollutant basis. Sources emit multiple pollutants simultaneously; economies can be achieved by regulating them the same way.
  • Least-cost solutions require consideration of all resources—those that produce and deliver kWh as well as those that provide energy services using few or no kWh. In some cases, optimal solutions may require using more kWh (e.g., to electrify transportation or home heating) in order to improve “emissions efficiency.”
  • Public health and welfare can be impaired by too little regulation—or by too much. Smarter regulation can help by allowing markets to reveal the true cost of electricity (e.g., through better rate design), eliminating the utility throughput incentive (e.g., via decoupling), and recognizing the multiple benefits of energy efficiency and clean energy (e.g., by streamlining evaluation, measurement, and verification of programs and other obstacles).
  • Regulatory plans need to incorporate future, as well as current, risks and benefits. Water issues are already of concern, and additional air quality and climate mandates are likely. But the grid is also getting cleaner, which must be factored into state implementation plans.
  • Absent action, today’s challenges are likely to worsen. While efficient technologies have caused stagnant or declining electricity demand, new loads are emerging through environmentally beneficial electrification. Working together, environmental and energy regulators can facilitate such developments.

Energy and environmental convergence will continue, whether intentionally and thoughtfully, or inadvertently and haphazardly. Behind every problem, though, is an opportunity. We believe a purposeful path toward greater integration is possible that could lead to better environmental outcomes from a cleaner, safer, more reliable, and affordable electricity system.

We believe a purposeful path toward greater integration is possible that could lead to better environmental outcomes from a cleaner, safer, more reliable, and affordable electricity system.

Retooling Regulation

Specifically, RAP is developing a model process we’ve dubbed “E-Merge” to meld best principles from energy planning, such as long-term reviews of what energy resources are needed and most cost-effective, with environmental improvement more aligned to how people breathe and businesses operate. Focusing on air quality and climate issues for now, E-Merge would have energy regulators, environmental regulators, policymakers, and stakeholders work together to define acceptable public health standards (or default to federal standards). Meeting those standards would, over time, limit the amount of air pollution allowed. The challenge of doing so can be addressed as a system optimization and risk reduction exercise, specifying as criteria the need to meet emissions limits for multiple pollutants, keep the lights on reliably, and do so at minimum societal cost. System dynamics techniques exist to analyze such situations and distill solutions. Naturally, they are not quick, easy, or cheap. But, fortunately, they are scalable, so regulators can start with directionally correct E-Merge efforts, then introduce greater complexity introduced as needed.

As Eisenhower discerned, in order to address certain challenges effectively, you’ve got to think big. In the face of a swiftly evolving energy system and changing air-related public health requirements, broadening our collective field of vision—as the E-Merge process suggests—may provide a “bigger,” more effective path forward.

This post introduces the need for and potential of a purposeful E-Merge process. Subsequent posts will elaborate upon:

A version of this post originally appeared in Utility Dive.