Not to Worry. The Clean Power Plan is Still Very Good for Energy Efficiency

Aug. 4, 2015
Energy efficiency is no longer a building block in the Clean Power Plan, released in final form by the Obama Administration August 3. But our sources tell us that’s not a bad thing — as counter-intuitive as it may seem. In fact, the carbon reduction plan will give energy efficiency a big boost.
Energy efficiency is no longer a building block in the Clean Power Plan, released in final form by the Obama Administration August 3.

But our sources tell us that’s not a bad thing — as counter-intuitive as it may seem. In fact, the carbon reduction plan will give energy efficiency a very big boost, as expected all along.

Why did the EPA remove energy efficiency as a building block? Largely because it wants to avoid as much litigation as possible.

The plan requires that states come up with plans to reduce carbon by 870 million tons by 2030 from power plants. That’s 32 percent below 2005 levels.

Four building blocks were used in calculating the emissions requirements states must meet in the first draft of the rule, which was proposed about a year ago.

Since then, some commenters (there were 4 million)  said that energy efficiency didn’t serve as a good input in calculating the requirements, unlike the other three building blocks.  The others focused on how to reduce carbon dioxide in power production, either by changing operations or switching fuels. Energy efficiency is not something a power plant owner can do, but involves activities beyond the owner’s domain.

The EPA is understandably worried about legal challenges to the rule, and tried to minimize any vulnerabilities. So removed energy efficiency as building block number four.

“It seemed to me that building block four was really a sore thumb vulnerablity to the plan,” said Paul Gutermann, a partner with Akin Gump in Washington, D.C. “It created a lot of uncertainty. I think that backing away from that is a reflection that they understood that it was a vulnerability.”

Although it’s not a building block, energy efficiency still can — and very likely will — be used in state compliance strategies. In fact,  EPA officials repeatedly emphasized that they expect energy efficiency to be a key component.

“There may be much idle talk in coming days about why efficiency is not on the final roster of building blocks for the determination of state goals. But efficiency is about results, not distractions,” said Kateri Callahan, president of the Alliance to Save Energy. “Regardless of how stringent goals to reduce bulk greenhouse gases from power plants are determined, energy efficiency remains the cheapest, fastest, fairest and most reliable set of compliance mechanisms.”

Steven Nadel, executive director of the American Council for an Energy-Efficient Economy added that the “EPA and the president have made it clear that investing in energy efficiency will be a major opportunity for states looking for ways to comply with the Clean Power Plan rule. The inclusion of energy efficiency in compliance plans is much more important than whether energy efficiency is used in EPA calculations to develop individual state targets.”

The three building blocks that remained in the final rule consider carbon reductions achieved in:

  1. Making coal‐fired power plants more efficient
  2. Replacing coal with natural gas-fired generation
  3. Replacing coal with renewable energy

Malcolm Woolf, senior vice President for policy and government affairs at the Advanced Energy Economy argued that the EPA should have kept energy efficiency as a building block, given its track record in delivering energy savings and therefore emission reductions. But he added that to energy efficiency companes what matters “is the size of the market opportunity that can be addressed by advanced energy technologies, not how it’s calculated.”

A wide range of energy efficiency technologies are likely to see growth as a result of the Clean Power Plan. But the most interesting to watch will be forms of energy efficiency that double as distributed energy, like microgrids,  combined heat and power, and district energy. These approaches benefit from two converging trends in the United States: the desire to clean the air and the push to make energy systems more reliable and less prone to outages.

“The International District Energy Association (IDEA) supports the deployment of cleaner, more efficient power facilities, especially for our cities, communities and campuses where district energy and combined heat & power have been proven to be economically compelling and highly effective at reducing greenhouse gas emissions,” said Rob Thornton, IDEA president and CEO.  “The members of IDEA look forward to collaborating with state and local energy agencies, planners and regulators to accelerate deployment of more resilient and sustainable district energy/CHP systems as an effective compliance strategy to the Clean Power Plan, as outlined in our white paper “Smart Tools in a 111(d) Toolbox”.

Extra boosts from Clean Power Plan

The Clean Power Plan gives energy efficiency an additional boost in its attempt to hasten carbon reductions. The EPA is creating Clean Energy Incentive Program (CEIP) to reward early investments.

The incentives apply to demand-side management energy efficiency, wind and solar that deliver results in 2020 or 2021 or both years.

The communities will have the opportunity to earn extra allowances or Emission Rate Credits (ERCs) with the highest credit for energy efficiency in low-income communities.

Energy efficiency also could benefit if states adopt programs like the Regional Greenhouse Gas Initiative to comply with emissions requirements. In RGGI, a regional cap and trade program in the Northeast and Mid-Atlantic, a large portion of auction allowance revenue goes back to the states for additional investment in energy efficiency. The Clean Power Plan encourages RGGI-like regional trading.

The EPA expects the Clean Power Plan to reduce how much consumers spend on energy because it will cut energy waste. The agency estimates energy bills will drop seven percent by 2030.

The state plans are due to the EPA for review on Sept. 6, 2016, unless states seek an extension, in which case they are due Sept. 6, 2018.

What do you see ahead for energy efficiency as the US imposes its first-ever carbon reduction rules for power plants? Let us know by commenting below or on our LinkedIn Group, Energy Efficiency Markets.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of She is co-founder and former editor of Microgrid Knowledge.