Financial incentives prime the pump for Clean Power Plan
In August, President Barack Obama unveiled the first comprehensive limitations on carbon from power plants. Now, the Clean Energy Incentive Program (CEIP) will aim to tap financial resources to help prepare markets for the Clean Power Plan.
The two-year, voluntary matching fund program will incentivize solar and wind energy in any states that opt in. It also offers extra leverage for energy efficiency in low-income communities.
Clean Energy Finance Forum spoke with Joe Goffman, associate assistant administrator at the Environmental Protection Agency, who explained the program, its vision and its objectives.
Lisa Veliz: Why is the Clean Energy Incentive Program being introduced?
Joe Goffman: We’re trying to bolster the benefits of the CPP. We’ve identified renewable energy as the basis of the standards we set. This is an additional tool to push investments in the right direction.
Veliz: Can you tell us more about the CEIP?
Goffman: [The CEIP] is a classic state-federal matching program, using dollars that can be used by power plants or states meeting the obligation to meet standards starting in 2022.
It is limited to wind, solar or projects that invest in demand-side management for energy efficiency. And to qualify, one of those projects needs to commence construction after the state submits plan or [after] 2018. The project has to be up and running by 2020 or 2021.
Once you get to 2022, there is an advantage for zero-carbon generation.
You might picture states not wanting to use what is a finite resource for them — allowances or credits to promote those projects — notwithstanding the fact that they’d get a federal match if they did so. We’re confident that most states will find a constituency in the wind industry or the solar industry.
Veliz: Why does the CEIP only cover the years 2020-2021?
Goffman: What we’re trying to do with this extra value that’s being created for potential projects is to target projects that wouldn’t necessarily have happened anyway, but [may happen] for this additional value.
What we concluded was that the way to sort those projects out was to have the commencement date at some point in the future. We wanted to target them on projects that we thought could ripen within a manageable time window.
Once you get to 2022, there is an advantage for zero-carbon generation. By that time, wind or solar projects would require additional incentives. Now, because of the long lead time, we wanted to ensure that there were going to be these kinds of projects in the pipeline.
Veliz: How will funding be allocated for CEIP proposals?
Goffman: There’s a finite number of federal credits: 300 million. Hypothetically, if every state put in a reservation next year, we would create an account for each state, reflecting that state’s share of the 300 million credits. And the allocation of credits to those accounts would be based on the relative size of the reduction that each state had to make.
Veliz: How are low-income communities identified, and what type of allocation will they receive?
Goffman: We have not taken a final decision yet. We are planning to start an outreach process where we will engage directly with low-income communities, states and project developers to look at our options for answering these questions.
We really want to hear from the purported beneficiaries of this program, both on the low-income communities’ side and on the project developers’ side.
We’ve already had informal discussions with low-income community groups that are concerned about rates and economic-development issues. We want the low-income communities themselves to give us their view on that.
Veliz: Is there a timeline for this part of the process?
Goffman: There will be a series of public discussions between now and end of the calendar year. By the time the next administration comes into office, we will be well past the day the CPP, this program and the federal plan will take effect. These are final rules right now.
By 2017, states will have met their first deadline and the next administration will be called on, as with any other law. The CEIP has yet to formalize certain features of the fund distribution, but we will look in January to gain more clarity on the process.
Veliz: Will there be a quota or cap on funds? What’s the equivalent in dollars?
Goffman: The federal match is 300 million credits. We didn’t do a dollar evaluation of what those credits will be worth.
Veliz: Are distributed generation, cogeneration and energy storage projects eligible to participate?
Goffman: As we’re thinking about it now, I don’t think those could participate directly.
I imagine that we could see solar projects or wind projects that come in with some cutting-edge storage elements, but they’d have to be wind and solar projects.
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