What business needs to know about the Clean Power Plan

Dan O'Connor
An Indianapolis coal power generating station.

It may seem easy to dismiss the proposed Clean Power Plan as another intractable logjam between the Obama administration and fossil fuel-state Republicans, as political wrangling and lawsuits keep flying and the Supreme Court temporarily halts its implementation.

But the Clean Power Plan has a very decent chance of becoming the law of the land after the legal challenges are fully litigated, many experts say. And if and when it does become law, it will be a game changer in energy generation in this country — according to both advocates and opponents.

Its passage could usher in the low-carbon economy of innovation and investment that is poised, ready to pounce as soon as the policy roadmap is clear.

"Energy is really one of the biggest challenges in the world. There have been no advances in development without energy; they are in lockstep," said Dipender Saluja, partner and managing director of Capricorn Investment Group. His firm has $1 billion deployed into clean tech investments and behind each of them, "regulation has been a big piece of the story," he said, speaking about the Clean Power Plan at a recent Clean Tech Forum in San Francisco. 

The Clean Power Plan, issued in August by the Environmental Protection Agency after years of hearings and proposals, requires states to lower the carbon emissions from their power plants by 32 percent from 2005 levels by 2030.

It has been embroiled in controversy since it came out — and before. Twenty-seven states filed suit to prevent the federal government from enforcing it on the grounds that it represents an over-reach of authority by the EPA. And 29 states filed a petition to delay its implementation pending the litigation.

Just a 'temporary time out?'

The U.S. Supreme Court granted this petition Tuesday evening, issuing a temporary stay on enforcement of the plan until the states' challenges could be litigated. The ruling reversed a District Court rejection of a plea for a stay.

Although legislators and attorneys from Kentucky, West Virginia and other coal states declared victory, many others expect that in the long run, the Clean Power Plan will withstand court challenges and even the Supreme Court will rule it is legitimate. 

"We expect this ruling to be only a temporary 'time out' as the plan heads to full implementation," said WRI's Sam Adams, director of the U.S. Climate Initiative, noting that ruling was not a judgment on merits of the plan itself but on the timing. "Experts agree that the Clean Power Plan is on solid legal ground and will prevail based on the merits."

He added, "The benefits of the plan are clear, far-reaching and worth fighting for."

The Supreme Court ruling allows litigation to proceed at the Appeals Court level before implementation or enforcement.

The specific structure of the Clean Power Plan are that it sets specific targets for each state based on the state's current emissions and what it would cost to lower them, and sets national carbon dioxide emissions performance rates for existing coal and gas-fired power plants based on what can be achieved through tested efficient performance.

Beyond that, the Clean Power Plan leaves it up to the states to devise their own plans for how to comply with the carbon reduction mandate and then, how to implement such plans.   

Plans can involve a mix of new renewable power generation, energy efficiency and emissions allowance cap and trade systems, among other things — leaving plenty of room for market-based approaches. And stakeholder groups are forming in most states to shape those plans.

Powerful potential

"We are very excited about what the Clean Power Plan can enable — the fact that it is enabling competition, enabling technologies by not being prescriptive,” said Josh Richman, vice president of global business development and policy at Bloom Energy, a manufacturer of power generator systems, fuel cells and energy server architecture.

Anne Kelly, senior program director for policy at the Ceres investor network and director of the Business for Innovative Climate & Energy Policy, said she is encouraging companies to see the opportunities here.

"There are stakeholder groups working in every state. It is an exciting time for businesses to get involved," Kelly said.

Companies involved in renewable energy generation as well as technology innovators in everything from Internet of Things technologies to carbon capture to cement making and investment fund managers speak of being poised for an unleashing of market opportunities.

Big energy purchasers that have been trying to lower their carbon footprints and source more renewable power will find it easier to do so.

"Businesses have set goals for GHG reductions and purchasing renewable energy  — and many, many companies have — will find it much easier after the Clean Power Plan," Kelly said.

Google, filing an affidavit earlier with the U.S. District Court on the case, said the Clean Power Plan will help the company's quest to derive all electricity for its data centers from renewable sources, which in turn "makes good business sense," it wrote in the affidavit. "Because renewable energy technologies like wind and solar generally have low and stable marginal costs and are not subject to fuel price volatility, procurement of renewable electricity through long-term PPAs allows Google to secure contracts that minimize Google’s exposure to future electricity price inflation." 

Opportunities for business growth in the Clean Power Plan

States in the Northeast that are part of the Regional Greenhouse Gas Initiative (RGGI) carbon trading system have seen state revenues and business growth follow enactment of the trading system in 2008. According to the Analysis Group, the nine states have reaped $1.3 billion in economic benefits from the carbon trading program that's aimed to lower power plant emissions, and Analysis Group stated this could be viewed as a precursor of what could follow a national plan.

California, which has the most aggressive regulations to stem global warming and a cap and trade system for not only utilities but large manufacturers, farms, university campuses and any other entity that emits significant amounts of greenhouse gases, has seen investment in clean tech startups grow and the number of jobs in renewable energy sectors jump. It added 20,000 jobs in the solar sector alone last year, according to the Solar Foundation. Tiny Massachusetts, one of the states in the RGGI carbon trading plan, has the second most solar industry jobs in the nation, at 15,000, the Foundation said.

However, the Clean Power Plan also will likely cause some pain or job loss, particularly in the coal mining states of Kentucky, West Virginia and Wyoming, whose representatives are leading the fight against it. It will cost money to retrofit coal plants that can be retrofitted or to shutter others and build alternative fuel generating plants. Mining jobs — already fast disappearing as demand for coal plummets — could disappear.

That is why the Clean Power Plan has been called a job killer by coal-state members of Congress.

The COP21 factor

But it also has been called the document with potential to prevent even more ravages of climate change because it is the core of the U.S. commitment to the COP 21 Paris Agreement.

David Doniger of the Natural Resources Defense Council noted in an NRDC Switchboard post that while the case challenges EPA authority and therefore justices will decide on grounds of constitutionality, the Supreme Court in its eventual ruling will not likely ignore the role of U.S. policy represented in the Clean Power Plan on the global stage — specifically its key role in helping countries reach agreement at the COP 21 Paris climate talks. It is the central document of the United States' commitment to the Paris Agreement, and Doniger noted it is widely regarded as what encouraged 186 other nations to commit to taking action to reducing greenhouse gas emissions.

Against the backdrop of the Supreme Court ruling yesterday to halt implementation until the 27 states' complaint could be litigated is the reality that 18 other states filed briefs in support of the Clean Power Plan, according to the NRDC. So, too, have 24 large businesses and numerous environmental organizations.

And a few months ago, 360 large U.S. companies representing mainstay American industries sent letters to the governors of their respective states backing the Clean Power Plan.

Markets are eager for policy clarity. 

"Public policy determines if there is a market or not," said Bryan Miller, senior vice president of public policy and power markets at Sunrun, one of the largest residential solar providers in the U.S. 

Even utilities agree with this. Con Edison’s Eric Cherniss, director of development for Western U.S. power generation, said, "Regulation influences everything we do."