Published on August 3rd, 2015 | by Tina Casey2
CT Exclusive Interview: Clean Power Plan Has A Message For Natural Gas, And It’s Not Good
August 3rd, 2015 by Tina Casey
The Intertubes have been buzzing over President Obama’s much-anticipated Clean Power Plan, which has just been released on August 3 as federal policy enforceable by the Environmental Protection Agency. That ends months of speculation over what exactly the Clean Power Plan will require, and there is some surprising news in there for the natural gas industry.
The Clean Power Plan
For those of you who haven’t been following the news, the Environmental Protection Agency proposed the Clean Power Plan last summer. It includes carbon in the list of pollutants that EPA is lawfully empowered to regulate under the Clean Air Act, as a matter of public health. In effect, the Clean Power Plan will accelerate the transition of US electricity generation out of coal and into alternative energy.
The Clean Power Plan is a key element in President Obama’s Climate Action Plan, unveiled in 2013. The Clean Power Plan is aimed at reducing carbon emissions from power plants because collectively they are the biggest single emitter of carbon pollution in the US.
A Surprising Plan For Natural Gas
CleanTechnica has already posted an initial take on the final Clean Power Plan based on the material released by the White House, and you won’t get too much more information elsewhere just now. That’s because the August 3 unveiling was the first chance that industry insiders have had to check out the entire plan in full detail.
However, just a few hours after the release of the Clean Power Plan Ethan Zindler, head of Americas and policy analysis for Bloomberg New Energy Finance (BNEF) graciously spent some time on the phone with us to provide some initial insights.
To be clear, BNEF expects to have a full analysis available within a week or so — “we’re still trying to figure this all out” as Zindler puts it — but one item in the White House’s fact sheet on the Clean Power Plan jumped out at him:
The piece we’re most intrigued by is a new piece of policy called the CEIP. It appears to be directly intended to boost renewables in what looks to be a tough period ahead for the industry…It potentially provides a turbo-boost for renewables…”
What Is The CEIP?
Zindler’s summary is spot on: the new CEIP credit does not incentivize clean energy investment, insofar as that includes natural gas as a “cleaner” alternative to coal. CEIP is focused on renewable energy.
According to the White House fact sheet, the Clean Power Plan will:
…Give a head start to wind and solar deployment and prioritize the deployment of energy efficiency improvements in low-income communities that need it most early in the program through a Clean Energy Incentive Program…
You can get more clear than that, right? The fact sheet provides more details further along, under the title “Rewards States for Early Investment in Clean Energy, Focusing on Low-Income Communities:”
The Clean Power Plan establishes a Clean Energy Incentive Program [CEIP] that will drive additional early deployment of renewable energy and low-income energy efficiency. Under the program, credits for electricity generated from renewables in 2020 and 2021 will be awarded to projects that begin construction after participating states submit their final implementation plans…
Zindler emphasizes that the CEIP “turbo-boost” for renewable energy is contingent on several factors, including whether or not states submit their plans according to EPA’s timeline and are supportive of the plan overall.
All else being equal, though, as Zindler sees it the CEIP credits will play a critical role in enabling renewable energy investment to continue apace over the next several years.
Significantly, CEIP credits will help make up for the loss of longstanding federal tax credits for renewable energy, which certain members of Congress (okay, so Republicans) have been determined to eliminate.
Here’s how Zindler compares the draft rule — which was more inclusive of natural gas — to the final Clean Power Plan:
To oversimplify the draft rule, a year ago the Clean Power Plan set certain goals for the states. It said you can get from here to there, and it set up an open competition among alternatives…Over the next five or six years, gas is the low cost opportunity…
The final rule potentially provides an earlier boost for renewables to compete.
According to Zindler, CEIP factors into a new projection in which renewables could get to 28 percent of the market by 2030, a significant increase over the previous projection of 22 percent.
A Cloudy Future For Natural Gas
We predicted the marginalization of natural gas in the Clean Power Plan several days before the final version was released (go ahead, check it out under the title “EPA Clean Power Plan Could Drop Hammer On Natural Gas“).
If you’re new to the topic, you may be wondering why natural gas is being marginalized, and that’s a fair question.
In fact, the earlier version of the Clean Power Plan leaned on cutting carbon emissions by substituting natural gas for coal in the power sector. That’s no surprise considering that from the beginning of his first term, President Obama’s “all-of-the-above” energy strategy has made a generous amount of room for natural gas.
However, as detailed regularly on CleanTechnica and our sister site PlanetSave, serious environmental and public health issues attend the lifecycle of natural gas. That includes impacts related to the drilling method known as fracking, as well as general issues related to methane emissions all along the drilling, transportation and storage supply chain.
In recent months the Obama Administration has taken steps to address the “fugitive methane” issue, and that could have serious cost issues for the natural gas industry. That in turn will undercut any remaining price advantage natural gas has over wind and solar, further accelerating renewable energy investment.
No, we’re not saying that natural gas will go away altogether. However, in the future natural gas will play a smaller, more sustainable role in the future global energy landscape, just like coal.