Energy and Consumer Impacts of EPA’s Clean Power Plan

07 November 2015
By Dr. David Harrison, Dr. Anne Smith, Scott Bloomberg, Dr. Sugandha Tuladhar, Dr. Elizabeth Walker, and Preston White

In this analysis, commissioned by the American Coalition for Clean Coal Electricity (ACCCE), a NERA team led by Environmental Economics Practice Co-Chairs Dr. David Harrison, Jr. and Dr. Anne E. Smith analyzes two alternative scenarios for mass-based compliance with EPA’s recently-released Final Clean Power Plan (CPP) to reduce carbon dioxide emissions from existing power plants. EPA released the Final CPP in August 2015 as a nationwide regulation, to be implemented by the states, under Section 111(d) of the Clean Air Act.  This presentation updates NERA’s analysis of the Proposed CPP, which was documented in an October 2014 NERA report prepared for ACCCE, to reflect the different provisions of the Final CPP and more recent data.

The Final CPP sets state-specific carbon dioxide emission targets based upon EPA's calculations of the levels that EPA believes could be achieved in each state by implementing three types of changes, referred to as Building Blocks. The Building Blocks include EPA assumptions related to potential increases in the efficiency of existing units, re-dispatch to increase the utilization of existing natural gas combined cycle power plants, and increases in generation from renewable and new nuclear units. While not counted as a Building Block when setting the Final CPP limits for each state, EPA also allows for increases in end-use energy efficiency to be used for compliance purposes. Using NERA's proprietary NewERA Model with baseline conditions and other inputs based primarily on US government information, the NERA team modeled the likely effects of state-by-state compliance with the Final CPP. This analysis presents NERA's assessment of the potential energy market impacts and energy costs of the CPP, focusing on results over the period from 2022 through 2033. Results are prepared for two scenarios representing different assumptions on the availability of inter-state trading options, and a range of outcomes for these scenarios is presented based on two assumptions about the allocation of allowance value to electric local distribution companies (LDCs). The report finds that the EPA’s CPP rule would result in major changes in the US energy system and large overall energy system costs.