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State choices on how to implement CPP will affect power mix

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Extended CPP case, assuming more stringent targets post 2030

In designing the Clean Power Plan (CPP), the US Environmental Protection Agency has provided states with implementation flexibility. Adopted differences in pollutant target types, emission trading markets such as RGGI and policy timeline will greatly alter the installed generating capacity and power mix at state level.

Reflecting these options available to states, EIA has produced several scenarios as part of an Issues in Focus analysis. Coal generation declines in all cases while generation from nuclear and hydropower stays relatively unchanged. Wind & solar and (in most cases) natural gas generation is forecast to rise assuming a swift implementation of the CPP, compared with the non-CPP case.

Constraining absolute emission levels

The Reference Cases assumes that states comply with mass-based standards (which limit absolute emission levels) during the CPP compliance period from 2022 through 2030, and maintain the 2030 standard through 2040.

Hereby a state's total emissions are constrained, as fossil-fueled generators compete among each other for emissions allowances.

Rate-based emission standards

The Rate Case, in contrast, assumes that states stick to rate-based emission standards: These rates are calculated as the emissions from fossil units divided by generation from these units plus generation from new-builds of zero-carbon technologies and incremental demand-side energy efficiency.

Compared to the mass-based Reference case, renewable generation is higher in the Rate Case scenario, while natural gas use is lower

Interregional carbon trading

Another carbon trading-based scenario assumes that states will increase their cooperation to jointly meet targets by trading emission allowances, e.g. under the RGGI scheme.

Greater allowance trading enables regions with low-cost renewable resources to effectively over-comply and sell excess emissions allowances to regions with relatively high-cost renewable resources. Coal-prone states can buy emission allowance from green energy states, hence slightly less coal capacity is retired than in the Reference case.

More stringency post 2030

Under a Clean Power Plan Extended case, analysts assume that mass-based emissions targets become increasingly stringent after 2030. The electricity generation mix is largely similar to the Reference case through 2030.

After 2030, as electricity demand grows and fewer emissions are allowed, coal's share of generation falls from 21% in 2030 to 13% in 2040, offset by growth in renewables and natural gas.

 

Much depends on state policies, yet the EPA also has some say as to whether targets will get ever more stringent in decades to come. Demand-side response helps keeping supply balances in check, however, incremental efficiency gains is forecast to merely reduce 2030 electricity demand by 1.5% to 1.7%, equalling 67 billion kilowatthours (kWh) to 76 billion kWh, compared with a scenario without the Clean Power Plan.


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