Strict adherence to cost-of-service ratemaking led to what might be considered a Luddite decision in the Maryland PSC’s initial rejection of BGE’s smart-grid filing. More than 60 years ago, the U....
Complying with 111(d)
Exploring the cap-and-invest option.
state 111(d) equivalency plan program investments in energy efficiency, renewable energy, and other clean energy programs. As shown in Figure 1, this price per ton would typically add only a few mills per kWh – roughly 0.1 to 0.3 cents per kWh – to electricity rates. 23
For example, in Public Service of New Mexico’s service territory, given the 1,445 pounds per MWh carbon intensity of PNM Resources’ mix, a $3.00/ton price would raise about $23 million each year for the State of New Mexico to administer, yet would raise electricity rates by only $0.0022/kWh, or about $1.32 per month for a residential customer that uses 600 kWh a month.
Similarly, in Southern Company’s territory, with its carbon intensity of approximately 1,400 pounds per MWh, a $3.00/ton price would produce nearly $400 million to be shared proportionally between the states of Alabama, Georgia, Florida, and Mississippi to fund clean energy programs. 24 The ratepayer cost would be just $0.0021/kWh, or about $1.26 per month for a residential customer using 600 kWh a month.
These examples illustrate what a small price per ton can raise in the way of revenues for states to support clean energy programs to help them comply with 111(d). In each example considered, what appears as a small price and a small effect in rates is actually a substantial funding stream that could support the various policies that states might want or need to fund to meet compliance obligations or other purposes. 25
While EPA has yet to produce draft 111(d) guidelines for existing plants, states should explore various models for developing their 111(d) equivalency plans, including an approach based on cap-and-invest. This approach has proven to be low-cost, readily implementable by adapting existing air compliance programs, and to provide states with significant flexibility to choose the clean energy policies for which they are best suited. For West Virginia and Kentucky, that might mean a combination of end-use and supply-side efficiency, combined heat and power, and a renewable resource mandate of some kind. 26 For New Mexico or Arizona it might mean thermal efficiency in buildings. In all states, it would mean a concrete plan coupled with steady funding.
If EPA acts favorably concerning the lessons learned in developing cap-and-invest, and allows states the flexibility under 111(d) to develop the clean energy side of their energy economies, states will be able to adopt reasonable, effective frameworks and embark on economically workable paths to addressing greenhouse gas emissions from their power sectors.
1. Greenhouse Gas Policy Implications for Kentucky under Section 111(d) of the Clean Air Act , Kentucky Energy and Environment Cabinet, Frankfort, KY, October 22, 2013.
6. Available and Emerging Technologies for Reducing Greenhouse Gas Emissions from Coal-Fired Electric Generating Units , United States Environmental Protection