FACETS Analysis of the CLEAN POWER PLAN
FACETS was used to analyze the four alternative compliance pathways – two “rate-based” and two “mass-based” approaches – that EPA provided to states in the final CPP rule. The four pathways can be expected to have different impacts in different states, depending on conditions including state resource mix, gas prices, load growth and energy efficiency levels, and the choices of other states.
In this analysis, we explore the impacts of each pathway at the state and national levels, identifying the sensitivities of each pathway to several of these these factors. The full paper can be downloaded here.
Our key findings include:
• The emissions reductions called for under the Clean Power Plan are achievable and affordable. Average net present value costs of emissions reductions range from less than $2 per metric ton up to only $11 per ton in the cases with very high gas prices. Interstate compliance trade and energy efficiency can both help keep costs low.
• The emissions results of the four pathways vary under different scenarios because of the different incentives they create for generation resources. Only the Mass with New Source Complement pathway reliably delivers emissions reductions at EPA’s benchmark of 32 percent below 2005 levels across all sensitivities and implementations.
• The Rate standard pathways are particularly sensitive to natural gas prices, delivering greater reductions when gas prices are low, and less when gas prices are high. Pathways also vary in the extent to which they provide incentives for additions of new renewable and natural gas combined cycle (NGCC) capacity.
• The risk of leakage when a Mass cap covers Existing Sources Only is significant if the program does not include effective leakage-control measures. Our findings agree with those of several other modeling teams: While EPA outlined a number of useful tools to address leakage in the proposed model trading rules, the specific formulation EPA proposed is unlikely to be sufficient. Our results suggest that a greater level of support than this formulation provides to existing gas and new renewable generators is necessary to create incentives for this generation at a similar level to those created by the other pathways.
• Like other modeling teams, we find that energy efficiency (EE) can play a large role in reducing new source leakage, and a combination of EE and allowance allocation methods is more effective than either alone.
• The four pathways also have different impacts in different regions of the country, depending on existing capacity and resource mixes. States with strong renewable potential, under-utilized existing gas capacity, and/or low gas prices may find that they can export low carbon electricity, allowances/emissions rate credits (ERCs), or both. States with more limited compliance options may especially benefit from interstate trade.
The paper describing our findings can be downloaded here. You can explore national results using the motion charts (click on the images at right), which provide time-animatable scatterplots of emissions and generation by type across the 78 national pathway scenarios and the 32 leakage mitigation incentive scenarios. The video demonstrates how to use the motion charts and walks through some of our results and their implications in detail.