CPP Roundup: Fitch rankings, Rubio reversal, and Texas, Missouri plans

Published 03:15 on October 17, 2015  /  Last updated at 11:02 on October 17, 2015  /  Americas, US  /  No Comments

Presenting Carbon Pulse’s semi-regular CPP Roundup: a brief, bullet-pointed summary of this week’s happenings concerning the US’ proposed Clean Power Plan.

Presenting Carbon Pulse’s semi-regular CPP Roundup: a brief, bullet-pointed summary of this week’s happenings concerning the US’ proposed Clean Power Plan.

 

UTILITIES

Most utilities are not expected to join coal companies and more than a dozen states in their fight against the Clean Power Plan, as large swathes of the power sector were already on their way to decarbonsing their generation, according to the Wall Street Journal.

The paper notes that the rules provide a degree of valuable certainty to utilities for their investments.

The final CPP rules, published in August, are expected to be published in the Federal Register later this month, after which a pack of mostly Republican-controlled states is expected to file lawsuits with a Washington DC court challenging the EPA’s plan.

Other states are expected to request a compliance delay beyond the two year extension provided under the final rules.

 

FITCH

The final version of the CPP significantly shifts the burden of mandatory carbon reduction goals among states, Fitch Ratings said in a report published this week.

It named Kansas, Missouri, Nebraska, Tennessee and West Virginia as the states whose utilities will be most challenged to preserve their profitability while complying with the rules.

Power generators in Washington, Oregon, Virginia, Maine and Illinois are predicted to have the easiest ride.

“States with high electricity costs, sizable mandated carbon-reduction goals and high carbon-reduction costs remain the most challenged by the Clean Power Plan,” said Dennis Pidherny, managing director of Fitch’s Public Power group.

“For individual public power and cooperative utilities, the ability and willingness to pass along compliance costs to consumers via higher rates or new charges is still key for credit quality.”

Earlier this year, Fitch forecast that Arkansas, Arizona, Florida, Mississippi and West Virginia would be the most challenged, based on the EPA’s draft rules.

While the final plan gives states an extra two years to comply, Fitch said compliance “will remain an ongoing challenge”.

It called the EPA’s assumptions related to energy efficiency, renewable penetration and costs “aggressive”, adding that if the economics of gas-fired generation prove also prove overly optimistic, compliance costs could soar.

 

RUBIO

Republican presidential candidate Marco Rubio on Friday released his energy plan, vowing to gut the CPP if elected.

The pledge is in sharp contrast to Rubio’s record as state legislator in Florida between 2000 and 2010, where he supported several environmental measures including emissions trading.

At the time, Rubio called a federal cap-and-trade programme “inevitable” and argued that Florida should be amongst the first states to launch a market in order to allow it to exert greater influence over the development of a national scheme.

In his presidential energy plan, Rubio also pledged to lift the US ban on oil exports, expedite natural gas export permits and approve the Keystone XL pipeline.

“Transitioning to clean energy will create American jobs and spur innovation, which is why it’s so disappointing that Senator Rubio’s plan doubles down on the failed dirty energy policies of the past, putting our national and economic security at risk,” said billionaire political donor and environmentalist Tom Steyer.

The release of Rubio’s plan comes two weeks after Republican rival Jeb Bush announced his own, which also seeks to scrap the CPP.

 

TEXAS

Texas, the largest emitting state in the US, will meet 88% of its 2030 CPP target through its existing energy plans, and for that reason is poised to be a major beneficiary under the federal rules, said a report by the Environmental Defense Fund published this week.

However, the state could also have the most to lose should it fail to capitalise on the opportunity and design a bespoke compliance strategy, it added.

Texas is the top producer of natural gas, wind power, and combined heat and power (CHP) in the US, and has the potential to also lead in solar energy generation, EDF said, adding that it also has substantial energy efficiency potential.

“Texas decision makers could use the opportunity to the state’s economic benefit by leveraging its clean energy advantages to help other states comply. This could be achieved through both the sale of credits from surplus carbon emissions or emissions rate reductions, and the export of wind and solar energy to neighbouring states,” the report said.

It recommended that the state should improve the efficiency of lighting, air conditioning, heating and roofing to save electricity.

In addition, the Texas’ power sector uses a significant amount of water, which could be reallocated to households, agriculture and businesses under a low-carbon shift, EDF added.

However, the Texas Attorney General’s Office has said it will file a legal challenge against the CPP, calling it “a power grab … (that) placates special interests and empowers Washington bureaucrats to raise electricity bills and punish certain businesses”.

While EDF did not perform an economic analysis of what the price tag for full compliance would be, it notes that if Texas chooses to go down the litigious route and declines to craft its own CPP strategy, it will open the way for the EPA to impose its own model rule on the state.

Separately, the operator of Texas’ largest grid on Friday said the CPP would lead to the closure of 25% of the state’s coal-fired power plants, equivalent to around 4 GW in capacity.

That was below the Electric Reliability Council of Texas’ (ERCOT) original estimate of one in two plants.

The anticipated closures represent around 6% of ERCOT’s current installed capacity.

The organisation said it modified its forecast due to the changes introduced in the EPA’s final version of the CPP rules. The final plan calls for Texas to cut its GHG emissions by 32% below 2005 levels by 2030, compared to 39% under the draft proposal.

ERCOT said it would cost around $1 per ton of CO2e to meet interim 2022 goals, raising retail power prices by as much as 16%.

 

MISSOURI

Missouri on Thursday released the final version of its new State Energy Plan, which will help pave the way towards compliance with the CPP.

Observers the Union of Concerned Scientists (UCS) praised the Missouri Department of Economic Development’s (DED) proposal for showing significant improvements over its previous draft proposal.

They included scaling up the state’s renewable energy target to 20% in 2025 from the current goal of 15% in 2021, making the existing voluntary energy efficiency goals mandatory, and strengthening Missouri’s policies for incentivising rooftop solar investments.

The plan also called for diversifying its energy supply by reducing dependence on imported fossil fuels, maximising in-state renewable sources, introducing tax incentives to foster more wind power, and expanding residential energy efficiency programmes to hard-to-reach customers and vulnerable households.

“If successfully implemented, these recommendations have the potential to put Missouri on track toward greater renewable energy and energy efficiency deployment while reducing the state’s risk of overreliance on natural gas as it shifts away from coal,” the UCS said.

The organisation added that Missouri’s existing efforts will put the state at least 30% of the way towards its final 2030 emissions reduction target.

But the UCS noted that convincing lawmakers to support the State Energy Plan and pass the required legislation to bring it into law “won’t be easy… but it’s worth a shot”.

Missouri’s attorney general has vowed to challenge the CPP in court.

In a separate report published this week, UCS said Florida is the most over-reliant state on natural gas for power generation, which could pose a rick to any carbon cutting plans.

 

By Mike Szabo – mike@carbon-pulse.com

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