This week, the Obama administration and U.S. Environmental Protection Agency (EPA) released the Clean Power Plan Final Rule. The EPA moves this first nationwide greenhouse gas (GHG) reduction policy forward under the authority of the Clean Air Act section 111(d) and establishes CO2 emissions guidelines for existing fossil fuel-fired power plants. In order to achieve the estimated 32% reduction in GHG emissions by 2030 (from a 2005 baseline), each state will need to implement a formal compliance plan. So how will the Clean Power Plan (CPP) trickle down to the buildings segment?
Benefits of Energy Efficiency
The need for flexibility and inclusion of cost-effective solutions in order to meet the reduction target was a paramount message that emerged from the 4.3 million comments received during the rule-making process. As a result, the final rule enables states to leverage the most cost-effective option, energy efficiency, as a means of compliance. In fact, a 2014 Lawrence Berkeley National Laboratory study found that the average total cost of saved electricity through utility demand-side management (DSM) programs was less than $0.05 per kWh. In another 2014 study, the American Council for an Energy-Efficient Economy (ACEEE) estimated the levelized cost of electricity generation options and also concluded the benefits of energy efficiency from an economic standpoint, as illustrated in the figure below.
Levelized Costs of Electricity Resource Options
Utilities have recognized the benefits of energy efficiency in achieving GHG reduction targets. In California, for example, the state investor-owned utilities (IOUs) have long offered customer incentives to improve building efficiency. The benefits have made a mark, and even in light of a federal mandate from the CPP, Pacific Gas and Electric’s (PG&E’s) CEO expressed the company’s support of moving toward a lower carbon energy future with the statement: “I congratulate the Administration on finalizing the Clean Power Plan rule and greatly appreciate the significant outreach and engagement with our sector … It is expected that this first-ever national program to reduce greenhouse gas emissions from the power sector will advance investments in clean energy technologies throughout the country and provide tremendous environmental benefit.”
Regulatory Compliance and Opportunities
The Clean Energy Incentive Program is a critical element of flexibility under the CPP that enables states to award early action emissions rate credits (ERCs) and allowances to eligible demand-side energy efficiency projects that reduce end-use energy demand in 2020 and/or 2021 for those projects implemented after September 6, 2018. The goal is to accelerate activity in the early stages of the regulatory compliance period.
In the end, there are huge opportunities for energy efficiency in buildings. Demand-side energy efficiency projects implemented in low-income communities, for example, will receive 2 credits for 1 MWh of avoided electricity production, as the EPA will match each credit offered by the state. The door will open to much broader opportunities across the building sectors. It can even be stipulated that the momentum will accelerate the adoption of intelligent building solutions, including building energy management systems, as tools for measuring performance baselines and automated measurement and verification.
Tags: Building Innovations, Energy Efficiency, Energy Efficient Buildings, Intelligent Building Management Systems, Policy & Regulation
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