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The Clean Power Plan

On Monday, the Environmental Protection Agency (EPA) released a new draft legislation which promises to throw down the gauntlet on carbon emissions in the United States.   kathleen-wynneThe proposed rule would place restrictions on CO2 emissions for power plants with the goal of cutting greenhouse emissions across the United States by 30% in the next 15 years.

While the rule has not yet been finalized, there is already discussion in the industry of how this lofty goal will be achieved.  Power generation accounts for more than 30% of carbon emissions in the United States, and while recent regulations have been put in place to limit the amounts of other harmful air pollutants produced by power plants, this is the first rule to place limits on carbon pollution.

The plan, dubbed The Clean Power Plan, still has months of revisions and responses to complete before it is finalized.  Each state is expected to submit a compliance plan by June 30, 2016 – and tongues are wagging as to how the reduction goals will be achieved.

Let’s look at a few possibilities.

1. The Ontario Model

In 2003, the Ontario government announced its off-coal initiative, which eliminated coal fired generation from Ontario’s electricity stack by 2014.  At the time, coal generation accounted for almost 25% of Ontario’s electricity needs.  The plan gradually replaced coal generators with natural gas, renewable sources of wind and solar, and nuclear to fill the gap.

However, switching from coal to natural gas won’t fill the entire gap for the new regulations.  The US currently relies on coal to generate 39% of its electricity needs, with significant coal-generator shutdown planned over the next 2 years. While some coal generator shutdowns and new natural gas builds are inevitable, a full replacement of US coal generators to cleaner natural gas or nuclear generators is unlikely.

2. Renewable Energy Sources

Solar and wind energy are technologies that have come a long way in the last 20 years.  From 2006 to 2013, photovoltaic panel prices for solar energy dropped nearly 70%.  Until storage technologies catch up, however, solar and wind remain volatile and incomplete energy sources – only able to provide energy when the sun is shining and the wind blowing.  The reliability of these sources of generation to supply energy to the grid is well below that of traditional generators.

3. Energy Efficiency Programs

Energy efficiency is, by far, the largest single untapped source of energy in the world.  The EPA estimates that almost 25% of energy is wasted in industrial facilities while 30% is wasted in commercial facilities in the United States.

A report issued by the American Council for an Energy Efficient Economy found that energy efficiency initiatives alone could offset the need for almost 500 power plants, and reduce CO2 emissions by 26%.

Furthermore, energy efficiency incentives are by far the lowest cost resource for utilities, and the cheapest way for them to comply with new regulations.   A report issued by the ACEEE  found that efficiency programs cost utilities on average 2 to 3 times less than traditional power sources.

The cheapest energy is the energy you don’t produce in the first place – and for utilities in the United States, the easiest way to comply with new carbon regulations is to cut out the old, inefficient generators, rely on the newer, cleaner generators and eliminate the need to build replacement generation through efficiency programs.

The EPA regulations are a step in the right direction to help fight climate change and the adverse effects of air pollution on our health.  However the new regulations will have upward pressure on prices over the course of implantation.  As prices south of the border climb, so too will the electricity rates in Ontario.

Bruce Power’s Virtual Energy Manager helps our clients understand, manage and control their energy costs through identifying opportunities to limit wasted energy, and uncovering potential for added efficiency.  Energy efficiency is the key to lower electricity bills – just as the cheapest energy for a power generator is the energy that isn’t produced; the cheapest electricity for a business is the electricity that is never consumed.

Bruce Power is working with our customers to help them find their inefficiencies with our Big Data energy analysis tool, the Virtual Energy Manager.

Contact us today to start finding sources of energy waste in your facility- and be a part of the solution when it comes to eliminating emissions and lowering costs.

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Download our Q1 Market Update for a detailed summary on the contents of this blog and more information on the Ontario electricity market.

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