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EPA Pushes Forward with Release of Clean Energy Incentive Program Information

On June 16, 2016, EPA released new information about the Clean Energy Incentive Program (CEIP), a subsection of the Clean Power Plan. The CEIP is a program intended to incentivize early action before 2022 in renewables and energy efficiency, with priority given to low-income communities. While EPA had previously released preliminary information about the CEIP, this June 2016 publication clarifies several key issues: what projects can qualify for eligibility, in what amounts and where, and what EPA’s authority is to do so in light of the Supreme Court stay of the Clean Power Plan.

Why is EPA releasing this CEIP guidance? Isn’t the Clean Power Plan stayed?

In its new documentation, EPA asserts that it has the authority to continue its work on the CEIP and also its work with states that are moving forward with planning for the Clean Power Plan. According to EPA, the stay should not impact the release of CEIP information at this stage because: (1) states cannot participate in the CEIP until after the agency approves a state plan or promulgates a federal plan, and (2) the agency will not approve state plans or release a federal plan until after the stay is lifted. 

Because of the stay, key milestones of the Clean Power Plan (and the CEIP) are now uncertain. EPA acknowledges this uncertainty in timing and notes that dates set forth in the current CEIP documentation may need to be changed pending the outcome of litigation.

What projects are eligible to receive credits under the CEIP?

The CEIP gives “bonus” credit to certain programs that take early action within the context of the Clean Power Plan. The CEIP awards credits to two separate groups of resources: resources in the “low-income community” and those resulting from “renewable energy projects.”

  • Low-Income Community:  Resources may receive credits under the CEIP as long as they are located in a “low-income community.” EPA is allowing states to determine the definition of “low-income.” States may use any definition of the word as long as it existed prior to the release of the Clean Power Plan in the Federal Register in October 2015. These definitions can be relevant to geographic areas that contain low-income households (in which case resources in commercial and industrial businesses would presumably also be eligible) or to low-income households themselves. Eligible resources include energy efficiency and customer- or community-sited distributed solar photovoltaic generation. In order to qualify for credits, energy efficiency savings must be in effect on or after September 2018. Distributed solar projects must be providing power on or after January 2020 and before January 2022.
  • Renewable energy projects: EPA has revised its definition of what resources may qualify in this subset of the CEIP to include solar, wind, geothermal, and hydropower resources. Combined-heat-and-power and biomass resources are not eligible. To qualify for credits, these resources must be providing power on or after January 2020 and before January 2022.

How many credits are available?

CEIP resources receive credits from two different pools: a state pool and a federal matching pool. There is no limit on the amount of credits that states may make available from their state pools. In the federal matching pool, EPA has created two separate pools for rate- and mass-based compliance. Under rate-based compliance, there will be 375 million emission rate credits (ERCs) (measured in MWh) available for distribution to CEIP projects. Under mass-based compliance, there will be 300 million allowances (measured in short tons) available. Each one of these pools is split into separate pools, limited and applicable to each one of the states affected by the Clean Power Plan. Finally, each of these state pools of matching credits are split once more, with half of the credits being available to the “low-income community” and half being available to “renewable energy projects.” None of these matching credits may be reallocated to any other pool.

How many credits does each project get?

The number of credits a project may get depends on its generation and its program type. In an example where a project generates 100 MWh in a year:

  • If the project is a “renewable energy project”:
    • Under rate-based compliance, the state would give the project 50 early action ERCs (measured in MWh) and EPA would match with 50 early action ERCs, for a total of 100 ERCs.
    • Under mass-based compliance, the generation would first be multiplied by an emissions rate of 0.8 short tons per MWh, yielding a reduction of 80 short tons. Then, the state would give the project 40 allowances (measured in short tons) and EPA would match with 40 early action allowances, for a total of 80 allowances.
    • If the project is a “low-income project,” the contribution is doubled:
      • Under rate-based compliance, the state would give the project 100 early action ERCs (measured in MWh) and EPA would match with 100 early action ERCs, for a total of 200 ERCs.
      • Under mass-based compliance, the generation would first be multiplied by an emissions rate of 0.8 short tons per MWh, yielding a reduction of 80 short tons. Then, the state would give the project 80 allowances (measured in short tons) and EPA would match with 80 early action allowances, for a total of 160 allowances.

States must assign early-action CEIP credits as set-asides from the first Clean Power Plan compliance period; they must not result in incremental emissions. EPA’s matched credits, however, are incremental to the state caps.

EPA is requesting comments on this rulemaking for 60 days after this document is published in the Federal Register.

Be sure to check out Synapse’s further coverage of the CEIP and other environmental justice issues!