We previously wrote about a November study conducted by the National Economic Research Associates (NERA)1, which found that compliance with the Clean Power Plan (CPP) under optimized least-cost scenarios2 will result in average energy sector expenditure increases between $29 and $39 billion per year relative to projected baseline conditions (i.e., without the CPP). The effect, in turn, is a reported average annual increase in electricity rates of 11%–14%.
This is a controversial report and continues to be debated. To contrast the NERA study, Morgan Stanley Research (MSR) published an independent report in August, which found that under separate regional trading programs, the cost of CPP compliance will be approximately $11 billion annually. The effect is a reported average annual increase in electricity rates of 5% in the Southeast, 4.5% in the MISO region, and 0.5% in Illinois, with business-as-usual rates in all other regions.
The primary differences in the two reports can be reduced to the assumed costs of energy efficiency, clean energy, and allowances, as well as the makeup of the regional trading programs.
The “flexibility” afforded to states by the EPA in the final version of the CPP increases the range of potential financial impacts (both positive and negative) that can result from choosing a compliance strategy. Thus, the choice is not straightforward, and any decision must be weighed against the modeling assumptions used and the variables considered. Key data points shared by both studies include:
Center for Climate and Energy Solutions: Modeling EPA’s Clean Power Plan: Insights for Cost-Effective Implementation
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