Five Things to Know About the Clean Energy Incentive Program | Norton Rose Fulbright

November 6, 2015

Sue Cowell, in Washington

While everyone is keeping an eye on how the Clean Power Plan litigation plays out, developers of wind, solar, and demand-side energy efficiency projects are also very interested in monitoring, and helping shape the development of the Clean Energy Incentive Program (CEIP).

By way of background, the Clean Power Plan requires a 32 percent reduction in CO2 emissions from affected existing electrical generation units by 2030. States are to prepare implementation plans describing how they will achieve their obligations under the Clean Power Plan; however, the EPA will implement a federal plan for those states that don't submit a plan, or fail to get EPA approval of their plans.

States can develop rate-based or mass-based implementation plans, but the EPA has expressed its preference to implement the federal plan as a mass-based plan. Since not all affected units will be able to comply with the expected limits under rate-based or mass-based plans, EPA anticipates that such units will need to acquire and submit compliance instruments, termed allowances under a mass-based system or credits under a rate-based system. Under a mass-based system, one allowance would allow the emission of one short ton of CO2. Under a rate-based system, one credit would allow one megawatt-hour of electricity generation. The CEIP presents an opportunity for allowances or credits from early investments in eligible demand-side energy efficiency measures as well as solar and onshore wind projects.

Under the CEIP, states could provide early action allowances under a mass-based plan, or credits under a rate-based plan to eligible onshore wind, solar, and demand-side energy efficiency projects. As an additional incentive, EPA could provide up to a total of 300 million short tons of CO2 in the form of matching allowances or credits to eligible states.

Five Things to Know

Here are five things to know about the CEIP as it stands now.

EPA proposed including the CEIP in the federal plan that EPA will impose on states that fail to submit an approved plan.
States are not required to participate in the CEIP. To participate in the program, a state must make a non-binding statement of intent to participate in the CEIP as part of its implementation plan or initial submittal that is due by September 6, 2016.
A solar or onshore wind (offshore wind is excluded) project would be eligible under the CEIP if the following criteria are met: (i) the project is physically located in or benefits a state that submitted a final implementation plan that included the CEIP or is subject to a federal plan, (ii) project construction commenced after the applicable state submitted its final implementation plan to EPA, or after September 6, 2018 for states that don't submit a plan, and (iii) the project generates metered megawatt-hours of electricity in 2020 and/or 2021.
A demand-side energy efficiency project would be eligible under the CEIP if the following criteria are met: (i) the project is physically located in or benefits a state that submitted a final implementation plan that included the CEIP or is subject to a federal plan, (ii) the project commenced operation after the state submitted its final implementation plan to EPA that includes the CEIP, or after September 6, 2018 for those states that don't submit a plan, (iii) the megawatt-hours of electricity are saved in 2020 and/or 2021 and are quantified and verified, and (iv) the project is implemented in a low-income community.
EPA has not finalized the CEIP and is seeking comment on fundamental aspects like what it means to commence construction, commence operation, and exactly what will qualify as a low-income community. A more complete list of topics that EPA is soliciting comment on is included in EPA's Clean Energy Incentive Program Next Steps document.

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