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There’s a lot of work (to do)...

Earlier this summer the Environmental Protection Agency (EPA) released its proposed rules for Section 111(d) of the Clean Air Act. This is the rule that deals with reducing carbon emissions from existing power plants by 2030. The proposed rule was shaped by public input and builds upon existing priorities, activities, and efforts in states throughout the country.

The public comment period on this rule runs through December 16, and already nearly 700,000 comments have been submitted to the docket.  The comments run the gamut from people supporting the plan, to people that think it doesn’t go far enough, to those that have concerns and believe that its costs outweigh its benefits.

Although it is premature to predict what the final rule will look like, judging by the comments, it is clear the primary focus is to make sure that states can successfully meet their targets, and that success happens in the most cost-effective way possible.

In Arizona, the Department of Environmental Quality (DEQ) is not only addressing state-specific issues during the comment period, but also crafting Arizona’s “Clean Power Plan” for submittal by the 2016 deadline.  However, it is still unclear whether the Arizona legislature will allow DEQ to submit a plan on behalf of Arizona.  Earlier this year, the State Senate passed a resolution along party-lines nullifying all rules, including clean air and water requirements, imposed by the EPA.

If the legislature refuses to submit a plan, the EPA has the authority to develop a plan for Arizona.

Any plan though, will have to tackle the future of the state’s four existing coal plants, including possible plant closures. In the event of plant retirements, the plan must offset the base-load electric generating capacity with a cleaner resource.  

With talk of a death spiral facing the electric utility industry, this could be a once in a lifetime opportunity for the utilities to get healthy.  Investing in new power plants, factored into the rate-base, could extend the current utility business model well into the future.

But, this doesn’t have to be the only pathway to compliance.  The cost of meeting the emission reduction goals doesn’t have to be placed entirely on the backs of the ratepayers by way of investments in large-scale utility infrastructure projects.

Arizona’s plan must include our Renewable Energy Standard and Tariff (REST), and the Energy Efficiency Resource Standard (EERS).

The distributed generation (rooftop solar) component of the REST could “shift” some of the cost of compliance to homeowners that install solar.

Energy Efficiency should also play a major role in meeting the Arizona target.  Energy efficiency is the lowest cost way to meet Section 111(d) emission requirements, and the private sector is ready, willing and able to “build” an “Energy Efficiency Power Plant” as a cost-effective alternative to replacing retired coal assets with new fossil-fuel power plants.

Arizona’s public sector can help in this regard without impact, or cost, to taxpayers or existing budgets. Energy Savings Performance Contracting (ESPC) is a financing mechanism that requires no upfront capital on the part of the public entity, and uses energy cost savings to pay for the energy retrofits over the length of the contract.

In recent years, 49 Arizona public agencies, universities, schools and hospitals, have entered into ESPC agreements that have reduced their energy costs and carbon emissions significantly.

Under a performance contract, Higley Unified School District funded lighting, controls and HVAC upgrades in four schools.  The energy measures are saving the school $153,855 annually, or nearly 30 percent on its utility bill while reducing its carbon footprint.  The energy savings will pay the school's share of their energy performance contract in seven years.

Arizona State University has undertaken $85 million worth of energy efficiency improvement through performance contracts in recent years.  The City of Phoenix has a $65 million contract and Maricopa County a $25 million contract.  Phoenix Children’s Hospital procured $21 million worth of energy efficiency improvements through an ESPC agreement.  Gilbert, Marana and Scottsdale School Districts have partnered with private companies for energy improvements at no upfront cost. Even smaller schools like Chinle, Chino Valley, and Ganado have completed deep-energy retrofits through a performance contract.

More than $300 million worth of energy efficiency improvements have been implemented in Arizona public buildings in the past decade using a guaranteed energy performance contract. All of these projects were completed at no upfront capital cost to the public entity. These projects are not only eliminating waste, and saving taxpayers’ money, but they are also reducing the public sector’s carbon footprint.

In the final analysis -- meeting Arizona’s carbon reduction goals could turn out to be a win-win opportunity for everyone – utilities, homeowners, taxpayers, ratepayers, and our public institutions.  Even more importantly, meeting the reduction target will be a win for the health of our planet.

Jim Arwood
Communications Director
Arizona Solar Center

Question: Should the legislature allow a plan, developed by Arizonans, to be submitted in response to the EPA’s Section 111(d) rule?

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