EPA proposal unlikely to be a game changer for clean energy 'innovation'

Despite White House promises to "spur" innovation in drumming up support for the new U.S. EPA rule to cut carbon emissions on existing power plants, the rule if enacted will not create any great leap forward in clean energy technology.

The rule would not solicit a surge of investment for advanced energy storage and batteries; flexible, paper-thin solar panels would not become the building material of choice because states are looking for cleaner generation.

EPA Administrator Gina McCarthy said it best perhaps at the beginning of her speech unveiling the proposal.

"All of these options are not new ideas," McCarthy said. "They're based on proven technologies, proven approaches and are part of the ongoing story of energy progress in America."

The proposal would create a cost for CO2 emissions that is "politically feasible" but not a price high enough to really bring breakthrough technology from laboratories to the showroom floor -- estimated to be about $50 to $72 per ton of carbon, according to Robert Stavins, a professor of public policy and director of the Environmental Economics Program at Harvard University.

"The long-term target of cutting 80 percent of greenhouse gas emissions by 2050, that is going to require technology innovation, not just the support of existing technology," Stavins said.

Serious leaps in technology will be needed quickly to achieve the cut in greenhouse gas emissions necessary to keep global warming under the 2-degree-Celsius level that scientists have named the breaking point for catastrophe.

The proposed rule would incentivize the demand for current technology for solar, wind, biomass, geothermal and energy efficiency -- which is certainly better than even five years ago -- and it would bring incremental innovation in these technologies, including longer, more efficient wind turbines or thinner solar panels, all continuing to bring down costs.

And using proven technology allows EPA to defend the economic feasibility of the proposal with solid data.

The proposal's flexibility also opens the door for innovation in policy and process. Some technology enthusiasts hope a few forward-looking states may even use the opportunity to push the envelope on research and development investment.

The problem historically, said Matthew Stepp, executive director of the Center for Clean Energy Innovation at the Information Technology and Innovation Foundation, is that regulations don't provide a strong enough "pull" for advanced technology without additional R&D investment and incentives, which doesn't look likely in current state and federal budgets.

"Will EPA regulations plus weak investment in innovation spur the innovation we need? I don't think the answer is yes," Stepp said. "They set such a modest goal, we have a little bit of time to get innovation policy up to snuff."

Technology 'jump-start'

The rule is still a "significant step forward" even if the expected cost of compliance is on average about $30 per ton of CO2, according to Daniel Kammen, a professor of public policy in the Energy and Resources Group at the University of California, Berkeley.

The actual cost of compliance for states will depend on the choices each state makes in its plan between burning coal more efficiently, switching to natural gas, renewable energy or nuclear generation and energy efficiency policies required by the EPA proposal.

"We don't need technological innovation to start the process," said Kammen, who is also the director of UC Berkeley's Renewable and Appropriate Energy Laboratory.

"In the long term, we need that. In the short term, we have an overabundance of cost-effective renewable technologies," he said. "We don't need to look any further than California, Europe and China to know it is cost-effective to deploy the technology. The question is whether we can use this rule to jump-start this deployment now and then get on trend into areas like storage."

California already has set a mandate to add 1.325 gigawatts of energy storage capacity by 2020, Kammen noted.

States and clean energy advocates should also be sensitive to a reliance on natural gas in states' plans and not let it "block" cleaner energy or advanced technology like storage, Kammen cautioned. Natural gas should be used as a support for renewable energy; otherwise, there is a danger that states may have to "tear out" plants if there is an overabundance, because it will be necessary to cut more emissions in the future, he said.

The proposal should also go further to smooth the pathway for existing but not-yet-mainstream technology like demand-side management, according to Dan Delurey, executive director of the Association for Demand Response and Smart Grid.

"I think the rule is great, and flexibility for compliance provided to the states is great, but you know, it is almost as though the rule was written irrespective of all the change going on in the electricity and utility industry," Delurey said.

More precisely, Delurey said the proposal mainly talks about the plant or the plug -- generation or end-use efficiency, which usually focuses on people's consumption behavior -- and not about everything in between, known as demand-side management.

Technology and efficiency in grid operation, distribution, demand response and microgrids are a sizable market and are bringing significant savings in costs and carbon emissions that deserve some discussion in the rule -- or at least even one mention of the words "smart grid," Delurey said.

Demand-response programs, which rely on voluntary cuts in power use by consumers, are in fact set to reach $9.7 billion in revenue annually by 2023 from $1.6 billion annually in 2014, with North America being the largest market, according to a new report from Navigant Research.

These technologies will also likely have a significant role in measurement and verification for the proposal, even more reason to include them more substantially, he added.

The EPA proposal does include a clause toward the end of the 645-page document that said it would consider transmission improvements, storage and other new technology beyond the four building blocks that helps reduce emissions. But Delurey said not having a robust section on demand-side management makes it harder to convince the states to include it.

"I would like to be optimistic that all of that will find a way into the state plans. I think this can be a tremendous opportunity for technology both in product and practices. There is no reason to be pessimistic, yet I still need to point out that they didn't give us a lot to work with," he said.

Are the states ready to rumble?

The extent to which the EPA regulation is able to push clean energy innovation, either big or small -- and not just rely on natural gas -- lies mainly in the flexibility in the states' decisions about their compliance plans.

Meredith Fowlie, an associate professor in the Department of Agricultural and Resource Economics at UC Berkeley's College of Natural Resources, said the opportunity for "innovation" in management, process and policy should not be dismissed just because it isn't a shiny, new object.

"You can build a better mousetrap, but you also have to think about policy and improvements to deploy the mousetrap," she said.

EPA, Fowlie said, was also limited by the legislation the proposal is based on, and there are other policies designed to address R&D issues.

"Working within the Clean Air Act, you can only do so much," Fowlie said. "It is just not designed to be a technology push. It wasn't the original intent. That is not to say it is not capable of moving the ball, but that is not the primary emphasis."

But some of the states may not have a choice or may see a competitive edge. Leading clean-energy states like New York, California and Massachusetts have already set state goals for renewable energy and energy efficiency, uncovered the tweaks to be found in burning coal more efficiently or have few left, and are wary of building more natural gas plants because of public backlash, siting or cost issues.

"Now that they have done a lot of the low-hanging fruit, they are going to have to get creative," Stepp said. "This may spur states to ramp up investments or get more serious about innovation. There is really no telling what a lot of states are going to do."

He added, "That might be a good thing. I think we have all been a little fatigued on hearing the same policy proposals over and over again. States are likely going to be competing with one another to come up with the best plan -- that is when they do the best work."


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