Efficiency gains will moderate price increases under Clean Power Plan

Dive Brief:

The Obama administration's plan to reduce greenhouse gases will force power prices higher, but energy conservation will mitigate the impacts along with "price-induced conservation," according to the U.S. Energy Information Administration.
EIA said from 2020 to 2025 it expects residential power prices to rise an average of 6% nationwide, but due to such efficiencies bills will only be about 4% higher.
The agency's analysis is an update of its CPP impact predictions; in May EIA determined the rule would lead to about 90 GW of coal-fired production being taken offline, more than twice the amount expected by 2040 without the plan.

Dive Insight:

The Clean Power Plan will raise power prices, but a mix of energy efficiency and market forces will keep residential bills from following in lock step. According to the EIA, in the early years of compliance residential electricity prices will rise 6% above baseline analysis, but bills will be just 4% higher.

"The price increases resulting from the proposed rule are highest in the initial years of compliance when dispatch is switched from coal-fired to natural gas-fired generation," EIA found. "The South and Southwest experience the greatest increase in electricity prices under the CPP Base Policy case. Prices in these regions are as much as 15% higher in some years under the Base Policy case than in the baseline case that does not apply the proposal."

The agency explained that in those regions, a combination of higher demand growth and decreasing emissions rates means more generation will be shifted to renewable and natural gas-fired generators compared with other regions. Power demand is rising more slowly in the Northeast and Pacific regions, which have integrated more renewable resources onto their grids. There, the EIA said electricity prices will be similar to or lower than they would have been without the CPP.

The Base Policy Case considers the CPP as proposed. The Policy Extension Case considers if emission targets were extended to 2040.

EIA 'Analysis of the Impacts of the Clean Power Plan'

Differences in energy efficiency savings also show up between regions, depending on what measures have already been adopted.The agency said that by 2040, demand reductions range from 3.7% in the Rocky Mountain and Southwest regions to 0.8% in New England.