Efficiency First

The EPA Wants to Cut Greenhouse Gas Emissions From Existing Power Plants

What Could That Mean for Home Performance?

Only have a minute? Skip down to learn why it's relevant to HP pros.

You might have heard by now that the EPA has unveiled draft federal regulations that will limit the amount of carbon emissions from existing power plants. Either way, we’re here to give you the scoop, and let you know how this new rule has the potential to impact the home performance industry in a major way.

So what’s going on?

On June 2, 2014 the EPA formally proposed a draft rule, known as the Clean Power Plan, that will limit carbon emissions from existing power plants. EPA has issued these rules using its authority under the Clean Air Act, Section 111 (d), which by law requires the EPA to regulate pollution that threatens public health and welfare. Electricity generation accounts for America’s largest share of greenhouse gas emissions – around 33%, with 70% of that from fossil fuels like coal. Thus the regulation of new and existing power plants is an important part of addressing carbon emissions.

Why now?

Let’s step back for a minute: In 2007, the Supreme Court ruled that the Clean Air Act could be used to regulate carbon emissions if they were determined to be a threat to human health. In 2009, the EPA made this determination, the same year that efforts to pass a cap-n-trade bill to regulate carbon emissions failed to pass Congress. Last year, President Obama issued a Climate Action Plan to cut carbon pollution and slow the effects of climate change.

Because no federal regulations exist to limit the amount of carbon that existing power plants emit, and with Congress in gridlock over any type of climate legislation, the EPA has proposed a new rule to cut emissions.

How will EPA mandate emissions reductions?

The EPA has given states lots of flexibility to develop their own plans for reducing emissions, all adding up to a 30% nationwide reduction target by 2030, based on 2005 emission levels. States have the flexibility to achieve emissions reductions in a variety of ways, through a combination of measures that reflect its particular circumstances and policy objectives.

The EPA has identified four sets of measures, or “building blocks,” used today by many states and utilities that could be used in combination to reduce carbon emissions: Making fossil fuel power plants more efficient; using more lower-emitting power sources (like natural gas); expanding use of renewable energy; and energy efficiency measures. States could choose to engage in those efforts directly; they could also join regional “cap-n-trade” programs, or start one of their own, to achieve the same emissions reductions.

What does this have to do with the home performance industry?

When home performance pros are out retrofitting homes, they’re doing more than just increasing homeowners comfort, keeping them healthy, and saving them money (and the list goes on…) — they’re reducing their energy use, which in turn lowers greenhouse gas emissions. The whole point of the proposed EPA rule is to cut greenhouse gas emissions, and improving the efficiency of homes and buildings can help make that happen.

Now, there’s no definitive answer to how these rules will play out on the ground for home performance companies. But states that choose to achieve emissions reductions in part through energy efficiency will be looking for ways to deliver those savings. Greenhouse gas reductions, and the energy efficiency projects that make those reductions happen, would then have a monetary value. This could mean more opportunities to push for market-driven policies that reward (i.e. pay) for delivered energy savings -- like savings achieved through home performance retrofits.

In so many words, once the rule goes into effect, it could mean new incentives and lower costs for your customers, bringing more customers through your door and making it easier for your business to be successful.

When will these rules go into effect?

The proposed rule was released on Monday, June 2. Now, the EPA will accept comments and in June 2015 the final rules will be released.

States would have until June 2016 to submit their state implementation plans that tell EPA how they plan to comply with the new rules. Finally, in June 2017, the requirements would go into effect.

One unknown has to do with the courts. It’s expected that various parties will file lawsuits against the EPA at some point, challenging the rules. We don’t know whether that will have an impact on the timing of the rules, or their eventual roll out.

So, will this new rule have an immediate impact on home performance companies?

Probably not. But it could be extremely impactful down the road, so it’s important for industry pros to start paying attention. And some states could always choose to start implementing plans sooner, so that when they are required to meet their reductions, they know what they are doing.

Since we know the EPA is giving states the flexibility to achieve emissions reductions in a variety of ways, it’s important now that we push states to develop good plans that include energy efficiency/home performance as a viable option to achieve efficiency gains. If that happens, we’ll be a big step forward on the path toward better performing, more efficient homes and buildings across America.

Ok, what is Efficiency First doing?

Leading up to the release of the rule, Efficiency First had been engaged with the EPA and various stakeholders to ensure energy efficiency has a big role in the new rules. We provided guidance to the EPA explaining in particular how residential energy savings can and should be eligible for getting counted towards greenhouse gas emissions reductions.

Over the next year, Efficiency First will be working with allies to ensure that state-based programs can include energy efficiency (including from residential buildings) as a viable method for reducing carbon emissions. We’ll be asking for your feedback and engagement, so keep an eye out for a more in the coming weeks and months.