Missed opportunity: GTM Research weighs in on the Clean Power Plan

Yesterday we published an editorial arguing that EPA Administrator Scott Pruitt’s pending repeal of the Clean Power Plan (CPP) wasn’t a significant concern for the solar industry, citing among other things the unambitious timeline for compliance.

But not everyone in the solar industry agrees with our assessment of CPP, and with that in mind we have interviewed Colin Smith of GTM Research, who presents an alternative view of the potential of the policy.

pv magazine: Based on previous interviews with industry analysts, we haven’t found much potential impact from Clean Power Plan. Has GTM Research reached a different conclusion?

Colin Smith: There are two sides of the coin here. One on hand, solar is economically competitive with other sources of generation, is a great way to meet greenhouse gas reduction and sustainability goals, and is going to be developed regardless of the Clean Power Plan. The other hand, there are many emerging state markets where the Clean Power Plan would have spurred a lot of renewables and solar development and repeal of the CPP means a loss of many potential new state solar markets.

So on one hand you have voluntary procurement driving solar in the Southeast which is going to be one of the biggest regions for solar development, and you also see PURPA development which has taken off in recent years. The uptick in corporates adopting solar in order to meet renewable energy goals is another as a direct result of the declining costs of solar and renewables. A lot of that is going to be there regardless of the Clean Power Plan being in place. But there are other markets such as Kentucky, where the economics and political landscape for utiltiy solar might be tough which might have been driven to adopt renewables under CPP, and won’t be if it is repealed.

That is the upside that we are losing. There are a number of states that would have seen more and faster adoption of solar and renewables if the CPP were in place.

pv magazine: Other than Kentucky, what are the main states that you think would be affected?

Smith: Some of the Midwest and Plains states, such as Kansas and Oklahoma may have been pushed to adopt higher standards. Certainly places like Wyoming and Montana which have been coal hold-outs. In some places the benchmarks for CPP were set in such a way that they weren’t going to have a tremendous amount of impact.

The upside potential on a whole on the national level was really high. It is not an insignificant loss to have the CPP go away.

People talk about it being a figurehead piece of legislation, but it had the potential for significant impact and not just in terms of air quality, in terms of dumping, and in terms of fracking. It would have helped to reshape our energy infrastructure more broadly as well. The industry isn’t going to die without it, but it is something that I think most people in the industry agree would have been tremendously beneficial in the long run.

pv magazine: One of my big concerns with CPP has always been the timeline, with the first compliance period starting in 2022. How can any plans we make for solar today be meaningful in five years?

Smith: For better or worse, there was very obviously a reaction to it. Whether or not a state agreed with its implementation, utilities had to start panning for it, and started to put that into their resource plans. I think in some cases some of the early coal retirements, the CPP definitely played a role into the discussion. I think advanced solar procurement in many states may have been driven by that as well.

In a certain way, in order to meet a goal, you have to start planning for that, and many utilities began to factor in CPP in their planning stages. There was a reaction that was meaningful in that sense.

pv magazine: Given the low cost of renewable energy and uncompetitive nature of coal, aren’t the changes that would be mandated by CPP coming anyway?

Smith: Some of it definitely was coming anyway, and we would have seen adoption of solar based on the fact that it was simply a low cost of power. There is also a degree of that we had to start planning for it, and a lot of utilities started looking at coal retirements, natural gas retirements. I think there are a lot of decisions that may have gone the other way or have not been made without CPP.

CPP may have been representative of many things, but it has acted as a catalyst for a lot of change. My personal belief is that it has helped to push renewables adoptions forward, even in the unofficial stage that it has been in since its inception.

pv magazine: Anything else that we didn’t discuss?

Smith: I think that covers the broad swaths of this. One one hand, utility solar in particular, it has proven itself to be such an efficient, low-cost source of energy, that it will always be on the playing field. CPP was a great push to see it drive solar and renewables in greater volume in a shorter term.

One of the factors that we haven’t discussed is: Was it the best structured plan ever? There are certainly states that have said, we have retired enough coal, we’ve met our targets to 2030 and we don’t have to do anything to 2030.

It could have been structured in a way that baseline targets were set at more meaningful numbers, and could have enabled more action to take place, but overall I think it was a great piece of legislation.

pv magazine: Compared to other potential policy dangers such as tariffs on imported solar, subsidies for coal and nuclear, tax changes and PURPA repeal, how does CPP repeal compare in terms of the threat that you see?

Smith: It’s fundamentally an apples to oranges comparison: fascinating to discuss, but difficult to quantify or qualify. I think CPP offered a tremendous upside potential. I think it did create dialogue, it brought the idea of renewable energy and carbon reduction into a national discussion and one that is on the forefront.

There may not be a lot of mainstream coverage on the loss of PURPA, or any potential tariffs on the Suniva/201 case. Those pose a much bigger downside risk, as opposed to CPP, which is the loss of a potential upside risk.

There is additional planning still underway, and we will start to see certain utilities that had considered CPP shift their strategy, particularly in smaller markets. We won’t see any more development as a consequence of CPP going away.

As opposed to having this upside potential.