Ana C. Montalban and Jillian C. Bunyan ()
This summer, the U.S. Environmental Protection Agency announced a new proposal to reduce greenhouse gas, or GHG, emissions by regulating, on a state-by-state basis, how and where electricity is generated. Under its Clean Power Plan, the EPA has proposed new emissions standards and guidelines for states to accomplish targeted reductions in GHG emissions. This article will give an overview of the plan as well as some of the ways in which Pennsylvania has already positioned itself as a leader in green development incentives and emissions reductions. It will highlight certain challenges and uncertainties clients should be aware of as they prepare to take advantage of the development-friendly environment created by the Clean Power Plan.
Under the plan, the guidelines for reducing GHG emissions generally consist of the following: (1) increasing the efficiency of existing power plants; (2) favoring natural gas over coal electricity production; (3) using renewable resources to generate solar, wind, nuclear or hydro power instead of fossil fuel-fired generation; and (4) expanding existing energy-efficiency programs, thereby decreasing user demand for power.
Additionally, states will be required to attain certain renewable energy production and electricity demand reduction goals. Decreasing user demand for power or replacing fossil-fueled power with renewable electricity removes GHG emissions from the equation.
Many states have already begun to generate power from renewable resources. In fact, in 2012, 2 percent of Pennsylvania’s power was produced from alternative energy sources. In computing renewable energy targets, the plan utilizes states’ annual generation of renewable energy in 2012. For Pennsylvania, the EPA set a goal of 9 percent renewable energy production in the interim and 16 percent in 2030.
The Clean Power Plan also sets forth certain efficiency policies to reduce user demand for power. Target percentage savings on account of energy-efficiency programs are derived from states’ current policies and their attendant imputed savings. It is anticipated that certain states will be capable of reducing electricity demand by 1.5 percent per year. Assuming a 1.5 percent savings rate per year, the plan sets an interim goal of 4.2 percent and a final goal of 11.6 percent reduction for Pennsylvania, which is within the 10 highest targets in the country.
In addition to energy-efficiency policies, green infrastructure also plays a critical role in reducing GHG emissions. Buildings account for an estimated 40 percent or more of electricity consumed in the United States. Studies demonstrate that LEED and Energy Star buildings can be 30 percent to 70 percent more efficient than traditional ones.
These green buildings can even be energy-positive. According to the EPA, green building can greatly reduce demand for fossil fuel energy generation; thus, states should seriously consider employing green infrastructure in their plans for complying with the new emissions regulations imposed by the Clean Power Plan.
Currently, the costs of compliance with the requirements of the Clean Power Plan are uncertain. Rulemaking and rate setting and their effects on power economics are hard to predict even in the near term. Likewise, the value of energy-efficiency programs is not easily quantifiable. Potentially, the plan could render coal plants uneconomical, resulting in the abandonment of coal assets.
It may be difficult to attain the rate increases necessary to recover the costs of compliance with the plan and of investments in more favorable energy-generation programs. For instance, utilities continue to recover a large portion of costs from user charges. The demand side best practices the Clean Power Plan adopts to reduce electricity consumption would create more risks that utilities would be unable to recover costs incurred as a result of the required energy investments.
One upside that can alleviate some of the concerns the plan raises about the scope and cost of required energy investments is the Clean Power Plan’s built-in flexibility. The plan characterizes the guidelines as suggestions from the EPA on how to achieve the required goals and not as binding practices or procedures. Throughout the plan, the EPA emphasizes that it “does not prescribe how a state should meet its goal[s] … and provides flexibility for states to build upon their [individual] progress,” particularly in light of the unique energy generation mix available in each state. This manifest flexibility in the plan can prove to be a significant advantage for cities that have already begun to address climate change and GHG emissions and to advocate for green economics.
Fortunately, Pennsylvania has already implemented tactical strategies to address GHG emissions, including energy-efficiency programs, renewable energy projects and green building. In 2007, Montgomery County became the first wind-powered county in the nation. The state’s existing wind farms, most of which are located in the Appalachian southwest, have the capacity to power the equivalent of 180,000 homes. Moreover, Pennsylvania’s Alternative Energy Portfolio Standard, adopted in 2004, contains one of the most ambitious solar power plans in the eastern United States. In terms of demand energy-efficiency programs, Pennsylvania’s Sunshine Solar Program provides rebates to homeowners and small businesses that produce solar power, thereby decreasing the demand for fossil fuel-generated electricity.
Pennsylvania also offers solar alternative energy credits for commercial, industrial, residential, nonprofit, educational and government users. Finally, several loan and grant programs are available in Pennsylvania to assist in the financing of renewable energy projects.
Western Pennsylvania is an exciting example of innovation in the state. Historically, the region has been known for its immense anthracite coal mines and coal factories. On a regional scale, Western Pennsylvania now has numerous financing sources (including loans, grants and tax incentives) to encourage the creation, development and renovation of green buildings, as well as inspire a more sustainable perspective in projects of all kinds. Incentives are offered to businesses, nonprofits, governments and even individuals. Some of these incentives include the Pittsburgh sustainable development bonuses, the Urban Redevelopment Authority of Pittsburgh’s green design initiatives and incentives, and the Duquesne Light energy-efficiency rebate program. Additionally, Western Pennsylvania is host to multiple funds such as the Penelec Sustainable Energy Fund and the Colcom Foundation, which provide funding and grants for projects that enhance environmental sustainability.
Like other regions of Pennsylvania, Philadelphia is also at the forefront of green innovation. Mayor Michael Nutter has set ambitious goals for the city in an effort to reposition and repurpose Philadelphia as a leader in green thinking.
Greenworks Philadelphia, released in 2009, is a plan that seeks to increase energy efficiency and cultivate renewable energy sources in order to combat climate change and reduce the city’s vulnerability to rising energy prices. Some of its targeted goals include: lowering city government energy consumption by 30 percent; reducing citywide building energy consumption by 10 percent; retrofitting 15 percent of housing stock with insulation, air sealing and cool roofs; purchasing and generating 20 percent of the electricity needed from renewable energy sources; and reducing GHG emissions by 20 percent.
In 2013, Philadelphia released a progress report that demonstrates that the city has made advances toward several of the aforementioned goals. For instance, city government has reduced its consumption of energy from 3.77 trillion British thermal units to 3.50 trillion BTU and its purchase and production of alternative energy has increased from 2.3 percent to 14 percent. Greenworks Philadelphia, like the other initiatives adopted throughout Pennsylvania, could serve as a model for other states as they develop their own guidelines to comply with the Clean Power Plan.
As previously mentioned, while the Clean Power Plan does provide significant flexibility, it may be challenging to implement due to the uncertainty surrounding the costs of compliance and the recovery of investments in energy. This uncertainty makes it difficult for states to develop and implement tactical strategies in the very arena where proactivity is necessary and should be encouraged.
In addition to the financial uncertainty, clients should be made aware that green development is accompanied by certain legal risks related to siting, zoning and permitting, environmental assessments and unforeseen impacts.
Green development falls within many areas of Pennsylvania land use and municipal law. Despite efforts to promote green development, many areas in the state have conflicting structural constraints in their zoning, land use and land development codes, especially in areas of transportation management and stormwater management, which may hinder the use of green development strategies.
Additionally, challenges may lie in the comparative newness of green construction. Green development often involves relatively untested materials and procedures. For instance, vegetative roofs (one of the projects encouraged by Greenworks Philadelphia) may cause water intrusion and maintenance issues. Water barriers may not have been placed properly to withstand weight during events such as Hurricane Sandy or winters that are abnormally snowy. Similarly, structural issues may arise when placing wind turbines on buildings, not to mention unanticipated environmental effects on, for instance, avian populations.
In conclusion, proactive thinking and planning on the part of local governments, residents and businesses could result in significant emissions reductions and the expansion of green development throughout the state, as well as the development of a framework for cost-effective compliance with the Clean Power Plan.
Pennsylvania already has a strong set of incentives, which will likely only be expanded in light of the proposed Clean Power Plan. Due to the flexibility of the Clean Power Plan, it is yet to be seen how cities like Philadelphia will build green development and renewable energy incentives; however, it seems very likely to happen. Businesses in the state should be poised to take advantage of this opportunity to engage in green development, but should also be alert and aware of legal risks that may accompany these types of projects.
Ana C. Montalban is in the public finance practice, and Jillian C. Bunyan is in the environmental practice, of Greenberg Traurig. Both maintain their offices in Philadelphia. Montalbán previously clerked for Chief Judge Theodore A. McKee of the U.S. Court of Appeals for the Third Circuit and worked for the Law Department of the City of Philadelphia. Bunyan served as an honors attorney fellow in Region X of the U.S. Environmental Protection Agency.