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Legal Update

Obama Administration Promotes CHP to Increase Industrial Energy Efficiency

6 September 2012
Mayer Brown Legal Update

In the August 30, 2012 Executive Order “Accelerating Investment in Industrial Energy Efficiency,” President Obama directs the Departments of Energy, Commerce and Agriculture, and the Environmental Protection Agency, in coordination with the National Economic Council, the Domestic Policy Council, the Council on Environmental Quality and the Office of Science and Technology Policy, to coordinate policies to encourage investment in industrial efficiency in order to reduce costs for industrial users, improve US competitiveness, create jobs and reduce harmful air pollution. In doing so, these agencies are required to engage states, industrial companies, utility companies and other stakeholders to accelerate this investment. More specifically, these agencies must take steps to, as appropriate and consistent with applicable law:

  • Coordinate and strongly encourage efforts to achieve a national goal of deploying 40 gigawatts (GWs) of new, cost-effective industrial combined heat and power (CHP) in the United States by the end of 2020;
  • Convene stakeholders, through a series of public workshops, to develop and encourage the use of best-practice state policies and investment models that address the multiple barriers to investment in industrial energy efficiency and CHP;
  • Utilize their respective authorities and resources to encourage investment in industrial energy efficiency and CHP, such as by:
    • providing assistance to states on accounting for the potential emission reduction benefits of CHP and other energy efficiency policies when developing State Implementation Plans (SIPs) to achieve national ambient air quality standards;
    • providing incentives for the deployment of CHP and other types of clean energy, such as set asides under emissions allowance trading program state implementation plans, grants and loans;
    • employing output-based approaches as compliance options in power and industrial sector regulations, as appropriate, to recognize the emissions benefits of highly efficient energy-generation technologies like CHP; and
    • seeking to expand participation in, and create additional tools to support, the “Better Buildings, Better Plants” program at the Department of Energy, which is working with companies to help them achieve a goal of reducing energy intensity by 25 percent over 10 years, as well as utilizing existing partnership programs to support energy efficiency and CHP;
  • Support and encourage efforts to accelerate investment in industrial energy efficiency and CHP by:
    • providing general guidance, technical analysis and information, and financial analysis on the value of investment in industrial energy efficiency and CHP to states, utilities, and owners and operators of industrial facilities;
    • improving the usefulness of federal data collection and analysis; and
    • assisting states in developing and implementing state-specific best practice policies that can accelerate investment in industrial energy efficiency and CHP.

In implementing this section, these agencies should consult with the Federal Energy Regulatory Commission, as appropriate—an agency that already has tried to promote CHP.

A related joint Department of Energy and Environmental Protection Agency report entitled “Combined Heat and Power—A Clean Energy Solution,” claimed that this initiative would:

  • Increase total CHP capacity in the United States by 50 percent in less than a decade
  • Save energy users $10 billion per year compared to current energy use
  • Save one quadrillion Btus (Quad) of energy—the equivalent of 1 percent of all energy use in the United States
  • Reduce emissions by 150 million metric tons of CO2 annually—equivalent to the emissions from more than 25 million cars
  • Result in $40-$80 billion in new capital investment in manufacturing and other US facilities over the next decade

This is one of several actions taken by the Obama administration to effect policy changes without the need for legislation. Its practical effects before the election will be limited. However, if President Obama is re-elected, these issues may have to be addressed by any projects or initiatives that require federal approvals.

If you have any questions regarding this Legal Update, please contact J. Paul Forrester, David I. Bloom or your regular Mayer Brown Energy or Projects lawyer.

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