Inducing profitable greenhouse gas reductions

The Clean Energy Standard Offer Program (CESOP) is a novel regulatory approach designed to provide clean energy at a discount and unleash private sector investment in our electric grid, while still protecting utility shareholders. The CESOP is structured to accelerate the deployment of any generation technology that significantly reduces greenhouse gas emissions and saves 15% relative to the cost of delivered electricity from the best central generation plant.

CESOP basics:

  1. Regulators determine the true long-term marginal cost of delivered electricity from the best new, electric-only power plant that meets current environmental standards.
  2. Distribution utilities offer qualifying clean-energy plants long-term contracts for power at 85% of the delivered cost from the best electric-only power plant.
  3. Qualifying clean-energy plants must achieve at least 60-percent annual fossil efficiency or be non-carbon-emitting power plants such as renewables or nuclear.
  4. Distribution utilities keep retail customers, fund interconnection facilities to qualified clean-energy plants, and earn allowed returns on required capital investment.
  5. Qualified CESOP plants will not be considered a major modification to industrial processes under the Clean Air Act, thus removing threat of operating permit loss.

CESOP corrects problems of the Public Utility Regulatory Policy Act (PURPA) and the Clean Air Act

  1. PURPA offers no benefit to consumers since utilities are required to pay Qualified Facilities (QF’s) the full “avoided costs” (100 percent) of new generation. CESOP modifies the rule to provide a 15 percent discount for QF power versus best new central generation.
  2. PURPA’s avoided cost calculation omits the costs of delivering power. CESOP avoided costs include this cost.
  3. CESOP raises the PURPA minimum efficiency requirement from 45 to 60-percent.
  4. PURPA allows qualified facilities to sell electricity to their host, which reduces the distribution utility’s sales and can cause rate increases to other utility customers. CESOP plants are not allowed to sell electricity except through the distribution utility.
  5. Industrial facilities fear that recycling their waste energy could jeopardize their operating permit under the Clean Air Act. CESOP specifies that wasted energy recycling plants will not threaten the industry’s operating permit.

Benefits of CESOP

  1. Induces profitable greenhouse-gas emission reductions.
  2. Stimulates private-sector investments in cleaner, cheaper heat and power.
  3. Provides benefits to all stakeholders, including the distribution utilities, manufacturers, and all retail customers.
  4. Improves U.S. manufacturing competitiveness and preserves/adds industrial jobs.

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Learn more about energy recycling in our recent writings and REDAlert logo