An Innovation + Regulation Policy Approach to Decarbonizing the U.S. Electric Power Sector

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Using the customized EIRP21-NEMS model, OnLocation analyzed several scenarios for the Energy Innovation Reform Project (EIRP) to examine how innovation policies that lower the cost of a broad suite of zero- and low-carbon energy technologies, combined with CO2 mitigation regulations, can achieve substantial CO2 reductions in the electric power sector by 2050. The objective of these scenarios is to provide insights of what could happen if the scenario assumptions reflect future technology evolution and market conditions.

Referred to here as the Innovation + Regulation (I+R) Policy, this core scenario combines innovation policies with a Clean Electricity Standard (CES) to reduce power sector CO2 emissions 80 percent below 2022 levels by 2050. More specifically, the innovation policies would promote the use of advanced power sector technologies, by lowering the cost and improving performance of technologies such as carbon capture and storage, advanced nuclear power, renewable energy, and energy storage. Innovation policies would provide federal funding for research, development, and deployment of these technologies, expand existing tax credits, provide targeted investment to reduce first-of-a-kind costs, and fund matching grants and other policies designed to spur further private-sector investment.

OnLocation modeled several scenarios as part of this analysis, including the I+R policy scenario and a CLEAN Future Act (CFA) CES scenario which are the focus of this paper. The CFA CES is a regulatory policy that aims to achieve net zero CO2 emissions in the power sector by 2035. We compare the cost and effectiveness of these two policies to each other, as well as to a business-as-usual (reference) case. Comparisons are also made with a revised reference case that reflects select power sector provisions of the recently enacted Infrastructure Investment and Jobs Act (IIJA).