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Achieving Energy Goals in the ‘New Abnormal’

April 22, 2021

The pace of regulatory and legislative developments in climate change and renewable energy over the past few years has been dizzying. With a new US presidential administration now focused on energy issues, examples set from forward-thinking states, and recent lessons learned on the importance of grid stability, here are some of the expected federal actions aimed at achieving energy goals in the “new abnormal.”

BIDEN-HARRIS ADMINISTRATION

President Joseph Biden had announced as a candidate that climate change was going to be one of his administration’s top priorities. That has proven to be true after he took office. Between executive orders issued during his first week in office and the Earth Day climate change summit that brought together world leaders to share how they are addressing climate change efforts in their countries, the Biden-Harris administration is taking significant steps to create a comprehensive approach to reducing emissions. The administration set out aggressive goals and really strong plans in its first 100 days. To achieve these goals, we are expecting more action on the regulatory side, and more actions like executive orders, that can be implemented faster than new legislation.

  • One of the first things that President Biden said he was going to do is establish a national Clean Energy Standard, the first time the United States will establish a national standard requiring utilities to use a specific amount of renewable energy power. His goal by 2035 is to get energy production to be zero emissions, and by 2050 to get to carbon net zero.
  • The United States announced a 52% reduction in emissions by 2030, which will take astronomical changes across the country. A large part of that goal rests with how the United States produces energy and delivers that energy to consumers.
  • Another major component of President Biden’s plan focuses on extending and expanding tax credits for both renewable energy production and investments. Significant private investment will be required to achieve the targets that the administration has laid out and meet the demand for renewable energy nationwide. The investment tax credits are designed to help bring in this investment to renewable energy development. A significant part of the tax credits is a separate credit for energy storage, which had only been allowed as part of a solar project for past tax credits. Incentivizing energy storage projects as standalone developments could be a big change.

Manufacturing is also an important part of the plan. The Biden-Harris administration has announced that one way to encourage economic recovery after COVID-19 is through green growth. It is incentivizing the manufacturing of solar panels and wind-related materials in the United States to encourage a migration from purchasing those materials from Chinese manufacturers.

GREENHOUSE GAS EMISSIONS

The regulation of greenhouse gases (GHGs) under the Clean Air Act (CAA) began to take shape in 2007 when carbon dioxide and other GHGs were confirmed to be air pollutants. The EPA under succeeding administrations has been flip-flopping with respect to the interpretation of the CAA with respect to regulating GHG emissions; particularly for certain sources such as power plants and oil and gas production facilities. Based on recent court decisions, the Biden-Harris administration appears to have a relatively clean slate to issue new rulemaking related to the regulation of GHG emissions.

  • President Biden issued two key executive orders on climate change, which provided a broad government approach to the reduction of GHG emissions. The transportation sector, oil and gas sector, and power plants are going to be the subjects of many discussions around emissions reduction.
  • Following a protracted legal battle including rule revisions, court decisions, and reconsideration of active litigation, the Biden-Harris administration is free to start rulemaking on GHG emissions for both new and existing power plants. The key question is whether this means EPA will take a fundamentally different position since power plant CO2 emissions are already on the decline.
  • There will likely be more regulation of methane in the oil and gas sector. Methane comprises 10% of the United States’ GHG emissions. Almost half of that comes from the production of oil and gas, including natural gas that is comprised primarily of methane.
  • The Biden-Harris administration has issued new guidance on the social cost of carbon that will significantly impact the valuation associated with 2020 legislation and future rules. The administration has greatly increased the scope of what is to be included in the social cost of CO2 per ton, which will impact all future cost-benefit analysis.
  • A patchwork of state regulations is starting to emerge related to GHG emissions. Several states, including California, Colorado, and New Mexico, have already imposed regulations. The industry may be more willing to accept federal regulation of methane emissions to set a level playing field.

CALIFORNIA CASE STUDY

California has been a remarkable success story in reducing greenhouse gas emissions. Since 2000, California’s GDP and population have risen dramatically, but the GHG emissions have gone down both per capita and per GDP. California achieved that largely by focusing on the industrial and electric sector. There has been dramatic decline in particular on the electric generation side. California is ahead of schedule, having hit 36% in renewable energy by 2019, well ahead of the 33% required for 2020 by Renewable Portfolio Standards (RPS) legislation. But massive amounts of new renewable resources and storage capacity will be required to ultimately achieve the state’s GHG goals under SB100, which moved goals up to 60% renewable energy by 2030, and maintain grid reliability. More still will be needed to achieve the State’s 100% renewable/carbon free energy goal by 2045.

  • Challenges ahead: in order to replace natural gas and the nuclear plants that are scheduled to go offline and achieve the state’s goal to be powered entirely by renewable or other carbon free generation, California is going to need to build one of the biggest new fleets of renewable energy generation that has ever been built in the world. It will require bringing new resources online at a rate that has never before been achieved. Intermittent renewable resources, such as solar that is only captured during the day, cannot fully replace gas and nuclear retirements. Pumped energy storage projects and batteries will be critical to filling the gap to maintain grid reliability, again on a scale never before constructed.
  • Without steady reliable energy sources, nothing works. It’s what our society is built on. The year 2020 was a reminder of the importance of a reliable energy grid after system-wide outages occurred during the West-wide heat storm, nationwide winter cold, and Texas storm outages – which underscored the future threat of climate impacts. Last August, more than 800,000 homes and businesses lost power in California alone to deal with insufficient energy supply relative to demand on the system. The system couldn’t keep up. Major reliability concerns regarding the loss of service prompted emergency procurement efforts by the California Public Utilities Commission to bring new capacity online in the next few years and policy discussion about keeping antiquated gas fired plants that make use of ocean water for cooling scheduled to shut down because of the adverse environmental impacts open for a few more years.