Some of America’s biggest utilities are pushing to remove penalties from President Biden’s iconic climate policy.
The effort to dilute the Clean Electricity Performance Program, a central part of the $ 3.5 trillion reconciliation program, reflects deep divisions within the utilities sector over how quickly the industry can move to decarbonize this decade.
Some large utilities say massive federal investment is needed to quickly rebuild the industry. Biden wants 80% of America’s electricity to come from carbon-free sources by 2030, up from around 40% today.
But other power companies say CEPP could backfire. They say companies could be unfairly penalized if new clean energy projects run into authorization delays, regulatory delays or other factors beyond their control. Many have focused their fire on a provision that would require shareholders to pay any penalty incurred by a utility.
Yet public service critics of the CEPP largely refrained from a full-scale assault on the bill. Many have set emission reduction targets and invested in renewables – a selling point for Wall Street. This dynamic has forced many companies to voice their concerns about CEPP in private while largely withholding criticism in public.
American Electric Power Co., an Ohio-based utility that has promised achieve net zero emissions by 2050. He issued a letter to congressional offices earlier this month who said CEPP would force decarbonization “too quickly”.
AEP’s concerns are shared by companies like Arizona Public Service Co. Last year, the Phoenix-based power company established a goal to produce all of its electricity from carbon-free sources by 2050.
“We support CEPP’s intention to accelerate decarbonization through incentives,” APS said in a statement. “We do not support the use of penalties or the proposed compliance framework as they would jeopardize the accessibility and reliability of customers, particularly in the desert Southwest where annual growth far exceeds the national average. “
The company said it would support a federal bill if it struck the right balance between adding new own resources without sacrificing affordability and reliability.
The CEPP would pay utilities that increase their annual sales of clean electricity by 4%. Businesses would be eligible to receive a subsidy of $ 150 per megawatt hour on 2.5% of their new clean energy sales. Those who do not meet the annual threshold of 4% would face a penalty of $ 40 per MWh.
Supporters of the plan say sanctions are needed to ensure a swift cleanup of U.S. electricity supplies. About a quarter of the country’s greenhouse gas emissions come from power plants, just behind transportation. But most decarbonization studies show that power plants will need to clean up first (Climate wire, July 12).
Cleaner options like wind and solar are more available to power companies, for example, than electric vehicles are to most consumers. A clean power supply is also necessary to ensure that these vehicles deliver the greatest possible emission reductions.
“If that’s not it, then what?” “
Some experts have said attempts by utilities to weaken CEPP raise questions about their climate commitments.
“The alternative policy ideas that people have been putting on the table for decades are carbon prices, clean electrical standards or EPA regulations,” said John Larsen, analyst who tracks the electricity sector at Rhodium. Group, a consulting company. “All three are much more restrictive and heavy on public services than giving them $ 150 [per] MWh to buy clean energy. You have to wonder if that’s not it, then what can they live with to help the United States meet its climate commitments? “
CEPP passed the House Energy and Commerce Committee earlier this month, but faces an uncertain future. Democratic House leaders say it needs to be part of a larger budget bill, but it’s unclear whether it can win enough votes to pass in the Senate. Senator Joe Manchin, a Democrat from West Virginia, has expressed reservations about the bill.
Many public services have sought to keep a low profile during political wrangling. Southern Co., an Atlanta-based utility serving three southeastern states, declined to comment on CEPP. He set a target eliminate its greenhouse gas emissions by 2050. DTE Energy Co., a Detroit-based utility with a similar climate goal, also declined to comment.
Many utilities echoed Duke Energy Corp’s sentiment. The North Carolina-based electricity company, which claims a 2050 net zero goal, said he supported the concept of a federal clean electricity standard.
CEPP is loosely based on a clean electricity standard, with one crucial difference. Where a standard would force utilities to sell more clean electricity, CEPP is a budget program designed to spur change. The budget approach is a product of the political calculation of the Democrats. With Vice President Kamala Harris holding the deciding vote in the Senate, their only route to a major climate bill is through the budget process.
A spokesperson for Duke Energy said the company is evaluating the proposal.
“We are constructively engaged with policy makers on how best to structure these policies in a way that reduces emissions while protecting affordability and reliability for our customers,” Erin Culbert said in an emailed statement. .
The AEP and APS have been among the most vocal critics of CEPP, at least in private. In its letter earlier this month, the AEP argued that bringing clean energy projects online is not happening in 4% clean increments as the CEPP imagines. Instead, clean energy projects are brought online in installments, with larger increases in some years and smaller increases in others.
“Many electric utilities will simply not be able to avoid an unfair and arbitrary obligation to pay penalties for many years of the program, even though they may be able to meet their utility targets. clean energy, albeit in a non-linear fashion as provided for in the bill. ”AEP wrote.
He called for removing the requirement that shareholders in utilities pay a company’s penalty, writing: “shareholders will wonder why utilities pay penalties if they behave properly and deploy clean energy.”
A company spokesperson said AEP supports a clean energy transition and is working with lawmakers to ensure it can be done in a way that does not compromise affordability or reliability.
Supporters of the bill say the shareholders’ provision is necessary to ensure consumers are harmless while providing a strong incentive for utilities to act.
They argue that CEPP also offers great flexibility. It allows utilities to defer penalties for one year. Businesses will also be able to purchase electricity from other utilities to meet the annual goal of selling clean electricity. And they can invest in energy efficiency programs, which will reduce overall sales and therefore the amount of new clean electricity they can bring online.
CEPP has received public support from Exelon Corp., an Illinois-based company that has a large nuclear fleet. The company believes a combination of incentives and penalties is needed to make the program binding and ensure it delivers the promised clean energy development (Climate wire, September 15).
NextEra Energy Inc. CEO Jim Robo approved the general idea of Biden’s clean electricity plan in the spring, but he has not commented as more details have become public (Energy wire, April 22). A NextEra spokesperson did not return a request for comment. NextEra is one of the nation’s largest renewable energy developers and the parent company of Florida Power & Light Co.
Divisions echo divisions in industry during the Obama administration, with utilities falling to different sides of the debate over whether to place carbon dioxide limits on power plants.
The split is also reflected at the Edison Electric Institute, a trade association representing investor-owned utilities, which has issued favorable ratings to CEPP while raising concerns about costs and reliability. Congressional staff and industry representatives said many utilities lobby individually rather than through IEEs, given divisions in the industry.
Many companies fear they will not be able to meet the 4% threshold for clean electricity sales, leaving utilities worried about facing a series of sanctions under the program, said Scott Segal, a lobbyist for Bracewell LLP whose clients include DTE, Duke Energy and the Rivière Salée Project.
He noted that a company narrowly missing the 4% threshold would pay the same penalty as a company narrowly missing. Segal compared CEPP to an insurance program where a consumer pays a premium but never receives a payment.
“If you can’t claim the carrot, it doesn’t matter how big it is,” he said.
Ultimately, many of the issues are difficult to resolve because CEPP is part of a budget bill, Segal said. Regulatory details are difficult to include in the language of a finance bill as part of Senate parliamentary procedures.
“The architecture of a CEPP or CES could be an effective way to increase clean electricity,” Segal said. “But it has to be structured appropriately. Perhaps because this is only a budget debate, the drafters of these proposals do not have all the necessary tools.