Momentum Grows for a Federal Clean Electricity Standard

As more consumers clamor for climate action, manufacturers and other big ratepayers are in a squeeze. They want to compete for customers, and they could do it by purchasing clean electricity. However, without a federal clean electricity standard, corporate energy buyers are faced with a patchwork of state regulations that hinder progress, create cumbersome obstacles and discourage renewable energy investment.

Support grows for a federal clean electricity standard

President Joe Biden supports a federal clean electricity standard. It was left out of the infrastructure deal so now attention is turning to the budget reconciliation process, and energy stakeholders have been jockeying to include their priorities in the legislation.

Last April, for example, a group of public and private sector power producers wrote to President Biden and argued that a federal clean power standard would provide energy investors with certainty, helping to accelerate progress toward the President’s goal of cutting power sector emissions by 80 percent reduction in emissions compared to 2005 levels by 2030.

However, they also pointed out that the availability of wind, solar and other renewable resources varies from one place to another. They made the case for a federal clean electricity standard that provides for flexibility and feasibility.

In a further indication that the April letter represented a cautious approach, one of the signatories was Calpine Corporation, which owns a sprawling fleet of 76 power plants in operation or under construction in 22 states plus Mexico and Canada.

Though one of its power plants deploys geothermal energy, Calpine relies heavily on natural gas as a lower-carbon power generation resource. Unfortunately for natural gas stakeholders, the lower-carbon argument is falling apart as evidence grows on the extent of methane emissions issues stirred up by the natural gas industry, including local air pollution impacts as well as global warming risks.

The green hydrogen trend could enable power producers like Calpine to substitute renewable hydrogen gas for natural gas in power plants. However, the global supply of green hydrogen is still vanishingly small, and the scaling up of this technology is years away.

Reading between the lines, the April letter seems more focused on preserving the role of natural gas in pushing coal out of the power generation sector over the near term, rather than advocating for a more rapid transition out of all fossil fuels.

Electricity buyers write letters, too

A new letter obtained by Politico last week takes a more aggressive approach. Addressed to Congress, the new letter urges “support for a Federal Clean Electricity Standard that will transform the U.S. electric power grid to 100 percent clean energy by 2035.”

“Passage of a federal clean electricity standard will drive large amounts of new renewable generation and do so in a way that provides businesses with a clear path and expectation to make needed investment as the scale and speed necessary,” the letter argues.

The letter caught attention in the media because it was signed by scores of leading corporate electricity buyers, including Apple, Ben & Jerry’s, DSM North America, General Motors, Google, Levi Strauss & Co., Mars, Salesforce, Tesla and Unilever.

Interestingly, none of the signers of the April letter participated in the new letter with the exception of Holy Cross Energy, a rural electric cooperative base in Colorado. As with other utilities of its type, HCE is encumbered by long term contracts that continue to sustain fossil energy use. Nevertheless, it has succeeded in integrating a significant amount of renewable energy.

HCE is also involved in at least two potentially game-changing areas that would a federal clean electricity standard. One is the development of a suite of experimental grid controls that would enable a “hard pivot” away from centralized power plants. HCE is working with the National Renewable Energy Laboratory on that project.

The other area is the “coal-for-solar swap” model adopted by the firm Guzman Energy, which enables power producers to disencumber themselves from long term fossil energy contracts without making onerous up-front payments.

No country for natural gas

Also of interest is the new letter’s emphasis on a federal clean electricity standard that tosses natural gas out of the clean power bucket. The signers simply do not want natural gas included in a “clean” electricity standard.

“The electric power sector accounts for one-half of U.S. natural gas consumption, a major driver of upstream leaks of methane,” the letter points out.

“Methane is a potent greenhouse gas 84 times more powerful than carbon dioxide in its first two decades after release. Researchers estimate that methane from human sources is responsible for at least a quarter of today’s warming,” the letter emphasizes.

What about compliance?

This firm position against natural gas by some of the nation’s top corporate energy buyers is a welcome change from the “all of the above” decarbonization strategy advocated by former President Obama. It is also a giant step in the right direction after former President Trump’s efforts to coddle gas producers, which included the relaxation of methane emission rules.

However, the new letter leaves out the key issue of compliance.

The Environmental Defense Fund (EDF) and other advocates for a federal clean electricity standard argue that an enforceable compliance structure, complete with penalties, is the only way to ensure that the energy transition continues to accelerate.

“The U.S. cannot get where it needs to go on climate through investments alone. Incentive-based policies can only go so far, and a payment-only strategy cannot provide the certainty we need to ensure that the power sector becomes the backbone of a clean economy,” EDF argues.

“Financial incentives cannot be a substitute for strong standards that ensure pollution cuts and secure the deployment of clean energy, and Congress should not offer off-ramps or alternative compliance payments as a substitute to achieving the required outcomes,” adds EDF.

Where are the votes?

Realistically, it appears that financial incentives will win out over penalties.

Democrats have the majority in both houses of Congress, so they could pass a budget through reconciliation with the clean electricity standard, even if no Republicans vote with them.

However, Democratic senators from gas-producing states, like Joe Manchin (D-WV), are likely to dig in their heels against an enforceable standard with penalties. As a result, if a clean electricity standard is included in the budget, it will most likely provide for significant flexibility and it will focus on incentives, not penalties.

That may sound like pretty weak tea, and it is, considering that the impacts of catastrophic climate change are already occurring in the U.S. and other parts of the world.

Nevertheless, the new letter sends a strong signal to Senator Manchin and other policy makers from some of the top employers in the nation. These job creators are ready and willing to throw natural gas under the bus for the sake of climate action, and members of Congress who want to grow the job market for their constituents back home would be wise to do the same.

Image credit: Ruben Gutierrez/Unsplash