The House Democrats’ $ 150 billion clean electricity plan is raising concerns about who can build renewable energy projects.
The Clean Electricity Performance Program (CEPP) under consideration in Congress would distribute monetary rewards to electric companies that meet annual clean electricity targets and penalize them financially if they do not. The landmark federal proposal is designed to boost renewables in the power sector, but critics argue its terse language can leave key players out.
The absence of the program in its current form is a requirement that utilities must choose the cheapest way to add clean energy to the grid, which would be done through a process of call for tenders. Some large renewables developers fear that regulated and investor-owned utilities will choose to build all clean energy projects themselves so they can recoup the cost of those capital investments and make a profit.
“[They] are incentivized to build their own production, âsaid Brian George, director of policy strategy and government affairs for the Electric Power Supply Association (EPSA), the national trade group for competitive electricity providers.
EPSA members own and operate 150,000 megawatts of capacity which includes renewables, nuclear and fossil fuels. Members include LS Power Development LLC, NRG Energy Inc., Vistra Corp., Shell Energy and the BP PLC subsidiary BP Energy Co.
George acknowledged that the bill as drafted does not tell investor-owned utilities to build their own production, but “it also does not require tendering,” he said. he declares. A congressional directive would eliminate any room for interpretation, he added.
In general, large-scale wind, solar and storage projects turn out to be the cheapest electricity, argue supporters of renewables. As state energy regulators and utilities set renewable or zero-carbon targets, clean energy advocates argue that utilities should be required to seek proposals to build a new generation at from all types of fuels – and all builders – to see who can add those electrons at the lowest price.
An official at the Edison Electric Institute, the trade group representing investor-owned utilities, said the argument is fallacious because it leaves out an essential part of the production planning process: states.
âThe state regulatory process, by definition, requires that [the regulated electric companies] prove that what they’re doing is safe, âsaid Emily Fisher, general counsel for EEI and senior vice president of clean energy.
Power companies typically go through a long-term planning process that utility regulators verify. Efforts to meet the goals of the federal proposal would likely appear in a state-level Integrated Resource Plan (IRP) that must be approved by state regulators.
This means that CEPP would not automatically give the green light to power companies to build renewable energy gobs. Broadly speaking, the policy would make electricity providers eligible for a federal subsidy if they increased the amount of clean electricity on their grids by 4% per year – and penalize those who do not.
Investor-owned utilities would likely build their own renewable power generation while purchasing from other independent power producers to achieve this goal, according to EEI.
âIt would be absurd and inefficient to think that each individual eligible electricity supplier who has the performance target will build their own path to compliance; it wouldn’t make sense, âFisher said.
In addition, CEPP is based on traditional clean energy standards, which also involve a carbon trading mechanism, she said. Discussions about this are likely to emerge if the measure makes it through the Energy Ministry’s rulemaking process.
The CEPP passed the House Energy and Commerce Committee last week, but the fate of the proposal is far from certain as it faces a difficult climb in the U.S. Senate, where the president of the energy and natural resources, Joe Manchin (DW.Va.) has vowed to oppose as well as the Biden administration’s $ 3.5 trillion reconciliation bill.
CEPP supporters said the final language could change in talks with Manchin and other key congressional players (Daily E&E, September 22).
Clean energy and environmental groups have warned lawmakers not to water down the CEPP in the ongoing negotiations.
“The ambitious Clean Electricity Performance Program (CEPP) will stimulate investments that reduce emissions, create jobs and grow the economy,” Natural Resources Defense Council directors Yvonne McIntyre and Derek Murrow said in an article by blog last week. “Congress and the President must now ensure that he stays strong until the final pass to deliver a transformed electricity sector.”
Republicans argue the proposal does not fit into the reconciliation plan because it should not count as a budget item.
Concerns have arisen from many facets of the country’s electric utility industry.
One of the country’s largest electricity providers, American Electric Power, said in a recent letter that the program “would have a negative impact on the reliability and resiliency of the electricity grid” (Climate wire, September 15).
Several electric utilities and industry groups, including the American Public Power Association and the National Rural Electric Cooperative Association, have expressed concerns that small, not-for-profit utilities may have to bear the proposed costs of $ 40 per megawatt hour for not meeting the 4% clean energy target (Energy wire, September 17).
Independent power producers shouldn’t worry because demand for renewable projects will be so high that power companies won’t be able to build them on their own, said Jesse Jenkins, a professor at the University of Princeton who studies energy systems and advised lawmakers on the Biden administration’s clean energy standard, which turned into CEPP.
âI think it’s highly unlikely that vertically integrated utilities will be able to meet this demand on their own,â Jenkins said. âThey’re going to need PPI; they are going to need all kinds of RFPs [requests for proposals] to obtain the additional supply of clean energy.
Plus, renewable energy developers get a set of tax incentives, making projects cheaper to start with, Jenkins said.
Other parts of the House Reconciliation Bill would extend the Production Tax Credit (PTC) for qualifying renewable sources until 2031 and the Investment Tax Credit (ITC) in the Most cases until 2032 (Daily E&E, September 13).
The credits are typically used for wind and solar generation, but other resources, including landfill gas, hydropower, geothermal and marine energy, would generally be eligible for TPC under the plan.
Energy storage and linear generators would qualify for ITC under the House bill.
The tax credits are designed to work in tandem with the CEPP, Jenkins said. Tax incentives stimulate supply and CEPP targets demand.
“The policies are designed toâ¦ motivate both sides of the market so that we not only have a bunch of tax credits making clean energy cheaper, but nothing motivating buyers to buy more clean electricity.” , did he declare.
“Developers will receive more money because demand for clean energy across the country will skyrocket at unprecedented rates, and they will be able to have many more customers.”