Brian George is director of policy strategy and government affairs at EPSA.
With President-elect Biden’s election certified and the 117th Congress sworn in, lawmakers are now addressing policy priorities that impact our economy, energy systems and environment – and the ability of power companies to operate and invest in essential electric generation infrastructure to meet the demands of the future.
EPSA and our member companies – America’s competitive power suppliers – are cautiously optimistic about the next Congress. Lawmakers have an opportunity to tackle thorny issues gripping the power sector and to work with the Biden administration to provide common-sense reforms that can create much-needed regulatory certainty – allowing power providers to deliver even more cost-effective, cleaner and reliable electricity solutions that benefit American homes and businesses and our grid.
- Bipartisan, middle-of-the-road approaches will be key to successfully passing sound energy legislation.
While ambitious but costly proposals often serve as a lightning rod for criticism and can inhibit solutions-oriented collaboration, a majority of Americans are in favor of policies that address climate change.
Even acknowledging that fact, economic, environmental, and operational goals must be balanced. Recent data show 34% of U.S. adults are struggling to cover basic household expenses, with increased strain on those who have lost work due to COVID-19. For many, utility expenses make up a significant portion of their monthly budget and often go unpaid during a difficult month.
Meanwhile, inaction at the federal level only exacerbates regulatory uncertainty created by aggressive—and often unsynchronized—state action, resulting in a challenging landscape for power generation businesses to invest in the future of energy generation and delivery.
Given the slim majorities that exist in both the House and Senate, legislative action will likely require bipartisan agreement. And yes, finding consensus may be possible. Led by Senators Joe Manchin (D-WV) and Lisa Murkowski (R-AK) at the close of 2020, Congress enacted the most substantive energy legislation in over a decade. Just last week, Reps. David McKinley (R-WV) and Kurt Schrader (D-OR) introduced a clean electricity standard (CES) that establishes an 80% carbon emissions reduction goal by 2050. Importantly, the bill provides partial credit to qualifying low emission resources that can displace dirtier ones. While it is not perfect, the bill represents a strong bipartisan starting point and shows bipartisan interest in finding practical solutions to our energy challenges.
- Politically appealing policies that provide subsidies should be avoided.
To efficiently target climate change, all resources should be incentivized to compete to reduce carbon emissions at the lowest cost while meeting reliability needs. But in lieu of comprehensive action to reduce emissions, politically easier, higher cost, and less effective solutions often prevail in the form of resource- or technology-specific subsidies. This is especially true at the state level where five states have enacted zero emissions credit (ZEC) programs that provide customer-funded bailouts to “uneconomic” nuclear power plants – increasing monthly electric bills and failing to truly incentivize new clean energy build.
However, recent polling found that 65 percent of Americans oppose policies that increase utility bills or taxes to prop up struggling power plants. While nuclear generation is a part of a low-cost decarbonization plan, well designed climate policy will allow nuclear to compete with all other resources to reduce emissions in a least cost, and reliable manner without imposing unnecessarily higher costs on consumers.
Recent proposals in the House and Senate aim to establish federal-level ZECs for economically challenged nuclear power plants. Unfortunately, layering subsidies upon subsidies to prop up legacy generation is not a sustainable approach. While directing resources away from new least cost technology in favor of certain preferred resources costs are increased but long-term challenges are simply deferred rather than addressed and dealt with now.
EPSA has long opposed subsidies and other tax breaks, including those to wind and solar as those resources are among the lowest cost forms of new energy coming online and can compete in wholesale [energy] markets. In addition to raising customer costs, tipping the scale ultimately inhibits innovation and may dampen signals for private investment in new low- and zero-carbon resources.
- Consumers should come first.
Congress has long upheld its commitment to competition in the U.S. power sector, and for good reason – it has delivered wins for consumers and the environment, and incentivized new clean energy build. The proof is in the data. Commodity prices and emissions are down across the board in regions served by an independent system operator (ISO) or a regional transmission organization (RTO). Renewable energy buyers and advanced energy advocates support competitive markets because they offer a pathway for new resources. House Democrats recognized the many benefits of these competitive marketplaces in their CLEAN Future Act which required all transmission owning utilities to join an RTO or ISO.
At EPSA, we believe sustainable decarbonization will require competitive, market-based policies. In a study performed by Energy and Environmental Economics (E3), a carbon price of just $10/ton applied across the PJM footprint would reduce emissions by 50% over 2005 levels by as soon as 2030. It also saves consumers $2.8 billion annually compared to the business as usual case.
However, we also caution that a singular focus on the power sector will increase costs and frustrate decarbonization, likely creating unintended and unwelcome challenges to power system reliability. We must look to other sectors of the economy—such as transportation—to reduce emissions.
The power of competition to unlock innovation in an affordable and reliable manner for consumers cannot be understated. There is a lot of work to do in 2021 and we look forward to working with members on both sides of the aisle to make real strides in energy policy.
Explore the benefits of competitive power markets here.
Read more on competitive power solutions for the Biden Administration.