President Barack Obama has launched what is to be a new era of clean energy development in the U.S., announcing that this could be a “Sputnik moment.” During the Jan. 25 State of the Union address, he urged Americans to rally around a new goal: Obtaining 80 percent of America's electricity from clean energy sources by 2035.
While to some, Obama’s announcement means the accelerated growth of renewable energy, “clean energy” can be broadly defined. To conservationists, "clean energy" would likely mean 100 percent renewable energy. To others, "clean energy" could mean 100 percent clean coal. My understanding is that President Obama is referring to a combination of all the resources -- renewable energy, nuclear, natural gas, and yes, even clean coal.
“It is a very ambitious goal, and it is also a very vague and broad goal,” said Jeff Davis, co-head of the renewable energy practice at the Mayer Brown law firm.
Currently, the U.S. coal fleet generates roughly half of all electrical output. “There are reports that we’ll still be using the same percentage from coal in 2035. It will just be clean coal,” Davis said. According to the North American Electric Reliability Corporation, coal-fired generation will drop to less than one-third of total generation by 2030 – less than half, but still a sizeable amount.
While the definition of clean coal is unclear, renewable energy is expected to continue to grow in the coming decades. Davis said that the ripening of this “low-hanging fruit” – wind and solar is “key to the continued support of clean energy.”
In order to reach the goal of 80 percent clean energy by 2035, Denise Bode, CEO of the American Wind Energy Association, said renewable energy incentives and policies must reach a place of predictability allowing that “energy sources that will never run out ... instead of keeping renewable energy on a constant one-year footing.”
In December, the U.S. House approved the passage of a tax bill that includes a one-year extension of Section 1603 (Treasury Grant Program). Incentives for renewables typically have been extended one year at a time, leaving renewable energy industries little room to plan long-term projects and investments.
“It’s time to reorient the tax code to predictable policies,” Bode said. “Predictability of the permanent incentives for conventional energy sources is as important as the amounts.”
Davis said that incentives for renewable energy are a must, but the source for funding incentives is questionable. “A large part of the State of the Union address focused on deficits and reducing them, but at the same time the President is talking about providing incentives for clean energy. How do we pay for these incentives?”
The President seemed to signal that energy incentives could come from the reduction of oil subsidies. The oil subsidies vs. renewable energy incentives debate will be an interesting one to watch as it unfolds in the new Congress, given the historic way in which the different sides of the aisle have voted.
According to Obama, clean energy is an “investment that will strengthen our security, protect our planet and create countless new jobs for our people.” If clean energy is defined as renewable energy, then this goal could prove to be lofty. But if clean energy is a mix of clean coal, nuclear, renewable energy and natural gas, then this goal is undoudtedly attainable. The current and proposed U.S. Environmental Protection Agency (EPA) emissions control regulations alone are enough to guarantee that all existing coal in 2035 will be "clean."
“It’s advantageous to define the goal broadly in order to achieve it,” Davis said.
While the bar has been set, it will be up to Congress to pass legislation that allows the goal of 80 percent clean energy by 2035 to come to pass.
Wednesday, January 26, 2011
Wednesday, January 19, 2011
Greenhouse gas regulations and political hijinks
How will greenhouse gas (GHG) regulations affect new and stationary sources? Will GHGs play a role in the 2012 presidential elections? During a recent Bracewell & Giuliani LLP press conference, partners such as former EPA air administrator Jeff Holmstead, congressional/refining expert Scott Segal and former EPA enforcement official Rich Alonso took part in a discussion centering on these topics.
On Dec. 23, 2010, the EPA issued its plan for establishing greenhouse gas pollution standards under the Clean Air Act (CAA) in 2011. This included reference to New Source Performance Standards, which set the level of pollution new facilities may emit and address air pollution from existing facilities.
Holmstead said EPA is incorrect to say that new and modified sources are not yet regulated; “There’s just no standard for what they have to meet. Right now, developers are faced with undergoing a process that gives them a standard, but don’t yet know what the standard is going to be or how they’re going to get there.” This uncertainty, Holmstead said, has caused the construction moratorium.
“EPA is acknowledging that it’s going to be a couple years before people see these new permits.”
However, NSPS are more favorable than the typical EPA permitting processes, Holmstead said, and this could impact the effectiveness of the end product. “This is the big issue that EPA faces: if they do what’s sensible and reasonable for coal-fired power, they might get a 2 to 5 percent reduction in greenhouse gases.
EPA may not be willing to undergo this less strenuous process in order to reduce emissions by a few percentage points, Holmstead said.
Texas, where a federal court has denied the state’s attempts to delay U.S. environmental regulators from imposing regulations on greenhouse gases, will face construction being put on hold for at least a couple years, Holmstead said.
“I’m confident in saying that nobody in Texas will have legitimate authority to build a new project in at least two years, and that would be lightning speed.”
Segal spoke on how EPA regulations could affect political positions, and vice versa. Delays of one to two years in regards to emissions rule-making “could set up an unfortunate collision course with the presidential election.” A three-year delay on EPA’s behalf could allow the Agency to “operate from the position of political hijinks.”
While discussions have been made on how Congress will handle the greenhouse gas regulations, Segal said that Senate’s reaction to the standards will be something to watch. “Harry Reid has been a strong defender of premium renewable energy.” Among the 10 Senate Republicans, 100 percent voted for the last floor vote on a resolution of disapproval for global greenhouse gases. In addition, of the 21 Democrats up for re-election, 10 are from states in which a vote seen as favorable to greenhouse gas regulatory authority “would be a political liability.”
“That doesn’t mean they’re going to vote in favor of an amendment, it just means in 2012, they would have some ‘splainin’ to do if they voted against it,” Segal said.
The Bracewell & Giuliani team also discussed the Jan. 12 EPA announcement to defer biomass from greenhouse gas permitting requirements for three years. Alonso said that because biofuels are not yet under the structure of the CAA, this provides an incentive to build biomass. However, Alonso said that EPA has created a problem for itself.
“They have announced this as a three-year delay, but it’s not clear if this is legal.” Alonso said this policy will likely be challenged “because biomass does emit carbon.”
On Dec. 23, 2010, the EPA issued its plan for establishing greenhouse gas pollution standards under the Clean Air Act (CAA) in 2011. This included reference to New Source Performance Standards, which set the level of pollution new facilities may emit and address air pollution from existing facilities.
Holmstead said EPA is incorrect to say that new and modified sources are not yet regulated; “There’s just no standard for what they have to meet. Right now, developers are faced with undergoing a process that gives them a standard, but don’t yet know what the standard is going to be or how they’re going to get there.” This uncertainty, Holmstead said, has caused the construction moratorium.
“EPA is acknowledging that it’s going to be a couple years before people see these new permits.”
However, NSPS are more favorable than the typical EPA permitting processes, Holmstead said, and this could impact the effectiveness of the end product. “This is the big issue that EPA faces: if they do what’s sensible and reasonable for coal-fired power, they might get a 2 to 5 percent reduction in greenhouse gases.
EPA may not be willing to undergo this less strenuous process in order to reduce emissions by a few percentage points, Holmstead said.
Texas, where a federal court has denied the state’s attempts to delay U.S. environmental regulators from imposing regulations on greenhouse gases, will face construction being put on hold for at least a couple years, Holmstead said.
“I’m confident in saying that nobody in Texas will have legitimate authority to build a new project in at least two years, and that would be lightning speed.”
Segal spoke on how EPA regulations could affect political positions, and vice versa. Delays of one to two years in regards to emissions rule-making “could set up an unfortunate collision course with the presidential election.” A three-year delay on EPA’s behalf could allow the Agency to “operate from the position of political hijinks.”
While discussions have been made on how Congress will handle the greenhouse gas regulations, Segal said that Senate’s reaction to the standards will be something to watch. “Harry Reid has been a strong defender of premium renewable energy.” Among the 10 Senate Republicans, 100 percent voted for the last floor vote on a resolution of disapproval for global greenhouse gases. In addition, of the 21 Democrats up for re-election, 10 are from states in which a vote seen as favorable to greenhouse gas regulatory authority “would be a political liability.”
“That doesn’t mean they’re going to vote in favor of an amendment, it just means in 2012, they would have some ‘splainin’ to do if they voted against it,” Segal said.
The Bracewell & Giuliani team also discussed the Jan. 12 EPA announcement to defer biomass from greenhouse gas permitting requirements for three years. Alonso said that because biofuels are not yet under the structure of the CAA, this provides an incentive to build biomass. However, Alonso said that EPA has created a problem for itself.
“They have announced this as a three-year delay, but it’s not clear if this is legal.” Alonso said this policy will likely be challenged “because biomass does emit carbon.”
Tuesday, January 11, 2011
Power industry of 2011, meet environmental regulations
Welcome to 2011! Amidst news of falling natural gas prices and wind power projects meeting dead ends, most power generators will have a unified focus this year: preparing for EPA regulations in the hopper.
Waiting on regulation announcements and researching what needs to happen at power plants in order to meet standards – these seem to be in the crystal ball for the power markets this year. 2011 has commenced with a focus on greenhouse gas emissions regulations, as the EPA seeks to create a federal standard for greenhouse gases, and lawmakers have protested through at least four different bills to date. These bills seek to thwart greenhouse gas regulations from taking effect for two years.
Meanwhile, Texas and the EPA are involved in the fiercest part of the greenhouse gas regulations spat, as Texas is the only state that has refused to issue a greenhouse gas permit process. EPA filed a brief with the DC Circuit Court of Appeals in Washington on Jan. 6 saying that EPA is the “ultimate supervisor’’ if a state fails to develop or enforce an acceptable plan. Twelve other states continue to work with EPA to develop process guidelines.
On Jan. 7, Texas filed a brief with the Court saying that EPA did not follow procedures to seize control of the state’s permit process and did not provide sufficient notice or open the decision to comment. Texas and the EPA expect a ruling from the Court this week in their case.
Aside from greenhouse gas regulations, a number of other regulations are slated to be proposed or enforced in 2011 (see page 5 of this ICF International study). The North American Electric Reliability Council (NERC) predicts that these four rules could have the greatest impact on electric reliability:
-Clean Water Act Section 316(b), Cooling Water Intake Structures
-Coal Combustion Residuals Disposal regulations
-Clean Air Transport Rule
-Title III of the Clean Air Act; National Emission Standards for Hazardous Air Pollutants (NESHAP) for the electric power industry or Maximum Achievable Control Technology (MACT) Standard
In its 2010 Long-Term Reliability Assessment, NERC stated that the proposed rulemaking adds a degree of uncertainty to future planning of generation capacity needs. When considering the repercussions of these regulations on existing and planned generation capacity over the next 10 years, NERC found that, “Depending on the outcome of any or all of these regulations, the results may accelerate the retirement of some fossil fuel–fired power plants.”
John Moura, technical analyst for NERC, said the timing of several regulations being enacted in a short period of time will have its effect on electric reliability.
“The major driver of concern is going to be the time the industry has to react to these issues,” Moura said.
Recent studies by ICF International, NERC and Credit Suisse estimate anywhere from 10 to 75 GW of coal capacity are at risk for retirement by 2020. Retiring such a large percentage of the fleet could put electric reliability at risk, as could retrofits, Moura said.
“A utility has to take a unit offline to put a scrubber in. That kind of coordination in a condensed period of time can really create some issues both in the adequacy and in the operating reliability.”
2011 – a year for both regulation enforcement and the introduction of new proposals. Generators will seek to comply with new regulations and prepare for future regulations, while attempting to grow the North American electric system into an even more reliable, flawless network.
Waiting on regulation announcements and researching what needs to happen at power plants in order to meet standards – these seem to be in the crystal ball for the power markets this year. 2011 has commenced with a focus on greenhouse gas emissions regulations, as the EPA seeks to create a federal standard for greenhouse gases, and lawmakers have protested through at least four different bills to date. These bills seek to thwart greenhouse gas regulations from taking effect for two years.
Meanwhile, Texas and the EPA are involved in the fiercest part of the greenhouse gas regulations spat, as Texas is the only state that has refused to issue a greenhouse gas permit process. EPA filed a brief with the DC Circuit Court of Appeals in Washington on Jan. 6 saying that EPA is the “ultimate supervisor’’ if a state fails to develop or enforce an acceptable plan. Twelve other states continue to work with EPA to develop process guidelines.
On Jan. 7, Texas filed a brief with the Court saying that EPA did not follow procedures to seize control of the state’s permit process and did not provide sufficient notice or open the decision to comment. Texas and the EPA expect a ruling from the Court this week in their case.
Aside from greenhouse gas regulations, a number of other regulations are slated to be proposed or enforced in 2011 (see page 5 of this ICF International study). The North American Electric Reliability Council (NERC) predicts that these four rules could have the greatest impact on electric reliability:
-Clean Water Act Section 316(b), Cooling Water Intake Structures
-Coal Combustion Residuals Disposal regulations
-Clean Air Transport Rule
-Title III of the Clean Air Act; National Emission Standards for Hazardous Air Pollutants (NESHAP) for the electric power industry or Maximum Achievable Control Technology (MACT) Standard
In its 2010 Long-Term Reliability Assessment, NERC stated that the proposed rulemaking adds a degree of uncertainty to future planning of generation capacity needs. When considering the repercussions of these regulations on existing and planned generation capacity over the next 10 years, NERC found that, “Depending on the outcome of any or all of these regulations, the results may accelerate the retirement of some fossil fuel–fired power plants.”
John Moura, technical analyst for NERC, said the timing of several regulations being enacted in a short period of time will have its effect on electric reliability.
“The major driver of concern is going to be the time the industry has to react to these issues,” Moura said.
Recent studies by ICF International, NERC and Credit Suisse estimate anywhere from 10 to 75 GW of coal capacity are at risk for retirement by 2020. Retiring such a large percentage of the fleet could put electric reliability at risk, as could retrofits, Moura said.
“A utility has to take a unit offline to put a scrubber in. That kind of coordination in a condensed period of time can really create some issues both in the adequacy and in the operating reliability.”
2011 – a year for both regulation enforcement and the introduction of new proposals. Generators will seek to comply with new regulations and prepare for future regulations, while attempting to grow the North American electric system into an even more reliable, flawless network.
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