Behind-the-meter energy threatens the utility business model. Does history offer a lesson for crafting a response?
Climate policy heats up after the Great Recession.
It’s been smoldering for a while.
Last decade, climate regulation seemed inevitable. The year 2003 saw the Regional Greenhouse Gas Initiative emerge in the Northeast. Gov. Arnold Schwarzenegger signed California’s AB32 in 2006. Dozens more states established their own climate action plans. And in 2009, early in the Obama administration, the Environmental Protection Agency (EPA) issued its famous “endangerment finding,” setting the stage for federal regulation of greenhouse gas (GHG) under the Clean Air Act.
Still we watch for sparks of flame.
The Edison Electric Institute (EEI) in 2009 lent support to the Waxman-Markey cap-and-trade bill, which passed in the U.S. House but went nowhere in the Senate. Climate change got pushed to the back burner, usurped by TARP, ARRA, and Obamacare – not to mention the backlash from a newly elected House Republican majority.
Nevertheless, the smoldering continued. The courts upheld EPA’s endangerment finding, while turning away nuisance lawsuits in the context of impending regulation. Hundreds of cities across the country advanced separate efforts to reduce GHG emissions. RGGI grew (and shrank when Gov. Chris Christie took New Jersey out of the group). And renewable and clean energy initiatives at federal and state levels proceeded and (mostly) expanded, with GHG-abatement lurking as a key policy driver.
Now, here we are, halfway through Obama’s second term, and GHG regulation actually looks to be emerging. The EPA’s rules face legal opposition; probably they’ll be waylaid in court longer than Obama remains in the White House. But nevertheless the agency has proposed its final rule for new power plants, and rules for existing plants are due in June.
The climate fire has re-ignited. How fast it spreads from here might depend less on the actions of the federal government, and more on actions of the states that will feel the heat.
Coal, Shale, and EPA
Some of the EPA’s most strident opponents say its proposed rules will effectively outlaw any new coal-fired power plant in the United States, setting an emissions standard that can’t be achieved commercially. In a suit filed in January, for example, Nebraska argues that EPA based its standards on technologies demonstrated at federally funded carbon capture and sequestration (CCS) projects, which violates the Energy Policy Act of 2005. “The impossible standards imposed by EPA will ensure no new power plants are built in Nebraska,” stated Attorney General Jon Bruning. “This federal agency continues to overstep its authority at the detriment of Nebraska businesses.”
For its part, EPA counters that the standards aren’t based solely on the federally funded CCS demonstrations, but on other projects and commercially available options. How the courts sort out such disputes will be interesting, and likely the outcome will affect resource planning and plant operations in the future. For the time being, however, it’s a moot point; nobody is building a coal-fired plant anywhere in America, largely because natural gas is so cheap. No other fuel can compete – with the notable exception of