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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A frenzied burst of metaphorical arm-twisting and horse-trading is taking place in Washington, D.C., as slim Democratic majorities in the House of Representatives and Senate attempt to transform the U.S. electricity industry against the backdrop of natural disasters said to be caused, or exacerbated, by climate change.
Draft legislation called the Clean Electricity Payment Program is part of President Joe Biden's $3.5 trillion "Build Back Better" plan being considered by Congress. Because of slim Democratic majorities in both houses of Congress, the majority party is trying to pass the entire $3.5 trillion measure using a process known as "budget reconciliation," which focuses exclusively on government spending and revenue. This maneuver also avoids a filibuster in the Senate. The Democrats have signaled their intention to pass the measure on a straight party-line vote.
Even then it's not clear the measure can pass. The Senate is split 50-50 between the two parties, with the vice president empowered to cast a tie-breaking vote. But it's not clear the Democrats will stay united on this measure: Sen. Joe Manchin (D-W.Va.), chairman of the Energy & Natural Resources Committee, has opposed measures he deems too costly and that hurt his coal-rich state. Also, the president's "Build Back Better" package is competing with other legislative priorities, such as voting rights.
Using the budget reconciliation process forced the drafters of the electricity portion of the overall Build Back Better bill to approach clean electricity as a budget measure, relying on taxes and credits, rather than the more straightforward approaches of establishing a national clean energy plan or enacting a carbon tax. To secure ever-greater deployment of non-emitting generation resources, the drafters proposed a Clean Electricity Payment Plan (CEPP), where some states would be penalized for not achieving ever-greener targets and other states would be paid for exceeding their targets.
The CEPP seeks to have non-emitting resources produce 80% of the nation's electricity by 2030. If this measure passes, it likely would lead to a surge of investment and project activity for renewable developers.
Released earlier this month, the CEPP is not straightforward. Essentially, electricity suppliers must raise the share of low-carbon power by four percentage points each year from 2023 through 2030. If they do that, they would receive credits of $150 per megawatt-hour sold. Suppliers that don't hit their four-percentage-point target would be assessed a fee of $40 for each megawatt-hour missed.
The plan is projected to cost about $150 billion, not counting the projected billions of dollars in tax credits and penalties that will flow between electric providers and the U.S. government.
Observers' early assessment of the CEPP is that it would destroy coal-fired generation, slash gas power and lead to an investment surge in renewables--exactly what the Biden administration claims is necessary to help slow or stop global climate change.
To be classified as a clean energy resource, the generator would be required to emit no more than 0.1 ton of carbon dioxide per megawatt-hour of electricity generated. That's one-tenth the emission level of a coal-fired power plant, on average, and about one-quarter to one-third that of a natural gas combined-cycle (NGCC) generator. Gas plants could continue operating if they installed carbon capture and sequestration (CCS) technology to capture carbon emissions.
Although the CEPP recognized nuclear power as a clean resource, the incentives in the plan are not thought to be meaningful enough to cause a utility board of directors to green-light a new nuclear power plant, particularly given the difficult and costly effort to add two new units to the Vogtle Nuclear Power Station in Georgia. The CEPP expires in 2030, so it's highly unlikely a new nuclear unit could begin generating electricity by then, anyway. But existing plants would be eligible for a clean-air credit of $150 per megawatt-hour.
To an administration committed to decarbonizing the power sector, and then the entire economy, renewable energy and battery energy storage would be the big winners in the CEPP. For those doubting whether near-exclusive reliance on intermittent resources can power the $23 trillion U.S. economy, the U.S. Department of Energy (DOE) released a report, the Solar Futures Study, last week, as details were emerging on the CEPP.
Up to 45% of U.S. electricity could come from solar power by 2050, under three scenarios that were developed in the 310-page DOE report. The remaining electricity-generating resources would be wind, nuclear, hydroelectric, biopower and geothermal. There would be no coal-, gas- or oil-fired generation.
"Dramatic improvements to solar technologies and other clean energy technologies have enabled recent, rapid growth in deployment and are providing cost-effective options for decarbonizing the U.S. electric grid," the authors of the report wrote.
The Solar Futures Study developed and assessed three solar power scenarios: "reference" (or "business as usual"), "decarbonization" and "decarbonization with electrification." It claimed that for the 2020-2050 period, "the benefits of achieving the decarbonization scenarios far outweigh additional costs incurred."
In the "business-as-usual" scenario, "installed solar capacity increases by nearly a factor of 7 by 2050, and grid emissions decline by 45% by 2035 and 61% by 2050, relative to 2005 levels," the report said. Put another way, "even without a concerted policy effort, market forces and technology advances will drive significant deployment of solar and other clean-energy technologies, as well as substantial decarbonization."
The second scenario, "decarbonization," assumes new policies drive a 95% reduction (from 2005 levels) in the grid's carbon dioxide emissions by 2035 and a 100% reduction by 2050. "This scenario assumes more aggressive cost-reduction projections than the [business-as-usual] scenario for solar, as well as other renewable and energy storage technologies," the authors wrote.
The third case, "decarbonization with electrification," assumes large-scale electrification of end uses like buildings and transportation. This case also analyzes the potential for solar to contribute to a fully decarbonized economy by 2050, although the authors stipulate that there is a higher level of uncertainty around this scenario.
Under this third scenario, the most aggressive decarbonization explored in the DOE study, incremental power-system costs are anticipated to be about $562 billion, or 25%, higher than they otherwise would be. But factoring in sharply lower fuel costs reduces the incremental price tag for this third scenario to $210 billion.
However, the report noted, "avoided climate damages and improved air quality more than offset those additional costs, resulting in net savings of $1.1 trillion in the 'decarbonization' scenario and $1.7 trillion in the 'decarbonization with electrification' case." The report also mentioned a surge to solar power could create as many as 1.3 million new jobs in the solar industry.
Getting to the solar future envisioned in the study would seem to be a true "moonshot" project, comparable to putting a man on the moon over five decades ago.
In 2020, about 80,000 megawatts (MW) of solar power met about 3% of U.S. electricity demand, the DOE report said. Leaving aside the "business as usual" case, the report projected that the two "decarbonization" scenarios would require the cumulative deployment of between 760,000 to 1 million MW of new solar generation by 2035, which would meet between 37% and 42% of electricity demand. By 2050, those scenarios envision cumulative deployment of between 1 million and 1.6 million MW of solar generation, which would meet about 44%-45% of electricity demand.
Click on the image at right to see a graphic of future solar deployment developed by the DOE report.
The report commented: "A dramatically larger role for solar in decarbonizing the U.S. electricity system, and energy system more broadly, is within reach, but it is only possible through concerted policy and regulatory efforts, as well as sustained advances in solar and other clean-energy technologies."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
Draft legislation called the Clean Electricity Payment Program is part of President Joe Biden's $3.5 trillion "Build Back Better" plan being considered by Congress. Because of slim Democratic majorities in both houses of Congress, the majority party is trying to pass the entire $3.5 trillion measure using a process known as "budget reconciliation," which focuses exclusively on government spending and revenue. This maneuver also avoids a filibuster in the Senate. The Democrats have signaled their intention to pass the measure on a straight party-line vote.
Even then it's not clear the measure can pass. The Senate is split 50-50 between the two parties, with the vice president empowered to cast a tie-breaking vote. But it's not clear the Democrats will stay united on this measure: Sen. Joe Manchin (D-W.Va.), chairman of the Energy & Natural Resources Committee, has opposed measures he deems too costly and that hurt his coal-rich state. Also, the president's "Build Back Better" package is competing with other legislative priorities, such as voting rights.
Using the budget reconciliation process forced the drafters of the electricity portion of the overall Build Back Better bill to approach clean electricity as a budget measure, relying on taxes and credits, rather than the more straightforward approaches of establishing a national clean energy plan or enacting a carbon tax. To secure ever-greater deployment of non-emitting generation resources, the drafters proposed a Clean Electricity Payment Plan (CEPP), where some states would be penalized for not achieving ever-greener targets and other states would be paid for exceeding their targets.
The CEPP seeks to have non-emitting resources produce 80% of the nation's electricity by 2030. If this measure passes, it likely would lead to a surge of investment and project activity for renewable developers.
Released earlier this month, the CEPP is not straightforward. Essentially, electricity suppliers must raise the share of low-carbon power by four percentage points each year from 2023 through 2030. If they do that, they would receive credits of $150 per megawatt-hour sold. Suppliers that don't hit their four-percentage-point target would be assessed a fee of $40 for each megawatt-hour missed.
The plan is projected to cost about $150 billion, not counting the projected billions of dollars in tax credits and penalties that will flow between electric providers and the U.S. government.
Observers' early assessment of the CEPP is that it would destroy coal-fired generation, slash gas power and lead to an investment surge in renewables--exactly what the Biden administration claims is necessary to help slow or stop global climate change.
To be classified as a clean energy resource, the generator would be required to emit no more than 0.1 ton of carbon dioxide per megawatt-hour of electricity generated. That's one-tenth the emission level of a coal-fired power plant, on average, and about one-quarter to one-third that of a natural gas combined-cycle (NGCC) generator. Gas plants could continue operating if they installed carbon capture and sequestration (CCS) technology to capture carbon emissions.
Although the CEPP recognized nuclear power as a clean resource, the incentives in the plan are not thought to be meaningful enough to cause a utility board of directors to green-light a new nuclear power plant, particularly given the difficult and costly effort to add two new units to the Vogtle Nuclear Power Station in Georgia. The CEPP expires in 2030, so it's highly unlikely a new nuclear unit could begin generating electricity by then, anyway. But existing plants would be eligible for a clean-air credit of $150 per megawatt-hour.
To an administration committed to decarbonizing the power sector, and then the entire economy, renewable energy and battery energy storage would be the big winners in the CEPP. For those doubting whether near-exclusive reliance on intermittent resources can power the $23 trillion U.S. economy, the U.S. Department of Energy (DOE) released a report, the Solar Futures Study, last week, as details were emerging on the CEPP.
Up to 45% of U.S. electricity could come from solar power by 2050, under three scenarios that were developed in the 310-page DOE report. The remaining electricity-generating resources would be wind, nuclear, hydroelectric, biopower and geothermal. There would be no coal-, gas- or oil-fired generation.
"Dramatic improvements to solar technologies and other clean energy technologies have enabled recent, rapid growth in deployment and are providing cost-effective options for decarbonizing the U.S. electric grid," the authors of the report wrote.
The Solar Futures Study developed and assessed three solar power scenarios: "reference" (or "business as usual"), "decarbonization" and "decarbonization with electrification." It claimed that for the 2020-2050 period, "the benefits of achieving the decarbonization scenarios far outweigh additional costs incurred."
In the "business-as-usual" scenario, "installed solar capacity increases by nearly a factor of 7 by 2050, and grid emissions decline by 45% by 2035 and 61% by 2050, relative to 2005 levels," the report said. Put another way, "even without a concerted policy effort, market forces and technology advances will drive significant deployment of solar and other clean-energy technologies, as well as substantial decarbonization."
The second scenario, "decarbonization," assumes new policies drive a 95% reduction (from 2005 levels) in the grid's carbon dioxide emissions by 2035 and a 100% reduction by 2050. "This scenario assumes more aggressive cost-reduction projections than the [business-as-usual] scenario for solar, as well as other renewable and energy storage technologies," the authors wrote.
The third case, "decarbonization with electrification," assumes large-scale electrification of end uses like buildings and transportation. This case also analyzes the potential for solar to contribute to a fully decarbonized economy by 2050, although the authors stipulate that there is a higher level of uncertainty around this scenario.
Under this third scenario, the most aggressive decarbonization explored in the DOE study, incremental power-system costs are anticipated to be about $562 billion, or 25%, higher than they otherwise would be. But factoring in sharply lower fuel costs reduces the incremental price tag for this third scenario to $210 billion.
However, the report noted, "avoided climate damages and improved air quality more than offset those additional costs, resulting in net savings of $1.1 trillion in the 'decarbonization' scenario and $1.7 trillion in the 'decarbonization with electrification' case." The report also mentioned a surge to solar power could create as many as 1.3 million new jobs in the solar industry.
Getting to the solar future envisioned in the study would seem to be a true "moonshot" project, comparable to putting a man on the moon over five decades ago.
In 2020, about 80,000 megawatts (MW) of solar power met about 3% of U.S. electricity demand, the DOE report said. Leaving aside the "business as usual" case, the report projected that the two "decarbonization" scenarios would require the cumulative deployment of between 760,000 to 1 million MW of new solar generation by 2035, which would meet between 37% and 42% of electricity demand. By 2050, those scenarios envision cumulative deployment of between 1 million and 1.6 million MW of solar generation, which would meet about 44%-45% of electricity demand.
The report commented: "A dramatically larger role for solar in decarbonizing the U.S. electricity system, and energy system more broadly, is within reach, but it is only possible through concerted policy and regulatory efforts, as well as sustained advances in solar and other clean-energy technologies."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
