August 4, 2015 at 4:00 am ET
Obama’s Climate Legacy: Who Wins, Who Loses Under the Clean Power Plan
President Barack Obama unveiled the highly-anticipated Clean Power Plan Monday, and reactions ran a predictable gamut: the renewables industry lauded the rolling-out, while the power industry attacked it as anti-business and irrelevant to global warming.
Take it from Jason Grumet, president of Bipartisan Policy Center. “The final Clean Power rule has something for everyone. In the polarized climate debate, this means most everyone can find something to be upset about,” he wrote in a statement.
The expansive rule targets power plants, the nation’s top source of carbon dioxide emissions and sets individual emissions goals for each state based on a mix of four “building blocks”: improving the efficiency of coal-fired power plants; deploying more zero-carbon sources of electricity like wind, solar and hydro power, as well-as preserving nuclear power; expanding energy efficiency programs; and displacing more coal with natural gas.
The Environmental Protection Agency estimates the CPP will reduce power-sector CO2 pollution by 32 percent below 2005 levels by 2030, the equivalent of taking 150 million cars off the road. Previous attempts to craft a major U.S. climate policy have skirted Congress, leading Obama to take the reigns on the issue. “After years of talk and no action, this rule requires real action. It will put us on a realistic pathway to reducing carbon pollution,” Sen. Maria Cantwell, ranking member on the Energy and Natural Resources Committee, said in a statement.
But opponents – mainly utilities, fossil fuel groups, and conservatives – are less enthralled. Though EPA alleged to make concessions in the final rule, such as rolling back the interim timeline period for compliance, the reaction so far has been fiercely negative.
“The final version of President Obama’s ‘Clean Power Plan’ is somehow more harmful than the proposed rule,” said American Energy Alliance President Thomas Pyle. “It forces states to make even steeper cuts, it guts natural gas in favor of costly renewables, and it still has no effect on climate change.”
The Winners: Renewables, Natural Gas, and Nuclear
The CPP encourages the deployment of renewable power to help states meet their emissions targets. The final rule adds a “Clean Energy Incentive Program” that gives “a head start to wind and solar deployment” and prioritizes “the deployment of energy efficiency improvements in low-income communities that need it most early in the program,” according to a White House fact sheet.
The final rule also softened interim compliance deadlines, giving states more time to add zero-carbon electricity sources to the grid. More time also means less money, as the price of renewable energy continues to fall.
Wind power is poised to be among the biggest beneficiaries of the CPP, but its prominence hinges somewhat on whether Congress decides to extend the wind production tax credit, which subsidizes electricity generated by wind power. A proposal to extend the incentive for two years passed the Senate Finance Committee last week, but its fate will not likely be determined until the end of the year, when the House and Senate hammer out a final deal on tax extenders. According to the DOE, extending the tax credit in the near-term could allow wind-generated electricity to make up 20 percent of all power generated in the U.S. by 2030.
With or without the PTC, wind power remains one of the cheapest ways for states to comply with the rule, according to an analysis by the Energy Information Administration. Michael Goggin, senior research director for the American Wind Energy Association, added in an interview that the “highest quality wind resources are in the middle of the country,” where states tend to rely more heavily on “dirty” electricity generated from fossil fuels. Switching to wind would mean switching away from dirty power, giving those states “more bang for your buck” in complying with the CPP.
Not surprisingly, the solar industry is hailing the CPP as “historic” and “critically needed,” according to the industry’s top trade group, the Solar Energy Industries Association.
In a phone interview Friday with SolarCity, the leading residential rooftop installer, executives said the CPP raises the importance and benefits of solar, adding that solar power is particularly attractive because of the number of jobs it creates. Industry figures show the solar sector currently employs around 174,000 people – about the same amount as the coal industry.
Unlike other energy sectors, the natural gas industry has maintained a mostly neutral stance on the CPP. Under the rule, natural gas will continue to increase its share of the U.S. electricity portfolio, despite EPA shifting its emphasis away from natural gas in favor of renewables in the final version of the rule.
“The natural gas industry is expected to overlook modest deprivations, since no one likes a sore winner,” BPC’s Grumet said.
America’s Natural Gas Alliance CEO Marty Durbin said in an interview Friday that the Washington-based trade association needs to be careful about which side of the fence it sits.
“Let’s face it, who are our customers – electric utilities,” Durbin said. Rather than playing the role of cheerleader or critic, “our take on this all along has been that the market fundamentals for natural gas are very strong.”
The 2014 draft rule relied heavily on an early shift from coal to natural gas, which burns about 50 percent cleaner. The final rule attempts to avoid an over-reliance on natural gas by creating an incentive program to encourage states to boost renewable power and energy efficiency earlier than in the initial proposal.
ANGA officials appear to have hardened their tone following Monday’s announcement. “We believe the White House is perpetuating the false choice between renewables and natural gas,” the group said in a press release.
AEA’s Pyle said, “The news today that EPA will shift the emphasis of the rule away from natural gas toward renewables would make it an even more costly and unrealistic rule.”
At the end of the day, “There’s an opportunity here for us if the plan goes forward, but even if the plan doesn’t move forward, natural gas is going to do really well in the generation space,” Durbin said.
The nuclear industry lamented the CPP proposal for not giving enough credit to states that use nuclear as a source of carbon-free power. EPA appears to have been sympathetic to those complaints. In the new rule, the agency won’t count nuclear reactors under construction as existing sources, a win for South Carolina, Georgia, and Tennessee, which have a combined five nuclear plants in the works. Unlike the draft rule, those states can now apply those facilities towards their compliance plans.
EPA also bent to the industry on how it treats capacity increases at existing plants, which will now be counted as zero-carbon source additions in meeting state requirements, increasing the value of those projects.
The Loser: Coal
As the most carbon-intensive fuel, the embattled coal industry gets hit the hardest under the CPP. Due to market forces and tougher regulations, coal-related jobs have already fallen by more than 45,000 since 2011, according to the U.S. Mine Safety & Health Administration.
EIA’s analysis of the draft rule found that the shutdown rate of coal-fired power plants could more than double by 2030 under the CPP. Independent analyses have claimed additional industry job losses of up to 40,000 positions.
EPA leaves it up to the states to craft their own worker transition programs. Coal allies say the CPP is just another attack in Obama’s “war on coal.”
“EIA confirms EPA’s rule is all pain, no gain — a symbolic, but expensive gesture that continues the administration’s policy path for destroying high wage jobs,” National Mining Association President Hal Quinn said in a statement.
In a press call with reporters Sunday, EPA Administrator Gina McCarthy said that by 2030 coal power is projected to represent 27 percent of generation capacity — down from an expected average of 36 percent in 2015.
The final plan includes the ability for states to rely on carbon capture and sequestration technology for new coal-fired units, but to a lesser degree than originally proposed.
The In-Betweens: Utilities And The Climate
The power industry has blasted the CPP as an overburdensome regulation that would raise consumer electricity prices and threaten electric reliability.
Skepticism remains over several components of the rule, namely timing. “Our primary concern remains the overall timing and stringency of the near-term reduction targets,” said Tom Kuhn, president of the Edison Electric Institute, a trade group representing all U.S. investor-owned utilities, in a statement. “Ultimately, it is imperative that the final guidelines respect how the electric system works and provide enough time and flexibility to make the necessary changes to achieve carbon emission reductions.”
State plans are due Sept. 2016, but states that need more time can apply for an extension of up to two years. In response to criticisms over the rule’s timing, the first compliance benchmark was pushed back by two years to 2022.
Scott Segal, an energy attorney with the law firm Bracewell and Guilliani, wrote in an email that “While the final rule reflects some concession from EPA on this point, it should be noted that the final rule remains a very difficult task over a very compressed time period.”
“Don’t get me wrong: more time is a good thing,” Segal said. “However, EPA’s deadlines are still unrealistic.”
Electric grid reliability also remains a concern, although EPA added a “reliability safety-valve” that eases compliance with the restrictions in the event they threaten utilities’ ability to keep the lights on.
It might not matter for utilities’ planning purposes. “I know from my conversations with state leaders and utility CEOs that even those who may openly oppose the rules are thinking hard about how to meet them,” said Center for Climate Change and Energy Solutions President Bob Perciasepe, a former No. 2 EPA official, in a press teleconference.
It is unclear how the CPP’s supposed beneficiary – the planet – will fare under the plan. While the administration says the plan is the most consequential climate action taken to date, some environmental groups say it doesn’t go far enough.
Many praised the announcement: “Across the globe, this commitment…will be seen as a crucial step toward fulfilling President Obama’s pledge to reduce our country’s greenhouse gas emissions… which will set us on the path to achieving a strong emissions reductions agreement at the upcoming COP21 climate negotiations,” Climate Reality Project President Ken Berlin said in a statement.
Others took it with a grain of salt. “This is the most significant action yet from the Obama administration, but it’s still not enough to secure his climate legacy,” 350.org Executive Director May Boeve said in a statement. “We’ll be pushing the administration to build on this announcement and take the additional steps necessary to protect our climate, like rejecting the Keystone XL pipeline, ending fracking, and preventing Arctic and offshore drilling.”
Critics say the rule is pointless because – in the absence of similarly robust commitments by other big polluters – it would have little effect on global temperatures. “EPA’s own models show that their carbon rule will limit global temperature rise by a mere 0.018 degrees Celsius by 2100,” said the American Energy Alliance.