Issue No. 24


In today’s issue:

  • The EPA proposes a rule that would mean power plants, including those that use natural gas, would have to cut fossil fuel emissions by 90% by 2040, or be shut down.
  • The numbers don’t seem to add up. How is the U.S. going to build enough new electric capacity to replace what’s going off-line – at the same time demand will increase significantly?
  • As the EPA calls for drastic change, FERC commissioners worry that the reliability of electricity is in serious jeopardy.
  • NERC issues a warning for possible blackouts this summer for about half the country.
  • Permitting reform may be moving to the front burner.
  • New York becomes the first state to ban natural gas hook-ups for new residential construction, but lawsuits could follow.
  • Congressional leaders want assurances that the U.S. is prioritizing safe pipelines.
  • A Pew survey cautions policymakers that the public does not want to rush the transition to cleaner energy.

EPA to Power Plants: Cut Emissions by 90% or We’ll Shut You Down

On May 11, the U.S. Environmental Protection Agency (EPA) proposed a new rule that will require most fossil fuel power plants – including those powered by natural gas – to cut their emissions by 90% between 2035 and 2040 – or else shut down.

The rule, said Politico, “would break new ground by requiring steep pollution cuts from plants burning coal or natural gas, which together provide the lion’s share of the nation’s electricity. To justify the size of those cuts, the agency says fossil fuel plants could capture their greenhouse gas emissions before they hit the atmosphere — a long-debated technology that no power plant in the U.S. uses now.”

EPA officials claim that the proposed rule “will raise average utility bills by 2% by 2030,” reported the Wall Street Journal, which also noted that “utilities would begin phasing in the lower air-pollution targets in 2030 and have until 2042 to fully comply with the proposed standards.” The Journal’s report continued:

The new rules are likely to be another point of partisan debate over regulations designed to fight climate change and implement other progressive initiatives. Many Democrats are pushing the administration to do more, while Republicans are fighting the administration’s initiatives both in Congress and at the state level…. Critics say the proposed rules are too draconian and will hurt coal-mining areas such as West Virginia where the economy is tied to fossil fuels.

Critics responded quickly. West Virginia’s Republican Senator, Shelley Moore Capito, said in a statement: “The Clean Power Plan 2.0 announced today is the Biden administration’s most blatant attempt yet to close down power plants and kill American energy jobs.”

Capito’s colleague, Sen. Joe Manchin (D-WVa) “also opposed the new regulations and said he would block votes on any EPA nominees who come before the Senate Energy and Natural Resources Committee, of which he is the chairman,” reported the Journal.

“This Administration is determined to advance its radical climate agenda and has made it clear they are hellbent on doing everything in their power to regulate coal and gas-fueled power plants out of existence, no matter the cost to energy security and reliability,” Manchin said in a statement.

Two think tank scholars, Rea Hederman Jr. of the Buckeye Institute in Ohio and Wayne Winegarden of the Pacific Research Institute (publisher of this newsletter) wrote:

The Biden Administration, eager to revive the Obama era’s Clean Power Plan, wants America to run largely on green energy—and is prepared to pay, prod, and punish to get what it wants. No matter that federal green energy subsidies may cost three times their original estimates, which inevitably will fan the flames of inflation and demand higher taxes. No matter that letting newer, cleaner natural gas plants replace the country’s retiring fossil fuel plants will steadily reduce our greenhouse gas emissions. Washington prefers regulation to innovation.

As Manchin noted, the proposed rule raises major concerns about the reliability of electricity in the future. Speeding up the retirements of plants could create a scenario like the one that produced rolling blackouts in California during a heat wave in 2020. Last summer and early fall, California officials issued an emergency call for consumers and businesses to curtail electricity use to avoid mandatory electricity cutbacks – especially, Reuters reported, “in the late afternoon and early evening as the sun sets and the state’s vast supply of solar-generated electricity recedes.”

In their opinion piece, Hederman and Winegarden noted that “California’s top-down energy mandates that force power grids from affordable natural gas to high-priced green energy will likely add an average of $650 per year to every electricity bill in the state.” Higher energy costs and burdensome mandates were an impetus for Californians to move to “states like Ohio that embrace free market energy policies.”

But now, if the EPA proposals are enacted, Ohioans will be forced to “pay an extra $810 per year for the same electricity they use today.” The estimates were part of a study that the Buckeye Institute released last month.

The Wall Street Journal’s editorial board said the rule “means the end of natural-gas-fueled electricity. In an editorial on May 11, the board argued that “the rule is a de facto mandate to shift to renewables from fossil fuels, which Congress never explicitly authorized.” The rule also appears to run afoul of the Supreme Court’s 6-3 decision last summer, which, according to CNBC, “said that only Congress, not the EPA, has the power to create a broad system of cap-and-trade regulations to limit emissions from existing power plants in a bid to transition away from coal to renewable energy sources.”

The Journal’s editorial said that “the Biden EPA’s plan would do that and more by other means that are also probably unconstitutional.” The editorial added:

Section 111 of the Clean Air Act says the EPA can regulate pollutants from stationary sources through the “best system of emission reduction” that is “adequately demonstrated.” Yet the EPA wants to require that fossil-fuel plants adopt carbon capture and green hydrogen technologies that aren’t currently cost-effective or feasible, and may never be. Only one commercial-scale coal plant in the world uses carbon capture to reduce emissions, and no gas-fired plants do.

The Journal concluded: “The EPA is gambling that it can sneak this through the courts. But the rule is a de facto mandate to shift to renewables from fossil fuels.” The Supreme Court’s 5-4 decision in Massachusetts v. EPA (2007) that let the agency regulate greenhouse gas emissions “rests on shaky ground. EPA is inviting a legal challenge that could boomerang, and let’s hope it does.”

How Are We Going to Keep the Lights On?

In an op-ed in the Wall Street Journal on May 18, William S. Scherman, former general counsel to the Federal Energy Regulatory Commission wrote, “Imagine flipping a light switch and not knowing if the lights will come on. Normally unthinkable. But the Environmental Protection Agency’s proposed power-plant rules would destabilize the energy grid, resulting in less-reliable electric service.”

Scherman digs into the numbers:

Biden administration policies mean that higher consumption will be met with substantially lower supply. In 2022, the U.S. generated 4,243 million megawatt-hours of electricity, including 1,689 million from natural gas and 828 million from coal. If these plants close, that represents a loss of 2,517 million megawatt-hours, or 60% of U.S. electric generation.

He adds, “In 2022 all U.S. renewable resources generated a mere 913 million megawatt-hours. To replace the plants these new rules would close, the U.S. would need to quadruple its renewable-energy generation in 10 years.” Scherman continues:

That is to maintain present levels. It doesn’t account for rising energy demand, which is projected to triple world-wide by 2050, including for new hydrogen production and an increasingly electrified vehicle fleet. Quadrupling renewables will require hundreds of thousands of miles of new long-distance transmission lines, which are difficult to build. A multiyear backlog for energy-project interconnections means we are still years away from launching transmission projects needed to keep the lights on.

Scherman also makes the point that the EPA has demonstrated time and again that “it doesn’t have electric industry expertise. That is the purview of the Federal Energy Regulatory Commission, which is charged with keeping the nation’s electric grid reliable and functioning.”

FERC Commissioners Worry About Threats to Reliability

Meanwhile, on May 4, just a week before the EPA proposed a rule that could cause massive strain on the electric grid, the Senate Energy and Natural Resources Committee held a hearing at which FERC commissioners warned of severe threats to reliability. As Scherman noted, these are the experts. We should pay attention.

FERC’s Acting Chair Willie Phillips, a Democratic appointee, told the Senators, “We face unprecedented challenges to the reliability of our nation’s electric system.” FERC Commissioner Mark Christie, a Republican appointee, echoed Phillips’s warning, saying that the electric grid was “heading for a very catastrophic situation in terms of reliability.” And Commissioner James Danly, also a GOP appointee, referred to the “looming reliability crisis in our electricity markets.”

According to a Utility Dive piece, “Christie said the main problem is that power plants are being retired at a faster pace than they’re being replaced, pointing to estimates from the PJM Interconnection.” That’s a problem that will only be exacerbated by the EPA’s proposed rule.

About 40 gigawatts (GW), or about one-fifth of the installed capacity of PJM, the regional transmission organization (RTO) that serves 13 states and the District of Columbia, are at risk of retiring by 2030 (and again this estimate does not take into account the EPA rule), said a Feb. 27 report. PJM, the nation’s largest grid operator, expects only 15.1 GW to 30.6 GW of accredited capacity to come online by 2030.

“The arithmetic doesn’t work,” Christie said. “This problem is coming. It’s coming quickly. The red lights are flashing.” Utility Dive reported:

Phillips said he is “extremely” concerned about the pace of power plant retirements. “This is something that we have to keep a careful eye on,” he said, noting that FERC needs to work on the issue with states, which have authority over resource adequacy…. During Winter Storm Elliott in December, PJM was on the brink of rolling blackouts when a large number of gas-fired power plants failed to run, partly because they couldn’t get fuel, he said.

Phillips said that new transmission could help ease reliability problems: “Transmission plays a critical role in facilitating the interconnection of new resources, while ensuring that the electric system remains reliable.”

A big problem, however, is that utilities are building too much local transmission at the expense of regional projects that could be more efficient, said Sen. John Hickenlooper (D-Colo) during the hearing. In the PJM area (Mid-Atlantic and some Midwest states), 71% of transmission investment since 2014 has been on local lines under 230-kV, up from 26% previously, according to a new analysis by the non-profit Rocky Mountain Institute (RMI). The faster timelines and lower cancellation rates of local projects increase utility earnings by up to 24% compared to their alternatives, such as multi-zone projects, according to the report.

Chairman Joe Manchin asked the commissioners a simple question: Can the electric grid as it exists today, be reliable without coal-fired generation? All of the commissioners answered no, with Christie saying, “We need to keep coal for the immediate future.” 

Robert Bryce, a veteran energy journalist, published a Substack piece on May 13 headlined, “EPA v. The Grid: A week after FERC commissioners warned about a looming ‘catastrophic reliability failure,’ the EPA issued rules that could devastate the Mother Network.” Bryce noted several specific challenges to reliability, including not only early retirement of coal plants but insufficient pipeline capacity for delivering natural gas to power plants, insufficient high-voltage transmission capacity, and distortions in the electricity market caused by massive federal subsidies for weather-dependent renewables – a point also made in the hearing by Danly.

Bryce also referred to last year’s Long-Term Reliability Assessment report from the North American Electric Reliability Corporation (NERC), the non-profit that advises regional grid operators (like ERCOT, CAISO, and PJM) about the reliability of the bulk power system. NERC found that much of North America is at “elevated” or “high” risk of electricity shortfalls during extreme weather. John Moura, NERC’s director of reliability assessment and performance analysis, told reporters that there are “extraordinary reliability challenges and opportunities in front of us.”

NERC’s Ominous Warning for This Summer

Now, NERC has a new report, its Summer Reliability Assessment, and it is even more sobering. The report estimates that two-thirds of the U.S. and Canada could face electricity shortfalls and blackouts this summer.

“We are facing an absolute step-change,” said Moura in a call with reporters. Over the past five years, NERC has seen a “steady deterioration in the risk profile of the grid.”

He added, “The system is close to its edge…. Managing the pace of retirements is critical.”

According to Catherine Morehouse of Politico:

New England, the West, the Midwest and Ontario all face an elevated risk of grid problems this summer if demand on the system rises too high. But New York, the Southeast, most of Canada and the PJM Interconnection — the regional market that stretches from Chicago to the mid-Atlantic — are all expected to have enough resources to meet expected demand.

Some 165 million Americans live in the at-risk areas, Reuters pointed out.

The report notes that in the Midwest and Southwest, especially, the ability to meet demand hinges on the performance of wind farms. For example, NERC states that the output of the Southwest Power Pool’s “wind generators during periods of high demand is a key factor in determining whether there is sufficient electricity supply on the system. SPP can face energy challenges in meeting extreme peak demand or managing periods of thermal or hydro generator outages if wind resource energy output is below normal.”

Writes Morehouse:

Texas faces rapidly growing demand alongside transmission constraints and — similar to California and the West — high levels of solar power that contribute to daytime capacity but threaten to create problems as evening comes. But the region’s boom in solar and demand response capabilities have helped alleviate concerns that arose last year. New England is expected to have less power generating capacity this summer than last year because of power plant retirements, as well as lower levels of imports from other regions.

“Wildfire risks to the transmission network, which often accompany these wide-area heat events, can limit electricity transfers and result in localized load shedding,” NERC added.

Permitting Reform on the Front Burner?

As the White House and Republicans in Congress try to resolve differences over raising the debt ceiling, permitting reform has arisen as a possible portion of a compromise solution.

In recent weeks, Senator Joe Manchin re-introduced his permitting reform bill from last year, and Senators Shelley Moore-Capito, Manchin’s Republican colleague from West Virginia, and John Barrasso (R-Wyo), ranking member of the Senate Energy and Natural Resources Committee, introduced a different form of permitting legislation.

Manchin’s bill sets maximum timelines for reviewing permits for energy infrastructure projects, including two years for National Environmental Policy Act (NEPA) reviews of major projects and one year for lower-impact ones. The bill also addresses excessive litigation delays and clarifies FERC jurisdiction over the regulation of interstate pipeline, storage, import, and export facilities, clearing up confusion about which agency has that role.

The Republican bill requires courts to process NEPA challenges and issue final judgments within 180 days. It also sets strict deadlines for agencies to complete necessary project review documents, including environmental impact statements. And it prevents projects from being unreasonably blocked by states that delay (or deny) issuing Section 401 certifications under the Clean Water Act.

At a recent Bipartisan Policy Center event, John Podesta, senior advisor for clean energy at the White House, spoke forcefully in favor of permitting reform, saying, “These delays are pervasive at every level of government—federal, state, and local. We got so good at stopping projects that we forgot how to build things in America.” He added:

Last fall, I came back to the White House. And in my first week on the job, in my first meeting with the Secretary of Energy, I found out that permits for a transmission line I thought had been resolved in the Obama administration still hadn’t been approved. That’s unacceptable. And given that we have to increase electric transmission 60% over the next seven years—which means building transmission lines at twice our current pace—we have to fix this problem now.

Podesta continued, “Most Americans agree—81% of voters support the development of new transmission lines, and a majority say that permitting reform should prioritize clean energy projects over fossil fuels.”

Still, the group of Democrats who prevented Manchin’s proposed reforms from coming to the floor last year – despite his deal with the Congressional leadership in return for his vote in favor of the Inflation Reduction Act – remains opposed. On May 19, The Hill reported, 79 House Democrats “wrote a letter expressing concern about tying pieces of a Republican-led permitting reform package to must-pass legislation amid efforts to get a permitting reform deal into a compromise debt limit bill.” 

Wrote The Hill’s Rachel Frazin:

The issue has divided Democrats, some of whom argue that a faster process is needed to build out low-carbon energy in the fight against climate change, but others warn that efforts to speed environmental reviews could harm nearby communities by limiting their input.

These lawmakers have less power today as control of the House has shifted to Republicans, but, even if permitting reform becomes part of a debt ceiling deal, the finer details still need to be hashed out. And they’re complicated.

And Speaking of Burners: NY State Is Banning Gas Ones

New York became the first state in the nation to ban natural gas hook-ups for stoves and furnaces in new residential, as well as some commercial, buildings. Governor Kathy Hochul, a Democrat, signed the legislation on May 2 as part of the state’s budget.

Under the law, “all-electric heating and cooking is required in new buildings shorter than seven stories by 2026, and in buildings taller than seven stories by 2029. The law largely impacts residential buildings, but there are “exceptions in place for commercial and industrial buildings such as restaurants and stores.”

Hochul stated in an interview with FOX 5 New York: “Just like we had to, a long time ago, transition from coal as your energy source, we do have to transition. There are clean energy alternatives.”

As we reported in edition No. 20 of this newsletter, the gas stove debate reached a boiling point nationally in January when a report said the U.S. Consumer Product Safety Commission was considering a ban on new natural gas stoves. The backlash prompted CPSC Commissioner Richard Trumka Jr. to tweet that the CPSC “isn’t coming for anyone’s gas stoves.” The White House also had to clarify at the time that President Biden did not support banning the stoves.

While environmentalists celebrated the law, Rob Ortt, the state Senate’s Republican Leader, said,  “The energy plan that Albany leaders are proposing is far too intrusive, not to mention unaffordable, unsafe and unrealistic.”

While New York is the first state to ban natural gas hook-ups, many municipalities, including New York City, have already taken such steps – and have been met with legal challenges.

On April 17, the U.S. Court of Appeals for the Ninth Circuit ruled that a Berkeley, California, ordinance “banning natural-gas lines in new construction illegally interferes with federal law.” Adopted in 2019, the Berkeley ban was the first in the U.S.

“By completely prohibiting the installation of natural gas piping within newly constructed buildings, the City of Berkeley has waded into a domain preempted by Congress,” Judge Patrick Bumatay wrote for the three-judge panel that heard the case.

Berkeley argued that it had the power to regulate building infrastructure to protect public health and safety. The Biden administration filed an amicus brief supporting the city.

New York’s new measures sets the stage for more legal showdowns.

Congressional Leaders Want Assurances That the U.S. Is Prioritizing Safe Pipelines

Rep. Cathy McMorris Rogers (R-Wash), chair of the House Energy and Commerce Committee Chair, sent a letter on May 9 to the Pipeline and Hazardous Materials Safety Administration (PHMSA), asking for details on the implementation of its safety programs. With re-authorization of pipeline safety laws looming, the committee chair wanted “to ensure America’s pipelines continue to transport natural gas, liquid fuels, and feedstocks across the country as safely, reliably, and efficiently as possible.”

Writing with Rep. Jeff Duncan (R-SC), the chair of the Subcommittee on Energy, Climate and Grid Security, McMorris Rogers stated:  

As you know, pipelines are among the safest and most efficient modes of transport for fuels and feedstocks that power our nation’s economy. PHMSA and the States must coordinate effectively to ensure the nation’s existing 3.3 million miles of pipelines are operated and maintained in a manner that is safe and reliable.

PHMSA has an especially important role today, with new proposals for pipelines and liquefied natural gas (LNG) facilities mounting and the replacement of older infrastructure necessary to “improve the reliability of energy for the American people.”

Exports of natural gas are expected to triple over the next 30 years, according to a report on April 27 by the U.S. Energy Information Administration (EIA).

The level of concern by McMorris Rogers and Duncan was evident in the questions in their letter to PHMSA:

  • “Please provide a list of all regulatory actions and enforcement proceedings conducted on or after January 20, 2021.”
  • “On May 5, 2023, PHMSA proposed a new rule for gas pipeline leak detection and repair pursuant to Section 113 of the PIPES Act. By law, PHMSA is required to conduct a risk assessment and cost-benefit analysis, so all new regulations are cost-effective. Has PHMSA estimated the compliance costs of the proposed regulation? How much does PHMSA expect the proposed regulation will increase the price of natural gas for American consumers?”
  • “How does PHMSA estimate environmental costs and benefits?”
  • “Does PHMSA estimate environmental costs and benefits related to climate change that are incurred outside the United States for use in agency rulemakings?”
  • “Does PHMSA utilize the Social Cost of Carbon, the Social Cost of Methane, or other tools or models to estimate environmental costs related to climate change?”
  • “How does PHMSA define ‘equity benefits,’ a term used in the May 5, 2023, proposal?”

With U.S. natural gas production and LNG exports expected to grow through 2050, an increased emphasis will be placed on new energy infrastructure projects, especially pipelines. Clearly, the committee leaders are worried that other Administration goals related to climate change may be competing with PHMSA’s primary responsibility for safety.

A Pew Survey Finds Americans Want a Cautious, Reasoned Approach to Energy and Climate Policy

What do Americans think about all things climate and energy? To coincide with Earth Day, the Pew Research Center released the findings of a new survey of U.S. voters’ attitudes. The results are a cautionary tale for policy makers:

  • “Nearly seven in ten Americans (69%) favor the U.S. taking steps to become carbon neutral by 2050, a goal outlined by President Joe Biden at the outset of his administration.”
  • But….  “Americans are reluctant to phase out fossil fuels altogether… Americans are wary of relying exclusively on renewable energy sources.” Only about three in ten (31%) say the U.S. should completely phase out oil, coal and natural gas.
  • Two-thirds of respondents say the country should use a mix of energy sources, including fossil fuels and renewables.
  • Most Americans want government to encourage production of wind and solar power (66%), but sentiment for encouraging electric vehicles is mixed (just 43% are in favor).

These findings show that Americans are concerned about moving too quickly to eliminate fossil fuels. But we keep seeing such policies emerge month after month. When President Biden took office, he called for 100% “clean electricity” by 2035. More recently, the Biden EPA has proposed new regulations on vehicle tailpipe emissions that would require that two-thirds of all new vehicles sold in the U.S. by 2032 be all-electric. As we noted above, In New York State, the Governor signed a law earlier this month that will ban the use of fossil fuels in most buildings.

Also, in March, Maryland became the latest state to ban the sale of internal combustion engine-powered (ICE) vehicles starting in 2035. Maryland follows California, Massachusetts, New Jersey, New York, Oregon and Washington, which have all publicly announced they’ll enforce California’s Advanced Clean Cars II rule and prohibit the sale of new gasoline-powered vehicles.

Then, as we said at the start of this newsletter, the EPA wants to require power plants to cut emissions by 90%, or they will be closed down.

It seems from the Pew survey that voters are not enamored with such extreme approaches to energy use and climate policy.