In today’s issue:
- The comment period ended in August for the EPA power plants rule, which, if enacted, will likely lead to mass shutdowns of fossil-fuel-driven power plants.
- Grid operators warn that the proposed rule jeopardizes the reliability of the electric grid.
- EPA wants power plants to use hydrogen and carbon-capture technologies that are so far unproven.
- Edison Electric Institute, a trade association for large utilities, whose support is key, is also skeptical of the rule.
- Attorneys general from 21 states criticize the EPA for doubling-down, citing last year’s Supreme Court ruling.
- Will Kentucky be able to keep the lights on if plants are decommissioned?
- Permitting reform has passed, but serious questions arise over how it will be implemented.
- Pennsylvania, the number-two state for producing natural gas, considers building an LNG terminal to export it.
- A Rhode Island utility cancels plans for an offshore wind farm. Interest rates and government policies appear to be behind the move.
EPA’s Power Plant Rule Unleashes a Flood of Criticism as Comment Period Ends
As we first reported in our May newsletter, the U.S. Environmental Protection Agency (EPA) nearly four months ago proposed a controversial 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 comment period ended Aug. 8, and the EPA will now review a mass of critical letters calling for reconsideration.
As Bloomberg Law reported:
Comments flooded the Federal Register on Tuesday for the EPA’s latest round of power plant emission rules, giving a glimpse of the prolonged legal battle likely on the horizon once the agency finalizes the standards…. Critics overwhelmingly reiterated the same point: that the technology isn’t ready to match the rule’s timelines.
The article by Jennifer Hijazi quoted a typical letter from the Florida Municipal Power Agency, “one of the many utilities that lambasted the rule’s feasibility,” as saying: “The compliance deadlines and technology requirements in EPA’s proposal are unrealistic and potentially harmful, resulting in inordinate costs and reliability risks.”
We reported last month on the kind of risks that critics believe the EPA rule would create. A recent report by the New York Independent System Operator (NYISO) identified a shortfall of electric generating capacity for New York City in 2025 because of the retirement of older power plants in response to state environmental rules. A similar situation prevails in Kentucky (see below) and other states. The proposed rule, says critics, will supercharge such dangers.
The Bloomberg article on Aug. 9 related the background of the EPA proposal. The history began with the Obama Administration’s Clean Power Plan (CPP), which “would have transformed the nation’s grid by regulating it broadly, versus on a facility-by-facility basis.” The plan “was litigated extensively and never implemented.” It was eventually replaced by the Trump Administration’s Affordable Clean Energy (ACE) rule.
Litigation over the ACE rule reached the Supreme Court, “where justices significantly curbed the EPA’s ability to regulate greenhouse gases in the power sector.” Now, the EPA is trying again. “Lawsuits haven’t been filed yet against the EPA’s latest rule, but challengers will likely rely on arguments that the agency is exceeding its authority as it did for the contested Clean Power Plan,” wrote Hijazi.
The rule, said Politico in May, “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.”
According to the Wall Street Journal, “utilities would begin phasing in the lower air-pollution targets in 2030 and have until 2042 to fully comply with the proposed standards.” Critics say the timelines are unrealistic, and plants powered by natural gas and coal would have to be retired prematurely if they do not implement carbon capture and sequestration technology into their operations.
The U.S. Energy Information Administration reports that in 2022, coal was the source of electricity generation for 20% of electricity in the U.S.; natural gas, 40%; renewables, 22% (about half of that from wind); nuclear, 18%.
The crux of the EPA’s proposal is the use of carbon capture to meet emissions targets, but many experts say that technology isn’t ready to be deployed on such a wide scale. The only alternative for many coal- and gas-fired plants would be forced to close, exposing the nation to serious electricity shortfalls.
The rule “backs utilities into a corner where they’re forced to retire their plants. It seems almost a preferred compliance mechanism,” said Heath Knakmuhs, vice president and policy counsel for the Global Energy Institute at the U.S. Chamber of Commerce.
Joint Comments from Grid Operators Warn That the Rule Threatens Reliability
In joint comments to the EPA, several independent system operators (ISOs) and regional transmission organizations (RTOs) – which manage the grids in all or parts of 30 states and the District of Columbia, providing service to 154 million Americans – raised the danger of the rule crippling the reliability of the grid.
PJM Interconnection, the Electric Reliability Council of Texas, Midcontinent ISO, and Southwest Power Pool have consistently sounded alarm bells regarding the speed with which government regulations are demanding a transition to renewable energy, putting reliable electricity delivery in peril. In their Aug. 8 comment letter to the EPA, they wrote:
As the penetration of renewable resources continues to increase, the grid will need to rely even more on generation capable of providing critical reliability attributes. With continued and potentially accelerated retirements of dispatchable generation, supply of these reliability attributes will dwindle to concerning levels….
In a separate letter, ISO New England warned that the proposal could have unintended consequences. As Utility Dive explained:
The proposed rule, for example, would regulate natural gas combined-cycle power plants that are larger than 300 MW and run at a greater than 50% capacity factor, ISO-NE said. As a result, generators may opt to run smaller, less efficient units, increasing carbon emissions, the grid operator said.
The New England grid operator also noted that its region lacks the geology to make it feasible to store carbon dioxide or hydrogen underground. The ISO, like many other commenters, said that the time it had to assess the proposal was inadequate:
Given the limited time for analysis, [we were] only able to conduct a high-level assessment of the rules’ impact on regional generation, emissions and wholesale electricity costs. The ISO is aware that EPA plans to publish a separate rulemaking so as to cover all of the existing natural gas fleet. It is important to note that, until all parts of the rule are published, it is difficult for the ISO to gauge the overall impact of this current proposed rule and the results of this analysis may be underestimating the impact of the rule on future grid reliability.
Similarly, McGuireWoods attorney Allison Wood, counsel for the Power Generators Air Coalition, said in July 24 comments: “If EPA continues to refuse to extend the comment period—even though it is being told repeatedly by stakeholders, states, and elected officials that the time period is insufficient—the Agency runs the risk of having a court find that EPA violated the Administrative Procedure Act and the Clean Air Act in connection with this rulemaking,”
In comments on Aug. 5, EPSA, the Electric Power Supply Association, which represents America’s competitive suppliers of power, warned the EPA that its rule “will lead to the closure or reduced operations of critical electric power resources.” The organization noted that its “member companies are building low and zero-emitting power generation resources while maintaining the assets needed to provide reliable service” and that EPSA understands “the desire to reduce emissions economy-wide.” But, said EPSA CEO Todd Snitchler, “policies to do so cannot jeopardize Americans’ access to reliable and cost-effective electricity.”
EPSA’s comments emphasized the “need for dispatchable natural gas-powered generation to balance intermittent renewables and keep the system running.” The letter also stated that because of several factors – a more electrified economy (as electric vehicle use, for example, expands), extreme weather from climate change, and “political and logistical hurdles to building lower emission technology” – the U.S. is going to need a more, not less, robust infrastructure. “We will need all types of technology and resources to power the nation’s cleaner energy future,” said Snitchler.
The National Rural Electric Cooperative Association (NRECA) argued that the “proposed power plant rule threatens electric cooperatives’ ability to provide reliable, affordable electricity to their members.” The group called on the EPA to “withdraw the proposal in its entirety.” The NRECA, like other commenters, pointed first to the issue of necessary technologies not being ready for prime time:
The proposal hinges on the widespread adoption of nascent technologies: clean hydrogen and carbon capture and storage. Electric cooperatives are involved in the development of five carbon capture projects and are national leaders in the development of the technology. And while both technologies are promising, they are not yet widespread or commercially available and have not been “adequately demonstrated” as required by the Clean Air Act. Requirements for some coal units to co-fire natural gas are similarly flawed.
‘Forced Plant Closures Cannot Be the Best System of Emissions Reduction’
The NRECA also argued that “EPA asserts vast new authority of major economic and political significance without a clear statement from Congress. This disregards the ‘major questions doctrine’ and is inconsistent with the text, structure, and context of Clean Air Act Section 111.” (Section 111 gives the EPA the power, within limits, to set greenhouse gas pollution standards for the power industry.)
In an editorial shortly after the rule was released, the Wall Street Journal’s editorial board called the proposed regulation “a de facto mandate to shift to renewables from fossil fuels, which Congress never explicitly authorized.” The rule, said the Journal, appears to run afoul of the Supreme Court’s 6-3 decision in West Virginia v. EPA in June 2022, which said that only Congress, not the EPA, has the power to create a broad system of regulations to limit emissions from existing power plants in transitioning 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 piece 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.
In its May 11 editorial, 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.”
A letter from the U.S. Chamber of Commerce’s Global Energy Institute on Aug. 8 also argued that, in the West Virginia case, the Supreme Court had already rejected the approach used in the EPA’s proposed rule – further reinforcement of the headline in the Bloomberg Law piece: “Groups Foreshadow Legal Hang-ups for Biden’s Power Plant Rules.”
The Chamber was joined in its comments by a coalition including the American Fuel & Petrochemical Manufacturers, the National Lime Association, Aluminum Association, ConservAmerica, and the American Chemistry Council.
The letter stated:
In effect, EPA’s proposal is another attempt to use section 111 to restructure the nation’s electric grid through “generation shifting” to its preferred sources of electric generation. This is evidenced clearly by the proposal to require the retirement of sources that cannot comply using undemonstrated technologies by the proposed deadlines. EPA lacks authority to propose standards under section 111 that are so lacking in achievability, and so expensive, that fossil fueled power plants must shutter prematurely. Forced closures cannot be the best system of emissions reduction for existing power plants.
As for those “undemonstrated technologies” are concerned, the Chamber’s letter said that “clean hydrogen co-firing and carbon capture and storage (CCS), are not operating at any power plant in the United States—and even though technically possible in isolation, these BSER [best system of emission reduction] options cannot be made to operate at U.S. power plants within the timeframes contemplated in the proposal.”
Prior attempts to commercialize carbon capture at power plants, said the letter, “were abandoned or shut down due to technical challenges and economics.”
Edison Electric Institute, Whose Support the Administration Needs, Also Critiques the EPA Rule
The Edison Electric Institute (EEI), which represents investor-owned utilities, also argued that the timetable “could leave grid operators short of fossil-fuel-based generation that may be essential to prevent power outages in emergency situations, particularly during extreme weather when wind and solar power supplies can be low,” according to an EnergyWire piece.
In its comments on Aug. 8, EEI stated that “EPA should not finalize” standards that are based on carbon capture or blending zero-carbon hydrogen with natural gas in turbine generators. “If EPA moves forward with the standards as proposed…the Agency should provide electric companies and states as much compliance flexibility as possible to address achievability concerns,” EEI added.
EEI’s views on the rule were highly anticipated, as it is the power sector’s largest lobby group and has worked closely with the Biden administration on energy issues. The group’s warning shows the challenge facing the Biden administration as it pushes to decarbonize the U.S. grid by 2035. Without full support from the country’s largest utilities — which determine much of the trajectory of the electricity mix — the Biden clean energy goals are unlikely to be reached.
In its 213-page comment letter, EEI also argued that the rule put affordability and reliability – the two goals of the Federal Energy Regulatory Commission (FERC) – in jeopardy.
Sens. John Barrasso (R-WY) and Shelley Moore Capito (R-W V) last month called on FERC to determine whether the EPA restrictions on fossil fuel power plants could threaten electricity supply.
“EPA clearly lacks the expertise to project accurately the impact of its rulemaking on electric reliability,” said Barrasso and Capito, the top Republicans on the Senate Energy and Natural Resources and the Environment and Public Works committees, respectively, in a statement at the time.
So where does FERC stand? The agency, whose goals are reliability and affordability, plans to review the rule at its annual grid reliability technical conference, set for November 9.
Twenty-one State AGs Call the Proposal ‘Impossible,’ Questioning EPA’s Authority
Twenty-one Republican state attorneys general, in their own joint comment letter, charged that the EPA proposal “still doubles down” on an earlier rule’s “goals by setting unrealistic standards.” The AGs were behind the EPA’s defeat in the West Virginia case.
The attorneys general, led by Patrick Morrissey of West Virginia, added that the “impossible” proposal would force coal- and natural gas-fired power plants to shut down, said a Politico article on Aug. 9. “Yet EPA has no more authority to mandate this result indirectly than it did when it tried to do so directly,” the states said. “Thus, the Proposed Rule exceeds EPA’s authority by forcing the kinds of major shifts that West Virginia already said can’t be imposed by way of Section 111(d).”
Politico reported that the AGs opposed “EPA’s reliance on what they called unproven technologies, such as carbon capture and storage and hydrogen fuel, as the ‘best system of emission reduction’ under the Clean Air Act.”
They rejected some of the EPA’s suggestions, “like storing CO2 in unmineable coal seams…. This proposal is yet another idea that ‘has been demonstrated in small-scale demonstration projects’ but never full scale…. Speculating about the possibility of using other formations like depleted oil and gas fields…is also just that – speculation.”
Alabama, Arkansas, Georgia, Idaho, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Utah and Virginia joined West Virginia’s comments in the 55-page letter, which ended by charging that “the Proposed Rule seems to be another attempt to force fossil-fired plants to stop producing or else subsidize different forms of generation.
“But EPA could not reshape what sources are and aren’t allowed to comprise the nation’s electricity-generating sector through the CPP [the Clean Power Plan of 2015]— and it cannot through this effort, either. For the sake of our residents, businesses, and sovereign interests, we urge EPA to reevaluate the Proposed Rule in keeping with Section 111’s limits and the bounds of reasoned rulemaking.”
Meanwhile, according to an EnergyWire piece, “Activists organized by the Climate Action Campaign announced the hand-delivery of more than 1 million public comments to EPA on Tuesday [Aug. 8], urging the agency to adopt the strongest possible limits on climate pollution from electricity generation facilities.” Said the news article:
EPA’s current proposal is a step forward in cutting climate pollution from the power sector … [but] the proposal does not go far enough,” the climate organizations said. Their statement challenged President Joe Biden’s administration to live up to its pledge to achieve a carbon-free power grid by 2035 — a target that computer modelers warn can’t be reached if present power industry trends continue.
“Fifty years of history shows that the electric power industry’s nitpicking of EPA’s plan should be taken with a pinch of salt,” said David Doniger, a senior strategic director at Natural Resources Defense Council, said in a statement accompanying his group’s comment letter. “The electric power industry has a long track record of objecting to new pollution control requirements as they are proposed, but then outperforming those requirements once they are set.”
Kentucky’s Ability to ‘Keep the Lights on’ Is Being Questioned
On the subject of reliability, let’s turn to Kentucky, which could be a microcosm for the rest of the country. In a column on Aug. 1 for LINK Media, a publication focusing on the northern part of the state, Michelle Bloodworth, CEO of America’s Power, cited Kentucky’s rolling blackouts as a result of Winter Storm Elliott last Christmas and the last month’s emergency warning by PJM Interconnection (whose jurisdiction includes Kentucky) of interruptions because of sweltering temperatures.
Bloodworth wrote, “These repeat events are confirmation of what industry and energy experts have been saying for years: America and Kentucky are on the verge of a reliability crisis of our own making.” This crisis, she writes, “is the result of a federal regulatory regime designed to accelerate the proliferation of renewable energy.”
She cites the EPA’s regulations “that are forcing additional baseload power plants into premature retirement. These regulations have entirely ignored dependability, affordability, and the ability of grid operators to serve their customers during bouts of extreme weather.”
The crisis is “particularly acute in Kentucky, “where retirements of fuel-secure resources like coal are taking place at a uniquely rapid pace.” She adds:
Just last week, Louisville Gas and Electric and Kentucky Utilities announced plans to cut coal power by a third by 2030, beginning with four coal-fired electric generating units in the next several years. And across its entire network, the grid operator PJM is planning to deal with the retirement of 24,000 MW worth of coal-power plants by 2030. If anything, these projections underestimate the retirements because more regulations have yet to take effect.
At a Congressional hearing in May, FERC Commissioner Mark Christie made the same point: “We are retiring dispatchable generating resources at a pace and in an amount that is far too fast and far too great and it is threatening our ability to keep the lights on.” The problem, said Christie,” is not the addition of wind and solar and other renewable resources. The problem is the subtraction of dispatchable resources such as coal and gas.”
Others at FERC echoed these sentiments. Commissioner James Danly said that, “as things stand, coal is required…. It makes up just under a quarter of all the installed capacity in America and it would be impossible, given the locations and the realities of the electricity system, to replace it.” As a state, Kentucky ranks fourth, after West Virginia, Missouri and Wyoming, respectively, for the proportion of electricity generated by coal.
“I believe in an all-of-the-above approach,” said FERC Acting Chairman Willie Phillips, an appointee of President Biden, at the May hearing of the Senate Energy and Natural Resources Committee. “Whatever resources are needed to keep our grid reliable, we have to make sure they are available.”
Bloodworth concludes her piece by using the same phrase as Phillips:
Instead of artificially forcing the retirement of conventional, baseload power plants, we should again embrace an all-of-the-above approach to energy that puts people’s needs before politics. That means accepting that it will be decades before the infrastructure and technology to reliably transport and store power generated by renewable sources sufficient to replace existing 24/7 resources. To do anything else would be to put both the welfare and economic wellbeing of Kentuckians at risk.
Permitting Reform: ‘Oh, Boy, Here We Go!’ Implementation Now Could Involve Such Issues as ‘Environmental Justice.’
The long battle over streamlining the permitting process for energy infrastructure projects like natural gas pipelines came to what some expected was an end – or at least a partial end – with the June passage of the Fiscal Responsibility Act (FRA), which resolved the debt ceiling crisis.
But the struggle is not over. On July 31, the White House Council on Environmental Quality (CEQ) issued a proposed rulemaking regarding the portion of the FRA that relates to permitting reform. According to the White House, the rules would “fully implement and build upon new permitting efficiencies directed by Congress” under the FRA.
Others disagree. They complain that the changes won’t streamline the permitting process and will instead broaden the scope of National Environmental Policy Act (NEPA) procedures. A footnote, for instance, states that the government must “assure for all Americans safe, healthful, productive, and esthetically and culturally pleasing surroundings.”
Alex Hergott, who led the Federal Permitting Improvement Steering Council during the Trump Administration, said the reforms don’t address the root problem, which is “the hundreds of laws and regulations governing permitting at the federal, state, and local levels.” He added:
If I was a developer right now, my reaction is, “Oh boy, here we go. This is going to be a bumpy, unpredictable ride—let’s see how this turns out before we go to Wall Street to finance phase two of this transmission line or hydrogen, battery storage, or carbon capture project.”
Rep. Bruce Westerman (R-AR), who chairs the House Natural Resources Committee stated in a press release: “Expanding the size and scope of government agencies and burdening critical projects with new regulations does not streamline the permitting process. We expect CEQ and other agencies to follow the intent of Congress and adhere to the clear deadlines.”
What does the rule say? An analysis by AkinGump, the Washington law firm, concluded:
The proposed regulation would incorporate climate change and environmental justice into the definition of “effects” to include “climate change-related effects, including the contribution of a proposed action and its alternatives to climate change, and the reasonably foreseeable effects of climate change on the proposed action and its alternatives,” and “disproportionate and adverse effects on communities with environmental justice concerns, whether direct, indirect, or cumulative.”
The effect is to formalize requirements that the Biden Administration has been introducing and socializing with stakeholders since 2021. The analysis continued:
The proposed rule states that agencies should consider climate change effects in environmental reviews as well as perform an alternative analysis to identify and assess alternatives that address disproportionate adverse health and environmental effects.
While the proposed rule limits some aspects of the required NEPA review to match the updates authorized in the FRA – for example, timelines for environmental reviews and environmental impact statements (EIS)– the other proposals in CEQ’s rule actually increase red tape.
The rule also makes clear that a significant adverse effect may exist even if, on balance, the agency determines that the effects of an action will be beneficial. Under those conditions, an EIS is necessary, writes the law firm Perkins Coie.
To promote “environmental justice,” the rule favors renewable energy projects over traditional oil and gas. For example, as the Wall Street Journal noted in an Aug. 1 editorial headlined, “Biden’s Summer Regulatory Onslaught”: “If a utility wants to build a gas pipeline, agencies might have to evaluate if a solar plant would better promote environmental justice, however regulators define it.”
In summary, the CEQ’s proposed rules send a mixed message to energy stakeholders. Some streamlining reforms from the FRA are adopted, but agencies will be required to include additional, burdensome considerations in their reviews.
Pennsylvania Ponders a Facility to Ship Natural Gas Abroad
Pennsylvania faces a big decision on a port near Philadelphia for export of liquefied natural gas (LNG).
Proponents and foes debated the project – a $6.4 billion terminal along the waterfront in Chester City – at an Aug. 22 public hearing of the Philadelphia LNG Export Task Force. The proposed facility seeks to capitalize “on the abundance of Pennsylvania shale gas and soaring worldwide demand for LNG after Russian’s invasion of Ukraine,” as an article in the Philadelphia Inquirer put it.
LNG from the U.S. has played a critical role in supplying Europe at a time when the continent can’t rely on Russia.
The port is similar to those that have sprouted on the Gulf Coast and “turned the United States into a major natural gas exporter,” said the article. At the terminal, gas would be cooled to become a liquid, so that it can be stored and transported by ship. LNG shipments from the U.S. have gone from zero in 2016 to 12 billion cubic feet a day this year – but demand remains strong.
Pennsylvania is the second-largest producer of natural gas in the nation after Texas, but there are only two LNG ports on the East Coast – in Maryland and Georgia – to send gas abroad, and both of those have low capacity compared with the five current Gulf Coast facilities. Three more Gulf Coast terminals are under construction and 11 additional ones have been approved – but none on the East Coast.
Harnessing the state’s reserves and exporting LNG can help grow the economy, create jobs, and enhance U.S. national security.
“Although Pennsylvania is a major producer of natural gas, exporting LNG to Europe and other distant markets is not happening within the state,” wrote Earl Baker, a former Chester County Commissioner, in the Delaware Valley Journal. “To do this efficiently, we need a Southeast Pennsylvania LNG shipping depot, and on a scale that’s capable of serving the world.
This is the third hearing of the Task Force – which includes members of the state General Assembly, natural gas sector, building trades, and other stakeholders – and unlike the previous two hearings, this one featured significant community opposition. Zulene Mayfield, chairwoman of Chester Residents Concerned for Quality Living, “has long fought the Covanta plant and is focused on defeating any LNG proposal,” reported the Inquirer.
“This committee is stacked with individuals that would have the most benefit financially from a proposal such as this,” Mayfield testified. She claimed the plant would pose a risk to Chester City’s 33,000 residents and would displace homes, businesses and churches.
Chester City is in bankruptcy, and “its retirees are faced with pension cuts,” the Inquirer noted. At the hearing, Carl Marrara, executive director of the Pennsylvania Manufacturers’ Association, said the LNG facility would bring needed jobs to the city and county, boosting tax revenue. “We can help supply the world, especially our overseas allies, as they seek to disentangle themselves from foreign adversaries,” Marrara said.
The importance of onshore shale oil and gas took on added significance this month when the Biden Administration restricted drilling in the Gulf of Mexico to protect a whale species.
The Task Force was created 10 months ago to study and produce a report on how to develop an LNG terminal in southeast Pennsylvania. Its final report is due this November.
Utility Rejects an Offshore Wind Farm, With Interest Rates, Permitting Delays and a Lack of Tax Credits to Blame
Rhode Island Energy last month rejected a joint bid by Orsted US, a large Boston-based wind-power firm, and Eversource, a New England energy provider, to develop an offshore wind farm. The decision confirmed the need for streamlined permitting of energy infrastructure projects, a faster rollout of tax credits provided by the Inflation Reduction Act (IRA), and greater dedication to an all-of-the-above strategy.
The proposal was the only bid received by the utility. Government officials had sought between 600 and 1,000 additional megawatts for the state’s renewable energy portfolio in a project called Revolution Wind 2. (Orsted and Eversource signed a power purchase agreement with Rhode Island Energy in 2019 for its original Revolution Wind 1 project, which also involves Connecticut. That project is expected to be operational in 2025.)
Rhode Island Energy, in a July 18 press release, explained, “Higher interest rates, increased costs of capital and supply chain expenses, as well as the uncertainty of federal tax credits, all likely contributed to higher proposed contract costs.”
Rhode Island has an ambitious goal of generating 100 percent of electricity from renewable sources by 2033, which the rejection of this bid undermines. The state currently operates its only offshore wind farm off the coast of Block Island — five turbines that generate 30 MW of clean power.
The slow process of procuring permits, often driven by environmental activists skilled at instigating delays, has raised investment costs. The irony is that 65% of projects stuck in the permitting process, involve renewable energy and only 19% involve fossil fuels (the rest are for electricity transmission), according to a study by the R Street Institute. A Brookings Institution report last year stated, “Most wind energy projects in the pipeline are stuck in the permitting phase, with just 21% of planned projects currently under construction.”
Also notable is the uncertainty surrounding federal tax credits that were part of the IRA. The legislation called for $260 billion in clean-energy credits. Those credits “could hike annual utility-scale wind installations threefold to 39 GW/year [gigawatts per year] by 2025, Princeton University said in a special report,” said Reuters recently. “Solar installations could hike to 49 GW/year by 2025, five times higher than in 2020, and growth rates would continue to increase thereafter.”
But actually procuring those credits in a reasonable time is another matter.
The rejection of Revolution Wind 2 is indicative of the current energy environment in the country. Mixed messages from the Administration and its agencies have led to investor confusion, and the slow rollout of federal funds has delayed progress on renewable energy projects.
The Administration should be looking to make all energy projects cheaper, say experts across the policy spectrum, with a faster deployment of federal funds and tax credits, as well as a faster permitting process to prevent litigants from using frivolous lawsuits to increase project costs.
Within the New Jersey context, the public should know about the realities surrounding offshore wind. In an Aug. 21 NJ Spotlight Op-ed, Utility and Transportation Contractors Association of New Jersey executive director Dave Rible noted the Ocean Wind I project is “now also looking to state leaders for a similar government-funded break.” It’s clear that further financial aid is needed to ensure the project moves ahead.
The bottom line – public officials should exercise caution about an accelerated energy transition in light of the clear financial challenges.