Issue No. 36

  • The new Summer Reliability Assessment from NERC finds jeopardy from hotter temperatures, growth in demand, and reduced, or insufficiently rising, supply.
  • Because of power plant retirements and heavy reliance on solar and wind, the regions at the most risk include New England, Texas, and the Southwest.
  • A Senate hearing looks at the consequences of new projections that “electricity demand is poised for truly remarkable growth” after years of flat demand.
  • FERC makes a ruling on interstate grid transmission that causes controversy.
  • In what JPMorgan calls a “reality check,” companies are backing off earlier climate targets as electricity demands accelerate, mainly because of AI computing needs.
  • Energy-sector emissions fall to levels not seen in 40 years, and natural gas gets credit.
  • The Biden Administration slaps tariffs on Chinese EVs and other clean-energy products, but are trade restrictions really the best way to boost the economy and meet climate goals?

Regions of the U.S. Are at Risk for Energy Shortfalls This Summer, a New Assessment Finds

At risk for energy supply shortfalls this summer are seven areas across the United States and Canada, concludes the 2024 Summer Reliability Assessment of the North American Electric Reliability Corporation (NERC), the non-profit whose mission is “to assure the effective and efficient reduction of risks to the reliability and security of the grid.”

Its new report says that reliability is in jeopardy in regions served by: ISO (independent system operator) New England; Midcontinent Independent System Operator (MISO), in such states as Louisiana and Arkansas; Electric Reliability Council of Texas (ERCOT); WECC-SW (Western Electricity Coordinating Council), in the Southwestern U.S.; MRO-SaskPower (Midwest Reliability Organization), in Saskatchewan, Canada; WECC-BC, in British Columbia, Canada; and WECC-CA/MX, in California and the Baja portion of Mexico.

NERC’s assessment is that these regions have the “potential for insufficient operating reserves in above-normal conditions.” And, of course, “above normal” has become the “new normal.” As the NERC report states, “Last summer brought record temperatures, extended heatwaves, and wildfires to large parts of North America.” As for 2024: “Weather services are expecting above-average temperatures across much of North America, potentially creating challenging summer grid conditions.”

The danger results from the confluence of three challenges: hotter temperatures, growth in demand, and reduced, or insufficiently rising, supply.

“Demand is growing in many areas at a rapid pace with the adoption of electric vehicles and construction of new data centers, straining some parts of the system,” said Mark Olson, NERC’s manager of Reliability Assessments, in a press release on May 15. The report found “a significant increase in demand, particularly in the Southwest, Texas and British Columbia.”

Where Danger Is the Greatest: New England, Texas, and More

On the supply side, the NERC report noted that New England will have reduced capacity this summer because of the retirement of two natural-gas-fired generators at the Mystic, Conn, Generating Station this month. MISO also will suffer from both retirements and from lower imports.

“One of the key challenges operators face as the resource mix evolves is how to get through the summer evening periods with fewer available resources at their disposal,” said John Moura, NERC’s director of Reliability Assessments and Performance Analysis.

Texas and California rely heavily on solar power, which diminishes in late afternoon and evening, causing supply shortfalls. The report also noted that for MISO, “wind generation performance during periods of high demand is a key factor in determining whether there is sufficient electricity supply.” Wind and solar are both intermittent sources and require back-up from other generation, mainly natural gas.

States and regions are growing concerned. Early this month, ERCOT issued a “weather watch” for Texas after a spell of high temperatures well before summer had even started. Such a watch indicates the risk of power outages and a potential for lower reserves.

“We’re seeing growth on the electric grid from renewable sources. We’re seeing solar and wind growing on the electric grid year after year,” Pablo Vargas, CEO of ERCOT, said. Texas is far and away the number-one state for wind-power generation and ranks second behind California for solar.

The Texas population increased by 473,453 last year, the most in the nation, putting more strain on the power grid, and the southern part of the state is especially vulnerable under high heat conditions “when demand is high and wind and solar output is low,” said the NERC report.

Olson also emphasized this point for other parts of the continent:

A large part of North America could be at risk of supply shortfalls during heat waves and extreme summer conditions that can affect generation or wind output or the transmission systems.

Axios reported that a recently released climate outlook by the National Weather Service for June through August “shows only one whole state – North Dakota – in the Lower 48 with equal chances of below-average, average or above-average temperatures. Everywhere else in the region is projected to be hotter than average.’

The areas with the chances of the hottest weather are the Northeast and a swath running from Texas to the Rockies and the Pacific Northwest.

According to Climate Central, 71% of the U.S. locations surveyed now experience at least seven additional extremely hot days a year over the level of 1970. Boise, Idaho, in 2022 had 22 more days over 95 degrees than it did in 1970. Austin, Texas, had 47 more days a year over 100 degrees than in 1970; Montgomery, Ala., had 31 more.

Virginia is expecting a hotter than usual summer this year, with possible outages that can harm public health, said Axios, warning, “Extreme heat is a major public health threat that puts vulnerable populations at risk and can further strain the power grid during prolonged heat waves.”

The summer prospects are shining a spotlight on the importance in the U.S. of a balance of energy sources, including natural gas, to maintain energy reliability and affordability.

The NERC report stressed:

Stored supplies of natural gas are at high levels, but continued vigilance is needed to ensure the reliability of fuel delivery to natural-gas-fired generators. The natural gas supply and infrastructure are vitally important to electric grid reliability, particularly as variable energy resources satisfy more of our energy needs.

The report added, “Fuel supply and delivery infrastructure must be capable of meeting the ramp rates of natural-gas-fired generators as they balance the system when wind and solar generation declines.”

Senate Hearing Probes Opportunities and Risks of New Projections that Electricity Demand Will Rise Sharply

On the heels of the NERC Summer Reliability Assessment and the shocking Grid Strategies report that concluded that “the nationwide forecast of electricity demand shot up from 2.6% to 4.7% growth over the next five years,” the Senate Energy and Natural Resources Committee on May 21 held a hearing to “examine the opportunities, risks, and challenges associated with growth in demand for electric power in the United States.”

In his opening statement, the committee’s chairman, Sen. Joe Manchin (D-WV) noted that for the past two decades, demand for electricity has been “flat across the country,” but “we’re here today because that era appears to be coming to an end, with exponential growth in the domestic technology and manufacturing sectors. Utilities and grid experts across the country are telling us that electricity demand is poised for truly remarkable growth.”

Sen. Manchin pointed to three main factors. First is “the reshoring of industry and advanced manufacturing spurred by the Bipartisan Infrastructure Law, the CHIPS Act [Creating Helpful Incentives to Produce Semiconductors], and the IRA [Inflation Reduction Act]. Construction spending on manufacturing has more than doubled since we signed these bills into law.”

Second on Sen. Manchin’s list is “the revolution in advanced computing,” especially artificial intelligence, which has required more capacity from data centers, which are also essential for cloud computing and bitcoin mining.

Third is “the push to electrify technologies across multiple sectors, like the Administration’s push to flood the market with EVs [electric vehicles].”

NERC has projected that there will be 90 gigawatts (GW) of demand growth by 2030, but, said Sen. Manchin, “that number is likely conservative.” He noted that ERCOT revised its 2030 load forecast to add 40 GW of load growth. “That’s like adding the demand of the entire state of California to the Texas grid – six years from now!”

This is the “opportunity of a generation,” he said, but it is also a daunting challenge. “If America can’t build the energy infrastructure needed to support these industries with reliable and affordable power, we will…cede control to China and other nations that we cannot necessarily trust.” (See the last section of this newsletter.)

The problem, said Sen. Manchin, is that “between the Administration’s policies and our inability to act in Congress,” we may fail to bring enough new generating power on-line while at the same time, “we are retiring baseload and dispatchable generation faster than we can replace it.”

He pointed, in particular, to rules recently made final by the Environmental Protection Agency (EPA) that “as far as I can tell, aim to kill coal completely and stop natural gas from replacing it, even though these dispatchable resources are essential for reliability.” We have been reporting regularly on these power plant rules, most recently in our Newsletter No. 35.

“If this Administration were serious about onshoring critical industries – the ones driving the load growth – they wouldn’t be in a race to take power offline,” said Sen. Manchin. “They’d be racing to bring new generation online.”

He referred to the difficulty of permitting and building new energy infrastructure and connecting it to the grid – an obstacle not just “for fossil plants. It’s as bad or worse for wind.”

Sen. Manchin’s criticism was directed not just at the Biden Administration but at Congress. He quoted Sen. John Hickenlooper (D-CO) as saying that recent action (see below) by the Federal Energy Regulatory Commission (FERC) to help build new transmission is just “a Band-Aid on Congress’s inaction. The Chairman also quoted FERC Commissioner Allison Clements, a Democratic appointee, as saying that, “for some of [the] next steps, particularly inter-regional planning and permitting reform, Congressional action could be critical in providing direction and momentum to the commission.”

Finally, Sen. Manchin quoted Mario Loyola of the Heritage Foundation, who said after FERC issued its new rules: “Transmission expansion has only become more difficult. These are problems only Congress can solve.”

The committee’s ranking member, Sen. John Barrasso (R-WY), echoed many of Sen. Manchin’s points, saying that, hobbled by EPA rules, “America is not positioned well” to meet competition from China in AI. We need reliable sources of dispatchable energy in addition to solar and wind – nuclear, coal, natural gas, and hydropower. “Our goal,” he said, “should be addition, not subtraction.”

The hearing examined several other issues, including the obstacles to energy investment caused by “process” – permitting and other regulations – and litigation, which Mark Mills, the executive director of the National Center for Energy Analytics, called “sand in the gears.”

Interstate Transmission Rulings by FERC Trigger an Array of Responses

The rulings on interstate transmission permits to which Sen. Hickenlooper referred in the May 13 hearing came down from FERC three days earlier.

Many companies, including the nation’s technology giants, had been pressing for months for FERC to act. In a January letter on behalf of 44 companies, the Clean Energy Buyers Association told the commission that the “electricity transmission system must keep pace with the need to connect and transfer power from new and existing generation resources” and adopt the rule.

“The country’s lack of transmission has been a major hindrance for renewable and storage projects waiting to connect to the grid,” wrote Zach Wright in a Politico piece.

Reuters reported:

FERC has been working for nearly two years on the rule to reform how new electric transmission gets approved and paid for, with new requirements for moving electricity across states and covering the costs of new projects. FERC said that reforms to transmission planning received over 30,000 pages of comments, creating the largest public record ever considered by the commission. The final rule requires transmission owners to conduct 20-year plans assessing regional electric transmission needs that would need to be revisited every five years.

The rule outlines seven specific planning benefit categories: reduced transmission congestion, reduced transmission energy losses, avoided capacity costs, production cost savings, avoided costs from alternative or deferred transmission facilities, mitigating effects of extreme weather and unexpected conditions, and reduced loss-of-load reliability or planning reserve margin criteria.

It also scrapped anti-competitive conditional right-of-first-refusal (ROFR) agreements, while retaining “right-sizing” ROFRs for upgrades on existing lines. These steps will probably limit targeted litigation that slows projects. But the rule did not address a proposal to remove the construction-work-in-progress (CWIP) incentive.

The order was approved, 2-1, with what Devin Hartman of R Street Institute called “a blistering dissent from FERC’s sole Republican, Commissioner Mark Christie. He was particularly incensed that, in his view, the rule promotes a renewables agenda and will harm consumers.” Christie, a Republican appointee, also said that the order “goes far beyond FERC’s legal authority and fails to perform our consumer protection function and the Federal Power Act.”

A Politico article pointed to how politically contentious the issue has become:

The development of long-distance power lines that cross multiple states is increasingly dividing red and blue states. Many led by Democrats are adopting clean energy and climate goals that will require a larger grid, while some Republicans, wary of a transition away from fossil fuels, have questioned the costs of projects that may cross into their borders.

The ruling, said Politico, seeks to change federal and state approaches to regional planning that have “made it harder to shift the nation to low-carbon technology.” The problem has been that, “in areas where grid planning isn’t well coordinated among states, projections for rapidly expanding demand from data centers and the electrification of homes and vehicles are raising concern about grid reliability.”

Travis Fisher of the Cato Institute, a libertarian think tank, was sharply critical of the ruling. “Despite some sugarcoating from FERC, this plan: (1) mandates that regional transmission plans socialize the cost of the most aggressive climate and renewable energy goals of some states and corporate customers at the expense of consumers and taxpayers everywhere, (2) derives from no clear authority granted by Congress, and (3) was rushed to avoid further scrutiny under the Congressional Review Act.” Fisher added:

In other words, FERC is unlawfully supporting climate goals that Congress never approved. The need to upgrade electrical infrastructure in the United States is not controversial, but the political methods employed in this ruling are. FERC, an ostensibly independent agency tasked with ensuring reliable power at “just and reasonable” rates, goes far beyond that narrow task with this new ruling.

Contrary to such critics as Christie and Fisher, however, Hartman of R Street argued in his piece that “the nature of reforms indicates far more potential gains than losses for consumers, with much dependent on implementation quality, litigation outcomes, and complementary reforms.”

According to Hartman, the rule corrects several deficiencies of the old regime. “A core culprit,” he wrote, “was exemptions to regional economic planning under Order 1000. In areas with regional transmission organizations (RTOs), incumbent utilities took advantage of exemptions to build the vast majority of transmission as local and supplemental projects. These projects, contrary to economic projects, exclude economic criteria, legitimate cost-of-service oversight, and competitive solicitations.”

FERC Chairman Willie Phillips said after the vote:

Over the last dozen years, FERC has worked on five after-action reports on lessons learned from extreme weather events that caused outages that cost hundreds of lives and millions of dollars. We must get beyond these after-action reports and start planning to maintain a reliable grid that powers our entire way of life. The grid cannot wait. Our communities cannot wait. Our nation cannot wait.

In a piece for Utility Dive, Commissioner Clements, who voted in favor of the rule, wrote that it “establishes a new long-term planning process to better anticipate and address regional grid needs, is a strong step that can considerably enhance grid reliability while making electricity more affordable for consumers.”

Sen. Barrasso, however, blasted the rule, saying that “FERC’s partisan vote today is bad news for American families and does nothing to improve electric reliability…. The Commission’s rule will only add to those costs. Today’s decision will force customers – often in rural states – to pay for new transmission lines even when those lines don’t provide any meaningful benefit to them.”

With New Demands for Electricity, Companies Doubt Earlier Climate Goals Are Reachable. It’s a ‘Reality Check,’ Says JPMorgan Report

Can America meet aggressive clean energy goals in the face of power-demand realities? New doubts are being raised.

For example, “European oil giant Shell this year pulled back its emissions reductions targets, citing “uncertainty in the pace of change in the energy transition,” Houston Chronicle reported on May 10. And companies including Microsoft, Walmart and United Airlines have had their climate goals “decertified by the United Nations’ Science Based Targets initiative (SBTi), following concerns that the plans to achieve emissions reductions were too vague.”

In all, more than 200 companies, including Procter & Gamble and Unilever, “missed the deadline to set full net-zero targets, or have chosen not to use SBTi’s standard,” according to a report by Real Economy Progress in March. Microsoft’s latest sustainability report card showed a 29.1% emissions increase between 2020 and 2023, largely fueled by artificial intelligence data centers.

At the same time, Americans’ use of petroleum products is rising. After a sharp drop in 2020 because of COVID, U.S. consumption grew from 19.9 million barrels a day in 2021 to 20.2 million last year, according to Energy Information Administration (EIA). The U.S. last year produced more crude oil than any country in history.

The Houston Chronicle also reported that “natural gas demand continues to rise, up 4.5% over the past five years, with Goldman Sachs projecting an even larger surge in gas demand coming this decade as power grids try to keep up with the boom in new data centers.”

A Wall Street Journal piece on May 12 was headlined, “There’s Not Enough Power for America’s High-Tech Ambitions.” The piece cited the Grid Strategies projections of power usage increasing 4.7% over the next five years (noted above) and added:

For states like Georgia, the fear is missing out on what could be once-in-a-generation investments. Wall Street is salivating over an artificial-intelligence-fueled tech bonanza, while Washington is throwing billions of dollars into domestic manufacturing. The added wrinkle is that it is all happening as many parts of America—corporate America included—are trying to wean themselves off fossil fuels.

The piece quoted Arne Olson of the consulting firm Energy and Environment Economics saying, “We haven’t seen this in a generation. As an industry, we’ve almost forgotten how to deal with load growth of this magnitude.” 

Rapid decarbonization is going to need a “reality check,” analysts at JPMorgan cautioned clients recently. “Shifting the global energy system is highly complex and is a process that should be measured in decades or generations, not years,” they warned.

An article last month in Utility Dive, citing the JPMorgan report, also noted the “steep price tag” that comes with energy transition, with investments currently offering “subpar returns. “The bank estimated the wind and solar buildout between 2024 and 2030 alone will require approximately $3 trillion annually.” The piece added:

This year alone,  several energy companies — such as Equinor and BP — nixed offshore wind projects citing rising inflation, interest rates and supply chain disruptions. Such retractions in the U.S. wind power industry have impeded states in reaching their goal of deploying renewable energy over a certain timeline. New York State recently canceled three offshore wind projects which promised 4 gigawatts of capacity, setting the state back in its goal to deploy 9 gigawatts of offshore wind by 2035.

Christyan Malek, JPMorgan’s head of global energy strategy and lead author of the report, told the Financial Times, “While the target to net zero is still some time away, we have to face up to the reality that the variables have changed. Interest rates are much higher. Government debt is significantly greater, and the geopolitical landscape is structurally different.”

Natural Gas Gets Credit as Carbon Dioxide Emissions in Energy Sector Fall to Lowest Levels Since the ‘80s

The EIA reported last month that carbon dioxide emissions in the U.S. energy sector fell in 2023. Energy-related emissions are now “lower than they’ve been since the 1980s,” said Ars Technica.

The EIA attributed the recent decline mainly to a “change in the generation mix away from coal, which has the highest carbon intensity among fossil fuels.”

Four-fifths of the reduction of CO2 in the energy sector as a whole in 2023 were concentrated in the generation of electricity, where emissions fell by 7% compared to 2022. The reduction, said the EIA, was mainly due to “a significant decrease in coal-fired electricity generation, most of which “was displaced by natural gas….  Because coal-fired generation emits more CO2 per kilowatt hour than natural gas when combusted, replacing coal-fired with natural gas-fired generation reduces CO2 emissions overall.”

According to Energy in Depth, a research and outreach campaign affiliated with the Independent Petroleum Association of America, natural gas “is responsible for roughly 61 percent of the power sector’s emissions reductions since 2005 and year-over-year.”

In its report, titled “U.S. Energy-Related Carbon Dioxide Emissions, 2023,” the EIA also noted that last year, “U.S. natural gas‐related CO2 emissions declined by 10% (26 MMmt) in the residential sector and by 6% (11 MMmt) in the commercial sector.”

The generation of electricity accounts for 30% of U.S. carbon emissions. “That places it as the second most significant contributor, behind transportation, which is responsible for 39% of emissions,” said Ars Technica.

Questions Are Raised About the Puzzling Pause in LNG Exports

The Senate Committee on Energy and Natural Resources on April 16 called on Jennifer Granholm, the Secretary of Energy, to explain the puzzling moratorium on liquefied natural gas (LNG) exports to countries without a free-trade agreement with the United States. That restriction includes Europe, which has come to rely on LNG from the U.S. as a substitute for Russian natural gas by pipeline.

According to the Center for Strategic and International Studies, a Washington think tank:

The Biden administration pledged in March 2022 to ensure at least 15 billion cubic meters (bcm) of U.S. LNG supply to Europe that year, and the European Commission agreed to work with member states to ensure “stable demand for additional U.S. LNG until at least 2030 of approximately 50 bcm/annum.” The market delivered. LNG exports to Europe far exceeded targets for 2022 and 2023, reaching 56 bcm and 63 bcm, respectively. Today, about 50 percent of Europe’s LNG imports come from the United States.

Those exports are now in jeopardy. Granholm said she hoped DoE would “complete the review of its liquefied natural gas export policy by year’s end.” According to Law360, she “pushed back on accusations that the current pause of export reviews is permanent.” She said, “We’re not in this to deny all future exports.”

But Law360 reported that “oil and gas industry groups and their allies argue that the pause on reviewing new export applications has injected uncertainty into the global LNG markets and could discourage future investment.”

Law360 explained in its report on the hearing that the Biden Administration says that DoE’s “current analysis no longer adequately accounts for considerations including updated assessments of greenhouse gas emission impacts as well as U.S. energy costs. Granholm said the last time the agency performed that analysis, the United States was only exporting 4 billion cubic feet of LNG per day; it’s now exporting 14 billion cubic feet per day.”

Sen. Steve Daines (R-MT) responded to the Secretary’s remarks by saying, “With all due respect, the chilling message you send by pausing LNG permits is being heard around the world.”

“It is a pause for a study,” Granholm replied.

Two days after the Secretary’s Senate testimony, the House Oversight and Accountability Subcommittee on Economic Growth held its own hearing, where Brad Crabtree, head of the DOE’s Office of Fossil Energy and Carbon Management, said that the pause would conclude by March 2025.

“Crabtree said that previous analyses of the economic and climate effects of LNG exports were outdated and that issuing approvals now would make them legally vulnerable,” Politico reported.

Rep. Pat Fallon (R-TX), the subcommittee chairman, expressed skepticism. He stated:

The liquefied natural gas pause sends the wrong message to the world, as do other clearly political decisions against U.S. energy interests. For the record, we should note that this pause, this ban will only be lifted after the November elections this year.

In questioning Crabtree, Fallon asked whether President Biden was even aware of the LNG pause when it was enacted. When Crabtree said the President was, Fallon responded, I find it interesting that when Speaker Johnson spoke to the President about this issue, President Biden said that he was ‘completely unaware’ and said that ‘we haven’t done that.’ So that is interesting and alarming at the same time.”

According to a subcommittee press release, Rep. Clay Higgins (R-LA) “highlighted the geopolitical consequences of the Biden Administration’s partisan pause on LNG permits which has led our allies to seek energy from hostile foreign powers.” Said Rep. Higgins: 

Prior to the [executive branch’s] interference, the American LNG industry had been feeding reliable, affordable, clean energy to our allies across the world. And because of various interruptions that have been planned and calculated, interruptions to American energy production, and dominance, and export, our European allies have had to rely on other sources for their raw energy products to power their grids across the continent.

Some Democrats as well are supporting a reversal of the export pause. The Pittsburgh Post-Gazette reported on May 5:

Democratic U.S. Sens. Bob Casey — facing one of the most competitive Senate races against Republican businessman David McCormick — and John Fetterman say they’re concerned about the move’s potential impact on ‘good-paying energy jobs in towns and communities across the commonwealth.

Pennsylvania ranks second only to Texas in natural gas production. The state’s Democratic governor, Josh Shapiro, told CBS’s “Face the Nation” that “if the pause goes on for a long time, it has the potential to cost us jobs.”

Rep. Colin Allred (D-TX), who is running for U.S. Senate against Republican incumbent Sen. Ted Cruz, wrote in an op-ed for the Houston Chronicle, “It’s time for the Joe Biden administration to end its pause on permitting new liquefied natural gas projects and embrace the potential of LNG exports to strengthen our national security and lower carbon emissions while powering our economy at home.”

Last month, 25 Republican governors called on President Biden to lift the pause, and 16 of their states filed a lawsuit challenging the export hold-up. The DoE on May 7 filed a motion asking a Louisiana federal judge to dismiss the suit, accusing the states of creating a “false narrative.” about the action. Then on May 20, Louisiana’s Pelican Institute for Public Policy and the Liberty Justice Center filed suit, charging that the ban was unconstitutional and harmful to the economy.

Grow America’s Infrastructure Now (GAIN), a coalition of businesses, trade associations and labor groups, hosted a webinar on May 1, titled “Biden’s Worst Policy Yet: Consequences of Blocking US LNG Exports.” The event featured Sen. Bill Cassidy (R-LA), who said that the Biden Administration “wants to make sure greenhouse emissions don’t worsen, but… emissions in the United States are lower now than they were in 2005” because we have changed to cleaner-burning natural gas. With LNG, we are allowing “other countries to do the same…. It’s better for the world’s environment if we ship our natural gas overseas.”

He added that LNG helps our allies and hurts the petro-authoritarians like Russia’s Vladimir Putin. Sen. Cassidy also emphasized how the export pause is hurting employment in Louisiana, home to several current LNG facilities, with others planned or under construction.

“It definitely puts into question at least 250,000 jobs potentially,” said Dr. Ellen Wald, a senior fellow with the Atlantic Council Global Energy Center. She added:

It’s not just the LNG industry. It’s not just these specific projects. It also spreads outward to the oil industry and natural gas industry in general. If you inject this kind of instability, people don’t know that they’re going to be able to depend on a permitting process that has been in place in the United States for a while.

White House Issues Hefty Tariffs on China, But Will They Really Help?

The Biden Administration on May 14 announced it was increasing tariffs on China under Section 301 of the Trade Act of 1974. That measure allows the President to raise duties in response to restrictive trade practices.

The White House said the move will protect American workers and business from China’s “unfair, non-market practices.” The increases are hefty. Said the an Administration Fact Sheet:

The tariff rate on electric vehicles under Section 301 will increase from 25% to 100% in 2024. With extensive subsidies and non-market practices leading to substantial risks of overcapacity, China’s exports of EVs grew by 70% from 2022 to 2023—jeopardizing productive investments elsewhere. A 100% tariff rate on EVs will protect American manufacturers from China’s unfair trade practices.

The tariff on lithium-ion EV batteries and on battery parts will rise from 7.5% to 25% this year. “Biden will keep tariffs put in place by his Republican predecessor Donald Trump while ratcheting up others, including…doubling the duties on semiconductor tariffs to 50%,” Reuters reported.

The increase in tariffs is part of the Biden Administration’s strategy of building America’s clean energy at home as much as possible, establishing domestic supply chains. The White House also points to heavy Chinese subsidies to its manufacturers – a policy the U.S. itself is pursuing more vigorously.

The move highlights the administration’s goal to build America’s clean-energy future and re-establish domestic sources for solar panels, EVs and more. But the U.S., which has long subscribed to the principles of non-discriminatory trade as the best way to get goods into the hands of consumers efficiently and cheaply, remains far from achieving that reality. 

Erecting barriers to less expensive supplies of clean-energy components and whole products will inevitably slow the deployment of tools to fight climate change, wrote Sara Schonhardt, Benjamin Storrow and Scott Waldman in a piece for ClimateWire headlined, “Biden is Slapping Tariffs on China. Will the Climate Suffer?”

The article quotes Albert Park, chief economist of the Asian Development Bank (ADB): “If you’re thinking about the global transition to net zero, or just reducing carbon as fast as possible, then if some country is willing to subsidize production of green goods — solar power, EVs — then the rest of the world should say thank you very much.”

In an opinion piece last year, Park and Jong Woo Kang, also of the ADB, argued that, rather than raising tariffs, governments like the U.S. should lower or eliminate them:

Given the existential threat of climate change, green products and services should be made widely available at affordable prices. To achieve this goal, and support the clean-energy transition, governments must take collective action to lower trade barriers, rather than engaging in protectionism.

Tariffs on Chinese goods may eventually help the development of clean-energy industries here, but U.S. consumers pay the price. The Council on Foreign Relations cites “a 2019 study by researchers from the Federal Reserve and the University of Chicago found that consumers bore more than 100 percent of the costs of washing machine tariffs, indicating that appliance retailers charged even more than the tariffs had cost them. Some more recent research has found that U.S. consumers have ‘borne the brunt’ of the tariffs on Chinese goods through higher prices.”

When an exporter has to pay a 25% tariff on a good costing $100, the exporter might raise the good’s price to $125. But competitive domestic providers can then safely their prices too, perhaps to $120. Consumers are the losers.

Erin Walsh and Andrew Harding of the Heritage Foundation argued in a piece on May 17 :

China’s manufacturing sector has secured chokeholds not only on electric vehicles, but on many of the world’s green energy products, such as solar panels and wind turbines. Indeed, almost every ambitious target adopted by climate change activists pushing President Biden to declare a national emergency would require mass adoption of heavily subsidized Chinese “green” technologies and equipment.

Walsh and Harding write that Chinese solar panels are not only subsidized but also “often built using slave labor from the Xinjiang Autonomous Region, where China is actively committing genocide against Uyghur Muslims.” The Heritage authors add:

China is also the world’s largest producer and processor of rare earth elements, which are essential for green energy products and technologies, such as the lithium-ion batteries used in electric vehicles. For the Biden administration to meet its goal of 50 percent of cars sold in 2030 being zero-emission electric vehicles, it would require “ten times the amount of rare earth elements [the U.S.] currently has” domestically.”

As a remedy, the authors call on Biden “to stop pursuing this counterproductive agenda and start prioritizing American energy independence by withdrawing from costly agreements that restrict our energy production and give the CCP a competitive advantage.”

America will need an all-of-the-above approach to energy, with substantial investment in natural gas and a secure grid that has enough baseload power to make clean-energy goals a reality.