A significant part of the reconciliation bill is the “Clean Electricity Performance Plan” that is intended to increase the amount of “clean power” produced. The provision was in part drafted by outside interests including a professor from University of California, Santa Barbara. The House is considering a target of 80 percent “clean power” by 2030, which would be a significant increase from the current 40 percent “clean energy” output from renewable and nuclear energy, but short of President Biden’s 2035 goal of net zero carbon emissions from the generating sector.
To hit the target, the bill would provide $150 billion in subsidies for “clean energy” that the bill defines as anything producing less than 0.1 metric tons of carbon dioxide equivalent, which would effectively eliminate natural gas from the mix—the fuel that was primarily responsible for the historical reductions in carbon dioxide emissions in that sector over the past 15 years. To qualify for the incentives, power producers would have to increase their supply of clean energy by 4 percent annually. If they do not, they will be fined $40 for every megawatt hour that they fall short. The grant payment will be $150 for each megawatt-hour above 1.5 percent of the previous year’s clean energy generation.
The “Clean Electricity Performance Plan” is effectively a national renewable-energy mandate because utilities would have to buy or generate a certain amount of renewable energy each year. If they do not meet their quotas, they will be fined while those that exceed targets would receive payments from the federal government that they must spend on increasing renewable energy or reducing electricity prices. The program is set up as a payment program because an outright national renewable mandate would not meet reconciliation rules. The authors of the bill claim that the Clean Electricity Payment Program “is a purely budgetary proposal (involving only spending and revenue) as opposed to a regulatory approach” and “the enforcement mechanism is simply payments and fees,” which they believe will dodge a Senate filibuster by being in the budget reconciliation package.
The program resembles the Obama EPA’s Clean Power Plan, which required states to reduce carbon dioxide emissions in the generating sector by shuttering coal plants and using more renewables. The Supreme Court blocked the EPA rule in 2016 after states argued it violated the Clean Air Act. This “budget” plan would require the two dozen or so states that do not have renewable mandates to adopt them. It would also force states to prematurely shut down fossil-fuel plants that provide reliable baseload power with consumers paying for the costs of building new plants to replace them. In many respects, it manipulates the existing system to approximate the outcomes currently being experienced in Europe where electricity prices have skyrocketed, renewables have grown in share, and carbon trading schemes have been implemented, resulting in a shortage of reliable baseload generation.
While the program allows utilities to use hydropower, nuclear, carbon capture and “clean hydrogen” as “clean technologies” toward their renewable quotas, these options are not currently feasible due to their costs (e.g. Southern Company’s Vogtle nuclear facilities in Georgia) or their commercial availability. Further, nuclear and hydropower plants cannot be built in the timeframe allowed because the budget covers a 10 year time frame. Carbon capture and clean hydrogen also will not be commercially available in that time period.
The bill authors indicate that government payments to utilities will offset the cost of renewables, i.e. that they will raise taxes to finance the new generating technologies and then give certain companies tax credits for investing in renewable energy. The idea is to subsidize the politically favored behavior of those producers that meet the mandates. The bill also gives the electric grid $9 billion for updates that include improved interconnections between the Eastern and Western portions of the grid—the two major North American grids—and the Electric Reliability Council of Texas. The bill writers believe that a modernized (but more complicated) grid is necessary to accommodate increasing contributions from renewable energy and be more reliable when faced with extreme weather events.
But, in reality, the plan would raise energy costs and make the U.S. electric grid less reliable. The more utilities rely on renewable energy, the more backup power they need from fossil fuels to keep the grid stable. California, for example, recently had to approve five new natural-gas plants to avoid rolling blackouts. Last summer, portions of the state suffered from blackouts as the state was unable to import electricity from neighboring states that were also under intense heat. California has mandated 100 percent zero-carbon electricity by 2045 and an economy-wide goal of carbon neutrality by 2045.
Between 2011 and 2020, electricity prices “rose seven times more in California than they did in the rest of the country.” Furthermore, according to the Energy Information Administration, the price of electricity in California increased by 7.5 percent last year, which was the largest price increase of any state in 2020 and almost seven times the national price increase. In 2020, the price of electricity in California rose to 18.15 cents per kilowatt-hour—70 percent more than the U.S. average price of 10.66 cents per kilowatt hour. Those prices are a regressive tax on the poor and the middle class in California—a state that has the highest poverty rate in America.
This year, Europe has endured skyrocketing electricity prices as wind is not pulling its share, natural gas is facing a shortage of supply, and coal’s prices have increased as that fuel was the only reliable source left to fill the gap and keep the lights on. Europe’s anti-carbon policies created a fossil-fuel shortage and their carbon trading scheme made using such sources artificially expensive. They have heavily subsidized renewables like wind and solar and shut down coal plants to meet their commitments under the Paris climate accord. As wind energy did not pull its weight this summer, countries had to import fossil fuels to power their electric grids. Electricity prices in the U.K. jumped to a record £354 ($490) per megawatt hour—a 700 percent increase from the 2010 to 2020 average. Germany’s electricity benchmark doubled this year—a country whose residential electricity prices were three times that of the United States pre-coronavirus.
If this feature of the reconciliation bill becomes law, it will force more wind and solar into the U.S. electric grid, which will have major impacts on electricity affordability, reliability, and resilience. As seen in Europe and California, electricity prices will increase for consumers, blackouts are likely to occur, and taxpayers will provide subsidies for utilities to comply with their quotas. Further, the feasibility of this working as stated is so low that it will bring back memories of Obama’s failed “clean” endeavors that cost taxpayers billions. Europe’s example of attempting to comply with its Paris climate commitments only show that President Trump was right in withdrawing from the accord, particularly as China, the world’s largest emitter, has no intentions of meeting its obligations as can be seen by the coal plants it is building.