Democrats’ Clean Energy Plan Faces Skeptics On, Off the Hill

The Senate architect of a $150 billion program to increase clean power output to 80% by 2030 is optimistic Democrats will find consensus on a plan, even as one moderate senator and the utility industry show skepticism.

Senate Democrats led by Tina Smith (D-Minn.) are attempting to move a clean energy standard through Congress in the form of a clean electricity payment program that the chamber could pass without Republican support. But Energy and Natural Resources Chairman Joe Manchin (D-W.Va.) has been dismissive of the clean electricity payment program (CEPP), among the largest of the climate and energy proposals in Democrats’ $3.5 billion tax and spending plan.

His public comments have cast a shadow over negotiations.

“It makes no sense to me at all for us to take billions of dollars and pay utilities to do what they are going to do as the market transitions,” Manchin said in a Sept. 12 interview on CNN.

“We’re in the middle of negotiations,” Smith said. “I will keep pushing forward with good-faith partners in negotiations like Senator Manchin,” she said in a statement to Bloomberg Government. She views the concept as an infrastructure investment, according to her aides, and has structured the proposal to conform with the reconciliation process.

Photographer: Zach Gibson/Bloomberg

Smith has been working toward a clean energy standard since joining the Senate during the 115th Congress.

The House Energy and Commerce Committee last week approved a version of a clean electricity performance program during a marathon markup of its portion of Democrats’ reconciliation package. The Senate Energy and Natural Resources Committee has yet to release a draft of its reconciliation bill, despite a Sept. 15 deadline imposed by the resolution’s instructions (S. Con. Res. 14).

Manchin’s office didn’t respond to a question about when the committee would release its portion or hold a markup. His committee received a top-line number of $198 billion for reconciliation, and supporters of CEPP anticipate it would comprise most of that figure if included.

Transition Must Be ‘Done Right’

Under the House measure, the Energy Department could use $150 billion in grants as incentives for utilities to reach the Biden administration’s goal of operating on 80% clean electricity.

The grant would provide $150 for each megawatt-hour of clean electricity above 1.5% of the previous year’s clean electricity, according to the bill. Under the standards, nuclear energy, for example, would be considered clean, but not natural gas.

The program would collect payments from utilities that do not increase their clean electricity percentage by at least 4% compared to the previous year. “If, for example, the electricity supplier only increases its clean electricity percentage by 2 percent, the supplier will owe $40 for each megawatt-hour that represents the 2 percent shortfall,” according to a summary of the subtitle provided by Democrats.

Electric utilities are carefully weighing the proposal. But they are still waiting for more specifics, and closely watching how the politics play out. “The details will matter to ensure that our industry can continue to reduce carbon emissions and to make investments in the clean energy future that our customers want and deserve,” said Tom Kuhn, president of the Edison Electric Institute, a trade association representing U.S. investor-owned electric companies. He added that EEI supports the concept of the CEPP.

American Electric Power, one of the largest investor-owned utilities in the U.S. that provides power to millions of customers in 11 states, told members of the House Energy and Commerce Committee last week that the clean energy time frame was too aggressive for the current grid to handle, and criticized as punitive the proposed penalties on utilities for failing to meet what the group characterized as the bill’s “arbitrary” standards.

“A program of this magnitude, if enacted into law, will adversely impact the reliability and resilience of the electric grid, unless the increase in intermittent renewables is accompanied by an expansion of very expensive firm dispatchable and resilient resources, such as energy storage,” wrote Tony Kavanaugh, AEP’s senior vice president of governmental affairs, in a letter to lawmakers.

AEP has cut its carbon dioxide emissions by 74% since 2000 and are committed to achieving net zero emissions by 2050, according to Tammy Ridout, the group’s director of external communications. The utility plans to add nearly 16,600 megawatts of new wind and solar by 2030, she said.

“The concept of the Clean Electricity Performance Program aligns with our commitment to advancing clean energy,” Ridout said. But it’s critical that the transition to clean energy is “done right,” by maintaining a reliable and affordable energy system for customers, she added

“We need to make sure the timeline and incentive structures would allow us to do that,” Ridout said. “We also need to ensure support for the transition of communities where traditional energy jobs have driven the local economy.”

‘Gravy Train’ for Utilities

A representative for one large power company said the utility backs the transition and has long supported an economy-wide federal approach to reducing greenhouse gas emissions. But the company is worried about implementation of the CEPP. The devil is in the regulatory details of the plan once it reaches the Energy Department, the representative said.

Charles Hernick, vice president of policy and advocacy at the right-leaning Citizens for Responsible Energy Solutions, expressed similar concerns over implementation. The legislation, if enacted, “will be very light on direct language from Congress and leave a wide-open door for the executive branch to write rules because the energy market is complex.”

Hernick said the clean electricity payment program would amount to a “gravy train” for utilities. “Utilities will get payments for what they are already doing now and are interested in,” he said, calling the idea “unnecessary fiscally and borderline irresponsible.”

But Lindsey Walter, deputy director of the climate and energy program at centrist think tank Third Way, said the CEPP is a “smart policy” that incentivizes the buildout of clean energy, which would not happen through the market or tax credits alone. “It meets utilities where they’re at, encouraging them to increase their share of clean energy in a way that won’t pass on the costs to taxpayers.”

The clean energy plan is among several issues House and Senate leaders have to work out before a final vote on the reconciliation package. The House plans to vote on the tax and spending proposal during the current work period, which ends Oct. 1, House Majority Leader Steny Hoyer (D-Md.) said in a letter to colleagues on Friday.

To contact the reporter on this story: Kellie Lunney in Washington at klunney@bloombergindustry.com

To contact the editors responsible for this story: Zachary Sherwood at zsherwood@bgov.com; Giuseppe Macri at gmacri@bgov.com