United States: States And Private Sector Continue To Make Clean Energy Progress

Stephen J. Humes is a partner in Holland & Knight's New York office

HIGHLIGHTS:

  • State laws requiring clean energy and renewable portfolio standards are likely to continue advancing the nation's clean energy agenda regardless of new trends in Washington.
  • Major private sector companies are continuing to advance investments in renewables, energy efficiency and distributed energy resources due to corporate social responsibility commitments and desires to reduce global carbon footprints.
  • EIA reports coal could mount a modest come-back if the Trump Administration revokes the controversial Clean Power Plan.

Earlier this week we discussed that it will be hard for President-Elect Donald Trump's Administration to bring back jobs in the coal industry due to fundamental laws of energy economics that make coal-fired power generation more expensive than natural gas in the generation of electricity.

Outside of Washington, D.C., there are at least two other trends playing out right now in the clean energy marketplace that appear largely immune to the federal energy politics of the incoming Trump Administration.

About half of the United States have laws requiring electric utilities and other load serving entities, like competitive energy suppliers, to procure a minimum percentage of clean energy as part of their overall portfolio mix. This is typically called a renewable portfolio standard, or RPS. Just last August, New York's Public Service Commission adopted a clean energy standard that mandates electric portfolios consist of 50 percent renewables by the year 2030. New York's regulators said this mandate is one step needed to help the state reduce greenhouse gas emissions by 40 percent by 2030. New York is even reaching beyond its borders to allow renewable energy projects outside the state to meet the RPS in certain situations, creating a new opportunity for developers in Pennsylvania, New Jersey, Connecticut and beyond to seek to have their projects eligible in New York if they are connected electrically to the New York control area.

Increasingly, we expect to see certain states take advanced action to promote renewables without regard to changing federal priorities. These expanded priorities will continue to motivate electric utilities to invest in renewables or buy output from renewable projects, and will continue to incentivize retail electric suppliers to buy output (in the form of energy or renewable energy certificates) to satisfy their own RPS obligations.  Taken together, these market forces will help to drive further demand for investment in renewables.

A similar market force is playing out right now with many of the highly-successful and multinational corporations in the private sector that are based in or operating in the United States. Some companies, such as major big box retailers or operators of major web sites, data centers and manufacturing facilities, are moving aggressively these days towards renewable energy in part to help reduce their carbon footprint (the amount of greenhouse gas emissions flowing from their operations), but also to implement corporate commitments to corporate social responsibility. 

As these companies forge ahead and develop their own significant scale energy projects, new wholesale market participants are emerging. For example, one California-based developer of smart phones and other consumer technology products recently obtained its own license from the Federal Energy Regulatory Commission to engage in wholesale power sales at market-based rates under the Federal Power Act. This order would allow the company to build grid scale renewable energy facilities and then wheel the power from its generating site to major energy consumption sites using the interstate electric transmission system, but without buying and selling from other wholesale market participants. This creative strategy is expected to catch on, and shows that the private sector is committed to moving ahead with clean energy investments because it's good for business.

To show how significant some renewables developments have become, there was an interesting announcement recently from the North American Electric Reliability Corporation (NERC) that indicates how powerful the ongoing investment in renewables on private property really has become. NERC, which is the federally-approved organization with the mandate to ensure the nation's power grid maintains reliability, pointed to utilities' concerns about distributed generation resources, such as rooftop solar panels and said it plans to issue a report on the issue in the first quarter of 2017. NERC is expected to comment on the electric industry reliability impacts of the growing installations of solar panels on customer rooftops.  That report should be interesting reading and we will be sure to blog about it when it comes out.

Meanwhile, a new report released Thursday from the U.S. Energy Information Administration (EIA), which contains their 2017 energy outlook, shows that just by repealing the Clean Power Plan, the market decline in coal consumption for electric power generation would level off or even increase modestly. The Clean Power Plan (CPP) is the controversial Obama Administration rule that uses Section 111(d) of the Clean Air Act to regulate carbon dioxide emissions, a plan which is tied up in litigation and the U.S. Supreme Court stayed in February 2015 just prior to the late Justice Antonin Scalia's death. The CPP has been perceived as an attack on coal-fired generation.  So with the new EIA report in hand, Congress and the Trump Administration have been handed fresh evidence that repealing the CPP could actually help the coal industry immediately, notwithstanding the coal vs. natural gas economics.

We will be blogging about these and other developments on this site, so please return frequently for more information. 

Learn more about Holland & Knight's Energy and Natural Resources Team

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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