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Biden’s big infrastructure bill could doom the US coal and gas energy sector

Biden is proposing a federal clean energy standard, which would make renewables required by law.
REUTERS/Brian Snyder/File Photo
US president Joe Biden is proposing a federal clean energy standard, which would make renewables required by law.
  • Tim McDonnell
By Tim McDonnell

Climate reporter

Published

The White House released details of the Biden administration’s $2 trillion infrastructure spending package on Mar. 31. The package is focused on climate change, and could be the single most important piece of climate-related legislation considering during Biden’s term in office. The bill includes funding for everything from electric vehicle manufacturing and procurement, to expanding the power grid, to home energy efficiency retrofits, cleaning up old oil wells, and infrastructure to defend cities from rising seas and wildfires.

Overall, nearly half of the money in the bill is geared toward climate-related projects—ten times the $90 billion of President Barack Obama’s 2009 green stimulus. “It really goes further to address climate change and scale up clean energy than anything any administration has ever done,” said Josh Freed, senior vice president for climate and energy at the research and advocacy group Third Way.

But one of the package’s most ambitious climate proposals appears to have only a narrow chance of passing through Congress and into law.

A federal clean energy standard

The bill calls for something that many climate economists have long rooted for: A federal energy efficiency and clean energy standard. Effectively, this would turn the administration’s goal of reaching net-zero carbon emissions from the electricity system by 2035 into federal law. It would use an as-yet-unspecified combination of incentives and fines to compel the nation’s power utilities to preserve nuclear power plants and other existing sources of zero-carbon power, build more solar and wind farms, and energy storage systems, and decommission coal- and gas-burning power plants.  Most likely, the plan would set a minimum national floor for how much of a utility’s power must be sourced from renewables, that gradually increases over time, similar to states’ renewable portfolio standards. The standard would likely force many coal and gas plants into early retirement, except those that could be cost-effectively equipped with carbon capture (which has failed on most big power plants so far), and would stifle, if not eliminate, utility investments in new fossil plants.

Such a standard is one of the single most impactful policies the federal government can enact in the pursuit of reaching net-zero emissions economy-wide by 2050, according to a Feb. 2021 analysis by the research firm Energy Innovation. Clean energy standards have already been enacted in California, New York, and 28 other states, often passed with bipartisan support. Already, one in three Americans lives in a city or state that is aiming to eventually reach 100% clean power. And those targets are having an impact: About half of all renewable energy buildout nationwide since 2000 is attributable to state clean energy standards, according to a 2018 federal analysis.

But not all states share the same level of ambition; about half of state-level standards aim for less than 50% of power to come from renewables. In several states the standards are voluntary, and many coal-reliant states, especially in the southeast, have no standards at all. A federal standard, Freed said, would put them all on the same page, while allowing more ambitious states to go above and beyond.

“It provides a path of certainty for what needs to be invested in, what power sources, including nuclear, need to be kept online, and the timeframe to get there,” he said.

Because the Biden plan also mentions energy efficiency, it’s likely that it will allow utilities to take credit for steps they take to lower demand, like installing smart meters in customers’ houses or businesses. It will also likely be tied to other parts of the spending package, like grants for home weatherization, that are meant to help low-income households curb their energy bills, so that they don’t bear a disproportionate share of the costs of decarbonizing.

Utilities don’t want to be rushed

The new standards face an uphill battle. In recent decades, various US bills to enact a federal clean energy standard failed to pass, due to opposition from Republicans and fossil fuel industry lobbyists. The standard, which is not strictly a spending measure, may be stripped out of the infrastructure package if passed using budget reconciliation, the obscure procedural manuever that Senate Democrats will likely employ—as they did with Biden’s pandemic recovery bill in February—to pass the bill without a 60-member supermajority.

Utility executives, even those who see some profit potential in renewables, are likely to balk at the proposition, said Michael Doyle, a senior utilities analyst at the financial firm Edward Jones. “We think decarbonization by 2035 is a pretty aggressive timeframe,” he said. “Generally, the industry is in favor of decarbonizing, but taking it at its own pace. The cost of these [clean energy] technologies is coming down over time, so many utilities don’t want to rush into this too quickly.”

That calculus could change, though, if the administration succeeds in another part of its plan: To flip the existing script on energy tax subsidies by expanding and extending credits for renewables, storage, and carbon capture, and pay for them in part by cutting “billions of dollars in subsidies, loopholes, and special foreign tax credits for the fossil fuel industry,” according to the plan. If the cost of fossil fuels goes up while clean energy continues to drop, utilities might not need any extra prodding to make the right investments.

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