Monday, October 15, 2018

CPP’s Fate Leaves States, Markets to Drive Grid Decarbonization

By Robert Mullin

ANCHORAGE, Alaska — State policies, market forces and technological advancements will continue the decarbonization of the electric industry regardless of the fate of EPA’s Clean Power Plan, current and former utility regulators said last week.

EPA clean power plan

Little | © RTO Insider

“I think the Clean Power Plan is pretty much dying,” Doug Little of the Arizona Corporation Commission said during a panel discussion on environmental policy in the “aftermath” of the CPP at the annual meeting of the Western Conference of Public Service Commissioners last week.

“It’s only a question of how it’s going to die. Right now it’s on life support. The question in my mind is, over the next several months, will the EPA pull the plug on the life support and see if it lives in any form, or will they drive a stake through its heart?”

Arizona on Path to Compliance

Little said what happens to the CPP under the Trump administration will make little difference to his state, which opposes implementation of the policy.

The final rule from EPA was “actually something that was achievable” and the state’s utilities “did a tremendous job” of incorporating the emissions targets in their integrated resource plans, Little said.

“And, they’re not, in my view, going to essentially take that whole planning process that they spent the last two years working on and just throw it away,” he said. “The direction that they’re going to continue to take is the direction that they’ve been planning to take over the last couple years.”

Tim Echols of the Georgia Public Service Commission echoed Little’s take.

“To continue with Doug’s analogy about the hospital, I really think the Clean Power Plan is going to die — [but] not from the stake. I think it’s going to die from a lack of payment on the hospital bill. And they’re going to have to unplug it because in the regulatory hospital, not everybody gets service regardless of the situation in the emergency room,” Echols said.

The “non-payment” is the Trump administration’s proposed 31% cut to the EPA budget, Echols said.

“I don’t know how they do corporal punishment in Alaska or Hawaii, but I think President Trump is taking the EPA out behind the woodshed, putting them in timeout, whatever you want to call it,” Echols said. “And you know what? That’s not unusual for a president to make those kind of decisions. Think about what President Obama did to the [Nuclear Regulatory Commission] and to Yucca Mountain when he got elected.”

Political, Practical Concerns in Georgia

Already speaking of the CPP in the past tense, Echols said that he had two problems with the plan, one political and the other practical.

The political issue: that the CPP would have turned the appointed head of Georgia’s Environmental Protection Division (EPD) into an “energy czar.”

“Now I’m not appointed by the governor, nor are my four colleagues, and this was going to put the EPD administrator essentially in charge of the energy plan for the state,” Echols said. He noted that Georgia’s rural electric cooperatives are nonprofits “that don’t take their orders from the EPD,” leaving the burden for compliance on the state’s major investor-owned utility, Georgia Power.

Echols’ practical concern: “How it picked winners and losers. The big winner, of course — natural gas.”

To comply with the rule, states would be forced to close coal-fired plants. That — along with the trend of nuclear plant closures — would leave the power sector exposed to increase gas prices in the future, Echols contended.

“Personally, I’m glad the EPA’s in timeout. I’m not saying I don’t like clean air. I’m not saying I don’t value clean water. But this agency went way too far, and the president is sending a message, and frankly I think it’s the right message.”

Two-State Perspective

Kenney | © RTO Insider

Robert Kenney, vice president of state regulatory relations at Pacific Gas and Electric, California’s largest utility, said he could grasp both sides of the CPP debate.

“California has been very explicitly, vocally and unabashedly supportive of the Clean Power Plan. PG&E in particular has been vocally supportive of the Clean Power Plan. And I think that’s probably not surprising when you think about California’s position relative to taking steps to combat climate change,” said Kenney, a former Missouri regulator.

PG&E is ahead of schedule in meeting California’s 33% by 2020 renewable portfolio standard. Including hydroelectric and nuclear, the company’s portfolio is already 70% greenhouse gas free, so “the Clean Power Plan wasn’t viewed as a barrier,” Kenney said.

“Now contrast that to my experience in Missouri, where 80% of our generation was coal-fired, and the Clean Power Plan presented significant challenges,” Kenney said. “Many of the utilities that I regulated were vocally opposed to the Clean Power Plan on a variety of different legal grounds and on practical economic grounds.”

Those utilities were faced with possibly having to strand coal-fired assets in which they had invested billions to comply with EPA’s Mercury and Air Toxics Standards. That, said Kenney, was “difficult to get your brain around” as a regulator.

“I think what you will see in the aftermath of the Clean Power Plan is that states will continue to individually determine how [they] are going to deal with climate change depending on the particular state,” Kenney said.

Low gas prices in Missouri are already leading to the retirement of some of those coal-fired plants, regardless of the CPP, a development Kenney expects to continue.

Hawaii: Exempt but Vocal

EPA clean power plan

Akiba | © RTO Insider

Lorraine Akiba of the Hawaii Public Utilities Commission noted that although her island state is exempted from the CPP, the state’s attorney general has weighed in to support the plan against court challenges. Hawaii has enacted the most ambitious RPS in the country — 100% by 2045.

She predicted there will be “big fights” in Congress over the CPP and the EPA budget.

“This is what democracy is about. You know, last time I looked, we’re not an oligarchy and not a dictatorship. That’s the beauty of democracy. You see four different commissioners up here, with four similar but different viewpoints,” Akiba said.

Market Forces

With or without the CPP, the panelists agreed, market forces will continue the drive away from coal and toward gas and renewables.

“What really is affecting the direction towards renewables — and the direction away from some of the fossil fuels like coal — is sub-$3 gas,” said Little, who also touted the fact that his state enjoys more than 300 days of sunshine a year, making it fertile ground for the continued expansion of utility-scale solar.

Still, Little said that he’s “very concerned” about what FERC and the wholesale markets will do to “more properly value” baseload resources such as coal and nuclear to ensure grid reliability.

“I’m going to be interested to see what happens after my friend Rob Powelson and Neil Chatterjee get onto FERC and see how they’re going to address this with some of the changes in the market,” Little said. (See related story, No Fireworks for FERC Nominees at Senate Hearing.)

Kenney said technological advances are key drivers of both the market forces and environmental policy leading to decarbonization. Included among those advances: the improvement in natural gas fracking techniques and advances in PV solar cell production that has dramatically reduced costs.

“We’ve got technological advances that are giving us the tools to” execute low-carbon policies, Kenney said.

Akiba said she agreed that market forces will help determine the future. “I disagree with some of my colleagues that coal is coming back. Coal’s never coming back. Coal’s not economically viable for this country,” she said.

The fight against climate change will continue outside D.C., Akiba argued.

“States are the leaders in this. Cities are the leaders. And I shout out to Atlanta, Ga.,” Akiba said, referring to Echols’ home state. “The City Council and mayor there just adopted a 100% renewable portfolio standard for their city.”

Akiba also encouraged the conference to consider the economic benefits of reducing GHG emissions, saying “the rest of the world is going to decarbonize regardless of the rhetoric coming out of Washington, D.C.”

“There are opportunities for economic growth in renewable energy technology, new developments in electrification of transportation [and] alternative transportation. If we let that opportunity go, China is right there.”

Signs of Climate Change in Alaska

Rokeberg | © RTO Insider

Proclaiming that he wanted to get in his “2 cents” as a former politician, panel moderator Norman Rokeberg of the Regulatory Commission of Alaska offered some sobering personal observations of climate change in his state.

“Alaska is an oil and gas state. It pays the freight up here,” Rokeberg said. “As a result, it’s been difficult to not favor the use of fossil fuels, particularly natural gas. We have 305 trillion cubic feet of natural gas stranded on our North Slope.”

He turned to his point.

“I do want to take this moment to make clear and declare that climate change and global warming is real, and you see the signs of it everywhere in this state.”

Rokeberg listed the evidence: the recorded warming of the Arctic, which is melting sea ice and increasing acidification of the ocean, affecting Alaska’s fisheries; melting permafrost undermining the foundations of the state’s roadways and infrastructure; and a changing habitat in which more plants and shrubs are growing in Arctic areas.

“I’m a gardener — a green-thumber — and I’ve lived in Alaska all my life,” Rokeberg said. “And in the last 25 years, I’ve seen the growing season extend as much as two to four weeks — that is to say from approximately four months to five months in a short period of time. That’s pretty extraordinary when you think about it.”

Rokeberg then took off his politician’s hat and replaced it with that of a regulator.

“It’s real, but make your own decisions about causation, or things like that,” he said. “We don’t need to get into that — not as regulators.”