Biden should embrace competitive markets, carbon pricing, electrification: EPSA

In support of President Joe Biden's goal of slowing global warming, the Electric Power Supply Association has released policy objectives focusing on eliminating subsidies for legacy assets, promoting carbon pricing, adopting economy-wide electrification and establishing an impartial clean energy standard.

During a webinar introducing "America's Competitive Electric Future: 100-Day Roadmap for Cleaner, Reliable, Affordable, and Innovative Power Generation," EPSA board Chairman Curt Morgan, who also serves as Vistra president and CEO, said EPSA members are "making investments in cleaner technologies and reducing emissions."

The "three pillars" of energy policy which EPSA advocates that the federal government pursue to achieve climate change mitigation are:

• A "future-focused market design for reliable, affordable innovative power" that would provide market certainty and negate targeted bailouts or subsidies for specific power generation assets.
• "Competitive, affordable carbonization" or a "well-designed Clean Energy Standard or other mechanisms that allow all resources to compete to reduce emissions." If a carbon price or similar mechanism is established, it should be applied to the entire economy, including transportation, industry, agriculture, buildings and imports, Morgan said.
• "Sustainable economy-wide electrification," including transportation and buildings.

"Competitive power is eager to work with the Biden administration and other policy leaders in this first 100 days – and beyond that, obviously," Morgan said. "US power markets are a patchwork of competitive and regulated monopoly markets."

States that adopted competitive markets did so because regulated monopoly markets had resulted in high rates and little innovation, with all risk and costs borne by ratepayers, Morgan said. Competitive power markets resulted in improved system reliability, lower rates and more innovative solutions, with investment costs borne by shareholders.

'Bold action' needed

The Biden administration's top priority appears to be coping with the coronavirus pandemic and its economic effects, with an emphasis in "building back better," said Todd Snitchler, EPSA president and CEO.

Morgan said this could be achieved by quickly passing a targeted recovery plan and infrastructure improvement plan, plus establishing an economy-wide carbon price.

"We believe climate change is real and that man has contributed to that," Morgan said. "We need bold action."

The existing fragmented carbon pricing, as is seen in the Regional Greenhouse Gas Initiative in the Mid-Atlantic and Northeastern states, is inefficient, Morgan said.

Morgan also emphasized that a carbon price should be substantial – on the order of $40/ton, escalating over time, with rebates to those who cannot afford the extra cost.

Imposing such a carbon fee on imports would share the cost of decarbonization with companies in nations without a substantial carbon emissions reduction program, Morgan said.

Electrification

Regarding electrification of the economy, Morgan said EPSA members "look forward to meeting the electricity demand" that would be driven by such an effort with innovations such as improved battery storage and the incorporation of hydrogen into gas-fired generation.

"The battery is going to be a major component of the energy mix going forward and how we eventually get to a carbon-free system," Morgan said.

But the status of battery storage's current development limits their ability to meet demand to about four hours, which would therefore require multiple sets of batteries to meet overnight power demand – an extremely expensive option.

In the shorter term, natural gas-fired generation is likely to be needed to meet demand left over when intermittent resources are not generating, well into the 2040s, Morgan said.

"Technology is advancing at lightning pace, as we all know, but you are going to need a transition period to get" to a carbon-free grid, Morgan said.