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Power industry sees little or no impact from Clean Power Plan repeal

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Essential Energy Insights - October 2021


Power industry sees little or no impact from Clean Power Plan repeal

The U.S. Environmental Protection Agency proposal to repeal the Clean Power Plan is much ado about nothing, according to power industry insiders who have long been planning for a cleaner energy future regardless of regulatory actions in Washington, D.C.

American Electric Power Co. Inc. put it bluntly: "AEP's long-term strategy for our generation fleet will not change with changes in the Clean Power Plan," said spokeswoman Melissa McHenry. The company is instead pushing forward with adding significant new renewable and natural gas generation resources. Those moves will help AEP keep costs low and diversify its fuel mix, "regardless of the outcome of the Clean Power Plan." AEP has already cut carbon emissions by 44% since 2000, McHenry added, and the company's coal capacity has dropped from 70% coal in 2005 to a current rate of 47%.

Dominion Energy Inc. spokesman David Botkins said the company is planning in accordance with state policy initiatives, such as a Virginia proposal that "could be a state version of the Clean Power Plan," and that the company remains committed to planning for some sort of future carbon regulation.

Duke Energy Corp. similarly is eyeing a low carbon future and intends to stick with planned investment decisions that look decades ahead. Spokeswoman Dawn Santoianni pointed to the company's $11 billion cleaner energy investment plan.

"Our focus is on building a smarter energy future for our customers, and we remain committed to the investments we've planned," Santoianni said.

Edison Electric Institute Vice President for Environment Quin Shea touted the industry's 25% reduction of carbon emissions from 2005 levels as of 2016, and said that trajectory is expected to continue. The Clean Power Plan sought a 32% reduction of carbon emissions from 2005 levels by 2030.

One executive with a large electric utility told S&P Global Market Intelligence that power companies are simply listening to what customers are demanding: cheap, clean power. In fact, many large customers view clean energy as a branding exercise or are encouraged by investors or customers to move in that direction, the source who did not want to be named added.

There is another simple reason utilities are greeting the Clean Power Plan repeal with indifference: The rule had never gone into effect since the U.S. Supreme Court stayed it in early 2016. Santoianni said for this reason the repeal has "no immediate impact on Duke Energy."

Another industry advocacy group source who also did not want to be named summed up the lukewarm response: "In practical terms, this is a lot of political noise, and not a lot of policy movement."

But that does not mean the repeal does not have value, or is not supported by industry. Louis Renjel, Vice President of Federal Government Affairs and Strategic Policy for Duke Energy, said the rule raised significant legal questions and the EPA needs to address them in considering a replacement rule, if the agency plans to do so. The power industry also craves certainty around regulations so that long-term planning can be conducted with the best possible information, and a repeal is a step towards attaining that end.

The utility executive said the Clean Power Plan put utilities in an awkward situation where they did not believe the rule could stand up to legal review, but they worked with states anyway to come up with a workable plan. Power industry executives who have met with EPA Administrator Scott Pruitt stressed that the rule needed to be vacated, but also similarly pushed the EPA chief to craft a replacement to avoid citizen suit legal challenges, the utility executive added.

A framework for reductions?

Following the Supreme Court's stay of the Clean Power Plan, plenty of analysis and commentary highlighted that the power industry is already approaching the rule's emissions reduction targets. The industry advocacy source said the rule was designed to track what utilities were already doing, but would not have necessarily driven any near term behavior.

"The Clean Power Plan was a lot of different things to a lot of different people," the industry advocacy source said. "To opponents of the rule, it was this transformational thing that was doing evil things. To the environmental community it was this transformational rule that drove us towards the clean energy future. In reality, it was neither of those things."

In a media call hosted by environmental groups Oct. 10, the Rhodium Group, which has conducted analysis of the Clean Power Plan, said the rule set up a framework for emissions reductions that would have allowed future administrations to consider more ambitious targets. And environmental groups asserted that states that have not necessarily been leading on reducing carbon would have their feet held to the fire along with the rest of the country with the rule in place.

But the industry advocacy source dismissed this argument and said that whether they like it or not, states that have been less active in cutting carbon are doing so anyway because of market trends.

"There's no way of getting around the fact that coal is old," the industry advocacy source said. "There are a lot of coal plants that are aging and no longer economic."

Progress in some less active states has certainly been slower than, say, California or New York, which have emerged as leaders of the climate movement following recent policy decisions from the Trump administration. But power plants are still retiring in states like Pennsylvania, Ohio, Texas, Colorado and Wyoming, which have been less vocal on the issue.

The utility executive said the power industry recognizes that preserving a certain amount of coal is necessary for grid stability and fuel diversity, but if a plant does not cut it economically, and is not in a geographically essential area, it will be retired.

Also driving reductions in states without clear carbon reduction policies are utility investments in renewable resources outside of their typical footprint, the industry advocacy source noted. "That's driving a lot of the increase in renewables, because there's a lot of money in that," the source said. And in states that traditionally feature a heavy coal mix, coal-fired generators are being replaced by new combined-cycle natural gas turbines, rather than coal.

"Those things are cheap, and they're cheaper than existing coal. And so that's going to continue to drive reductions even in places where you'd think they wouldn't care about carbon," the industry advocacy source said.