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Granholm gives nod to coal, gas incentives in Clean Electricity Performance Program

Highlights

Granholm okay with natural gas, coal incentives

Carbon capture, utilization and storage required to qualify under CEPP

US Energy Secretary Jennifer Granholm Oct. 6 expressed support for allowing natural gas and coal-fired power plants to receive incentives under the federal Clean Electricity Performance Program, so long as they are paired with carbon capture technologies.

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"Decarbonization is decarbonization," Granholm said during an energy transition summit held by the Financial Times.

The Clean Electricity Performance Program is a $150 billion piece of legislation part of the larger budget reconciliation bill that the Biden administration and congressional Democrats are now trimming down – from a $3.5 trillion package to a roughly $2 trillion package – after Democratic senators Joe Manchin of West Virginia and Krysten Sinema of Arizona voiced opposition.

Manchin, who has faced recent criticism from climate advocates for his fossil fuel ties, has been a big supporter of allowing gas paired with carbon capture, utilization and storage technology, or CCUS, to play a role in Biden's clean energy agenda. And Granholm, in her comments at the webcast summit, signaled that he will likely get his way.

"He has a pretty big say in how this is shaped," she said.

As proposed, the Clean Electricity Performance Program, or CEPP, is designed to contribute towards the Biden administration's 2035 goal of 100% clean electricity by cleaning up emissions associated with electricity generation. According to the US Energy Information Administration, carbon emissions from the electric power sector accounted for one third of all US emissions in 2020.

The CEPP would incentivize cleaning up the power sector by paying electric utilities who expand the amount of clean energy they provide to customers and penalizing those who don't. Utilities that increase their supply of clean electricity by at least 4% over the previous year would receive $150 for each MWh above 1.5% of its clean energy electric generation in the previous year, according to a congressional fact sheet. Utilities that don't meet this goal would be forced to pay $40 per every MWh of their shortfall.

The bill defines clean energy as that with a carbon intensity less than 0.1mt of CO2 per MWh. This standard allows coal and gas-based electric generators to be eligible for the incentive payments so long as they achieve a carbon capture rate of 90% and 80%, respectively, according to the Natural Resource Defense Council.

"I continue to say this is about a silver buckshot, not a silver bullet to incentivize all those [energy sources] in the way this bill does," Granholm said. "It would be enormous for America."

The requirement to qualify as a clean energy source would be mostly costly to coal-fired power plants, and the coal industry has already expressed its opposition to the plan. In a Sept. 13 letter to the House Committee on Energy and Commerce, Michelle Bloodworth, CEO of the coal advocacy group America's Power, said the "CEPP would eliminate coal-fired electricity by 2030, if not sooner."

"Although the electricity grid is undergoing a transition, the coal fleet will be needed for the foreseeable future because it promotes grid reliability and resilience, generates affordable electricity, provides fuel security, and is an indispensable alternative when other electricity sources are not available or are too expensive," Bloodworth wrote. "The CEPP would eliminate fossil fuel-generated electricity in 49 states in less than 10 years."

Grandholm acknowledged that possible reality, but added that the design of the CEPP is to provide a means to buildout carbon capture technology.

"The question for coal has been, does it pencil out?" Granholm said. "But the CEPP provides the means to buildout the technology. That's what it funds. It doesn't fund shareholder profits. It funds the buildout of these technologies to scale."

Despite its expected decline through 2030, coal is projected to remain a significant part of the worldwide energy generation mix to keep up with population growth, the US Energy Information Administration said in its annual energy outlook released Oct. 6. Although renewables will be the primary source of new electric generation, the world's power sector will still depend on natural gas and coal to meet load demand and grid reliability as battery technology ramps up, the EIA said.