Power Industry Wish Granted: Greater Regulatory Certainty

For the decade-plus that I’ve been involved with POWER magazine and its offshoots, I’ve heard industry leaders say they want greater certainty—especially about regulations affecting emissions from fossil-fueled power plants. Whether the issue was building new plants, upgrading existing ones, or retrofitting with the best available control technology (BACT), the most frequently uttered explanation (or excuse, depending on your viewpoint) for slow or no action was that investment decisions were greatly complicated because of uncertainty about how the actions of politicians in Washington and regulatory agencies (under both Republican and Democratic administrations) would affect those decisions.

“We need greater regulatory certainty” was the rallying cry regarding everything from coal ash classification to wind power production tax credits to carbon taxes. Thanks to some recent key decisions in Washington, the industry now has greater certainty than it has in many years.

With the mid-July confirmation of Gina McCarthy as the new Environmental Protection Agency (EPA) administrator, President Obama’s release of his Climate Action Plan, and other recent nominations, the industry now knows what it faces.

Specifically, it has a pretty good idea of how McCarthy will guide the EPA based on how she operated in her four years as assistant administrator for the EPA Office of Air and Radiation. It knows that she has worked on environmental policy for both parties. As POWERnews reported, she has worked “for four previous Massachusetts governors and was part of former Massachusetts Gov. Mitt Romney’s 2003 appointed team to oversee the state’s environmental regulatory agenda—including the hefty task of shaping Massachusetts’s first climate protection action plan.” Both environmental and industry groups have applauded McCarthy’s confirmation. Tom Kuhn, president of the Edison Electric Institute, said her confirmation would bring “greater certainty to the agency” at a “critical time.”

Also adding to an atmosphere of greater certainty is the EPA’s agreement to publish on two websites any Notices of Intent to Sue and Petitions for Rulemaking upon receipt. Those measures are designed to help resolve some of challenges associated with closed-door settlement agreements (also known as “sue and settle” agreements). My bet is that sue-and-settle deals will become less frequent.

Though carbon cap-and-trade legislation never stood a chance even when Congress was controlled by Democrats, that doesn’t mean limits on carbon emissions are off the table. They’re just more likely to be dealt with via the EPA, as the president’s Climate Action Plan made clear. The administration is already sending signals that the timeframe for implementing carbon capture and sequestration technologies will likely be flexible, especially given the cost of available options. Nevertheless, the goal of the Climate Action Plan is clearly to encourage greater use of gas and renewables while forcing coal-burning units to operate ever more efficiently and cleanly.

Even the news that the president intends to nominate Ronald Binz to chair the Federal Energy Regulatory Commission could be seen as an indication of the administration’s commitment to championing renewable energy development (Binz has been a vocal supporter of renewables) while forcing coal units to retrofit with BACT, repower with gas, or retire.

Of course, nothing involving human societies is ever completely certain. In the energy policy arena there are counterbalancing forces at work, including moves by House Republicans to drastically slash spending on anything associated with the word “renewable,” including the Advanced Research Projects Agency-Energy—which also happens to fund early stage research and development on “clean coal” and carbon capture/use/storage technologies.

One thing is certain: The power industry has greater regulatory certainty than it has had in a long time. All signs point to a policy and regulatory environment that will put greater pressure on coal power generators to find economic ways of operating more cleanly—or not at all.

Americans like to believe that technology innovations can get them out of tight spots, and we’re looking at a very tight squeeze for coal-fired power. Whether opposition to any government involvement in supporting energy sector research and development gets in the way of support for technology innovation and the future of coal power remains to be seen.

One lesson in all of these latest developments: Be careful what you wish for.

—Gail Reitenbach, PhD is editor of POWER.

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