A sweeping climate proposal introduced by U.S. House Democrats on March 2 sets a stringent clean energy electricity mandate for power retailers nationwide, requiring they procure 100% of their power supplies from zero-emitting generation by 2035.
Among its slew of measures aimed at achieving net-zero emissions nationwide by 2050, the Climate Leadership and Environmental Action for our Nation’s (CLEAN) Future Act, introduced by Democrats on the House Energy and Commerce Committee (E&C), also establishes an electricity credit trading program to demonstrate compliance with the federal clean energy standard, as well as a carbon mitigation fund. (The House summary is here.)
As significantly, the bill also pushes for federal energy regulatory reforms, calling for a national policy on transmission to facilitate transmission of a decarbonized electricity supply. It requires the Federal Energy Regulatory Commission (FERC) to review its polices and incentives, and mandates FERC reporting on progress in encouraging deployment of transmission technologies. It also requires the Department of Energy (DOE) to consider the integration of renewable energy resources and lower costs to consumers when designating high priority interstate transmission corridors.
The bill, notably, also pushes FERC to consider climate change in its decision-making, citing sections 3 and 7 of the Natural Gas Act. It also clarifies that nothing in the Federal Power Act (FPA) limits FERC’s ability to approve a carbon pricing regime to set rates under sections 205 and 206. However, it also bans state interference in a customer’s right to purchase clean electricity in interstate commerce. As significantly, it requires all public utilities to place transmission facilities under the control of an independent system operator (ISO) or regional transmission organization (RTO) within two years.
The bill, notably, calls for reform of the Public Utility Regulatory Policies Act (PURPA), a law Congress enacted in 1978 to reduce U.S. dependence on oil and natural gas, and encourage the development of alternative generation, including cogeneration and small-scale renewable generation. Of specific significance is that the bill establishes a standard under PURPA, requiring states to consider investments in energy storage systems. The bill requires that qualifying facilities under PURPA have the option to enter into a fixed-price contract for energy, but it also establishes a standard requiring electric utilities to consider “implementation of non-wires solutions, or alternatives to traditional transmission infrastructure,” when appropriate.
Energy System Resilience Is a Key Focus
Finally, the bill pushes for electricity infrastructure modernization and resilience. Among these measures are a directive to the energy secretary to establish a program to provide funding to “eligible partners” for projects that improve resiliency, performance, or efficiency of the electricity grid. Partners include states, local governments, federal power entities, and national labs, as well as electric utilities, RTOs, and ISOs.
As proposed, the energy secretary must also establish a program to promote development of microgrids for isolated communities and improve the resilience of critical infrastructure, as well as establish a program to ensure that large power transformers and other critical electric grid equipment can be replaced in response to an event that damages and disables them.
To promote distributed generation, meanwhile, the bill directs the energy secretary to establish a loan program, but it stipulates that loans must achieve specific objectives, such as to “improve grid security and reliability, increasing use of local renewable energy resources, and enhancing peak load management and lowering energy costs for rural consumers.”
Hydropower and nuclear generation may also receive a boost under the bill. While the bill will add a new section to the FPA to improve the hydropower licensing process, it establishes a long-term nuclear power purchase agreement “pilot program.” Under that program, the DOE must enter into at least one long-term power purchase agreement to purchase electricity generated from advanced nuclear power technologies.
A ‘Starting Point’ on Concerted Climate Action
The legislation derives heavily from a House Democrat bill proposed last year, but it contains key differences, such as language that directs the Securities and Exchange Commission (SEC) to require public companies to disclose information about their exposure to climate-related risks. In all, the bill authorizes $565 billion in spending over 10 years to achieve a relative 50% reduction in nationwide greenhouse gas emissions from 2005 levels by 2030.
According to lawyers from Akin Gump Strauss Hauer & Feld LLP, however, the bill also includes some compromises. “While some progressive Democrats have called for a price on carbon emissions, the CLEAN Future Act does not include such language, as E&C Chairman Frank Pallone (D-NJ) acknowledged that such an approach lacked sufficient political support from more moderate Democrats and Republicans in both the House and Senate,” the firm said.
The firm suggested the bill may have a trajectory to passage. “One path forward is to incorporate this legislation into a broader, second reconciliation package this spring designed to provide stimulus to the economy through clean energy jobs, tax incentives and infrastructure investments and help the U.S. meet its Paris Agreement commitments,” it said.
Even if it doesn’t pass, the bill sets a “starting point for broader climate discussions,” the firm said, noting, “A slew of climate-related executive actions from President Biden’s Climate Day on January 27 preceded the House package.” The U.S. is now preparing to convene a climate summit on April 22 (Earth Day) to regain its leadership on the global climate scene.
For now, “The White House continues to refine its greenhouse gas emission reduction goals as part of its new nationally determined contribution (NDC) under the Paris Agreement, which we anticipate will be announced before the April 22 summit,” the law firm said.