Uncooperative Federalism and the Unraveling of Progressives’ Clean-Energy Ultimatum
- Nov 5, 2021 1:14 pm GMT
Perhaps you've heard: driven by the Biden administration, Congress is trying to hammer out a sprawling, unprecedented, bipartisan, multi-trillion-dollar infrastructure-investment plan that promises to make transformative updates to pretty much everything from transportation to water supply to broadband access while also taking environmental justice and other social issues into consideration — not to mention the energy sector.
As you might expect, legislation of that scope is equally convoluted and appeared to collapse under its own weight in late October, when a months-long bicameral standoff within the Democratic Party doomed the efforts of congressional leaders to get the “Built Back Better” plan back to President Biden's desk before November. For more explanation of the details of the legislative bills involved and some insider analysis, check out the podcast episode we did on the bill with former U.S. Rep. (turned lobbyist) Ryan Costello: The GT Power Hour: Episode 25 (A Primer on the Infrastructure Bill and all things Beltway).
Party leadership has since pivoted to a scaled-down substitute, which focuses on tax credits to drive investment but remains fairly sprawling; here’s a pretty comprehensive review of the new implications for the energy business.
But one of the biggest concessions was eliminating the $150-billion Clean Energy Performance Program, which was a primary sticking point for Sen. Joe Manchin (D-WV). The CEPP would have required 4% annual increases in clean-energy purchases from a 2019/20 average baseline with $150/MWh credits to LSEs who achieve the increases and $40/MWh penalties from shareholders rather than ratepayers for those that don’t.
In 2015, West Virginia became the first state to repeal its RPS, which had been enacted in 2009, and remains one of 12 states without an RPS or voluntary renewable-energy targets. Kentucky is another. When the details of the proposed infrastructure legislation was reviewed at recent stakeholder meetings convened by PJM, which operates the electricity grid for the Mid-Atlantic region that includes West Virginia and portions of Kentucky, LSEs serving customers in both states expressed concerns with the plan that included the lack of a reliability-focused safety-valve, the disproportionate impact different LSEs would incur depending on how their baselines were calculated and the overall impact such requirements would have on regions that have declined so far to undertake such initiatives on their own.
No matter how much money politicians want to throw at early adopters to try to generate critical mass, elimination of the CEPP and anything else that resembles a coherent national vision on carbon emissions continues to ensure that the country remains balkanized in its approaches to addressing climate-change concerns and that the state-to-state differences make efforts to move forward inefficient and often simply ineffective. Take a recent PJM initiative on carbon pricing for example: stakeholders worked for two years on potential ways to thread the needle before largely concluding earlier this year that it really only works if everyone is on board and deciding to shut the work down until states within PJM's footprint can agree or the feds step in.
So what now? States are certainly within their authority to exercise their sovereignty, but what if that right hampers their neighbors’ sovereign rights to also do what they want? In modern-day reproductions of the Tragedy of the Commons, do the demands of the few outweigh those of the many (or at least more than a few)?
I’m hardly a federalism scholar, but it seems to me that there has to be a logical and legal solution here. What if states are able to opt-in to lower LSE baselines and less-aggressive annual-incentive targets for a defined several-year transition period? What about tiers of involvement that correspond with states' federal-aid packages?
Obviously, this appears destined to get more complicated before it gets less, but the one thing we do know is that the all-or-nothing staring competitions on ideology and policy aren’t working. Let’s try something else.
Get Published - Build a Following
The Energy Central Power Industry Network is based on one core idea - power industry professionals helping each other and advancing the industry by sharing and learning from each other.
If you have an experience or insight to share or have learned something from a conference or seminar, your peers and colleagues on Energy Central want to hear about it. It's also easy to share a link to an article you've liked or an industry resource that you think would be helpful.