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How Will Things Change For the Energy Sector Under a Biden Administration?

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After the “election of a lifetime” is over and after the celebrations and recriminations have ended, it will be time for President-elect Joseph Biden Jr.’s administration to get down to work. For the energy sector, the new administration’s policies are an aggressive snapback to an earlier normal under President Obama before they were disrupted.

Don’t expect a regression to the mean, though. The present administration’s task is a difficult one, coming as it does during a time of intense debate about climate change mitigation strategies and disruptions to utility business models. Here is a brief look at how things may or may not change under the new administration.

A Predictable and Divided Approach to Administration

Perhaps the most important gift of a Biden presidency it its predictability. Hostility between federal and state regulators and a rollback of clean energy initiatives were hallmarks of the Trump administration’s time. President-elect Biden’s tenure signals a change in tone and deliberations involved in energy policymaking. As much as President Trump’s election was an unplanned step backwards, his successor represents a considered step forward.

The clean energy switch is back up with this administration but it is unlikely to be powered on at full blast. The groundswell of support for President-elect Biden has failed to translate to significant changes in the House and Senate composition. The majority for Democrats in the House of Representatives has shrunk and Republicans have a fighting chance of holding onto their Senate majority.

The result is that any clean energy legislation that the President-elect attempts to push through will face significant blowback from Republicans. “…we would expect things for clean and advanced energy to be relatively small compared to what they might be under…full[Democratic] control,” said Leah Rubin Shen, policy director for the Advanced Energy Economy. According to her, there might be “some appetite” for extension of tax credits that were set to expire for certain renewable energy sources. In other areas, however, the administration will have to contend with a fight.

The silver lining to all of this is the President-elect’s promise to spend $2 trillion on research and development for renewable energy sources during his four years in office. Those funds should provide plentiful supply to utilities aiming to reach a net zero goal on the grid. Another consequence of a Democratic administration is that the Environment Protection Agency (EPA), which was sidelined in the previous administration, will come back into the spotlight. Cliff Rothenstein, government affairs adviser at advisory firm K&L Gates, told S&P Intelligence that the agency could “aggressively start a robust enforcement initiative”.

FERC: More of the Same?

When President Trump came to power, there were two commissioner vacancies at FERC and the balance of favor was in favor of Democrats. Four years later, the situation remains the same but with a slight difference: there are two vacancies but the agency skews Republican. Given this state of affairs, it would be easy to craft a narrative entirely critical of commissioners appointed by Trump.

But the fact of the matter is that the agency’s record in the last four years is a mixed bag. Yes, it has passed rulemaking that blatantly provides fossil fuel producers an advantage in RTO bidding. But the agency’s orders, such as FERC Order No. 2222, have also paved the way for a future grid by boosting the presence of distributed energy resources in wholesale markets. There is a good chance that the agency may continue on the same course. Neil Chatterjee, who was FERC Chairman until recently and is one of the two Republican commissioners, said he is “optimistic” about the prospects of making a business case for clean energy earlier this year.  

Several online pieces have opined that the Minimum Offer Price Rule (MOPR) that generated much heat and debate from renewable energy producers will be the first to go under the new administration. President-elect Biden could also flip the agency’s current Republican creds back to a Democrat-majority by appointing two new commissioners. The balance of power for rulemaking is divided between the agency and state public service commissioners based on current projected estimates. Depending on the state, this development could delay or hasten the transition towards renewable energy. For example, Arizona is poised to elect Republican commissioners to its commission and they could alter the state’s plans to become carbon-free by 2050.

Discussions
Matt Chester's picture
Matt Chester on Nov 11, 2020

The silver lining to all of this is the President-elect’s promise to spend $2 trillion on research and development for renewable energy sources during his four years in office. 

I wonder whether that $2T package will still be on the table given the razor thin margins that have ended up taking hold in the Senate (with us not knowing until January which direction that thin margin will tilt). But regardless of the specifics, it's redeeming to know that some sort of action will be on the table and we'll have leaders in charge open and willing to hear from the energy and climate experts. The bar has been lowered, but it's nice to know we'll be able to exceed that bar with ease

Rakesh  Sharma's picture
Rakesh Sharma on Nov 11, 2020

You are right. My bad. The $2 trillion amount will likely undergo revisions based on the Senate tally and Republican willingness to negotiate on climate change. I read a piece today about Biden and McConnell's history of working together (both of them have served in Washington for more than 35 years) and how they believe in the "building blocks of negotiation". I suppose that familiar rapport will help them hurdle past their differences on climate change. 

Matt Chester's picture
Matt Chester on Nov 11, 2020

I'll cross my fingers but I won't hold my breath-- a lot has changed about the political landscape over that 35+ years, unfortunately

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