6 ways the presidential election will influence the electric utility sector
From FERC appointments to nukes and natural gas, experts outline how Trump or Clinton could shape the energy narrative
ile policy questions have taken a back seat to controversy over the past weeks, the presidential election still offers a stark choice for those in the energy industry.
For one candidate, it is time to unshackle energy producers and end overregulation of fossil fuels. For the other, a focus on a cleaner energy future, including half a billion solar panels and more efficiency.
But though the power sector is in the midst of an undeniable evolution, energy policy debate has been scant on the campaign trail, overshadowed by the politics of personality. Even Ken Bone’s question about the transition away from fossil fuels at the second debate was drowned out by a media obsession over his private life.
“Those with an energy-themed bingo card have not been doing well,” said Kate Konschnik, the founding director of Harvard Law School’s Environmental Policy Initiative.
Konschnik was part of a team of experts who assembled a report on the energy issues that will be faced by the next administration, and the decisions they will need to make. From the appointment of federal regulators to the legal defense of rules and regulations, the next President’s impact will be significant.
And yet, said Konschnik, the myriad decisions will also meet the existing momentum of market trends, meaning direct presidential control over the energy narrative will be limited.
Hillary Clinton and Donald Trump have incredibly divergent policy proposals. The real estate developer’s ideas focus on loosening regulation of energy development, opening more offshore areas to production, and ending policies detrimental to the coal industry. He told fossil fuel industry conference that he would scrap President Obama’s Clean Power Plan, which aims to curb greenhouse gas emissions 32% by 2030 from the power sector.
On the other hand, Clinton’s energy proposals include a focus on renewable energy, efficiency, natural gas as a bridge fuel, and lowering oil consumption.
“Were they enacting policy in a vacuum, they would take very different paths,” said Konschnik. But “market trends are really important, and they can’t be wished away. Their decisions are confined in some ways by the realities they will face the first day in office.”
That said, the next administration will make decisions on energy issues from electric vehicles to nuclear plants, including the technology and market sides. And there are a half dozen general areas where influence will be greatest.
A copy of the report can be found here: Illuminating the Energy Policy Agenda: Electricity Sector Issues Facing the Next Administration. It was published by researchers from Duke University, the University of North Carolina, and the Harvard Law School, and does not make policy recommendations.
Federal power regulation
The Federal Energy Regulatory Commission is charged with overseeing wholesale power markets, and the White House appoints the five-member commission. But right now, FERC has two seats vacant — and three Democrats currently serving.
“It’s unusual, but not quite as unprecedented as the Supreme Court having just eight justices,” said Ari Peskoe, the senior fellow in electricity law at the Harvard Law School Environmental Law Program Policy Initiative. The longest stretch of a three-member commission was about a year, in 2005 and 2006. By law, FERC cannot have more than three members from the same political party, so a Republican will likely be nominated next.
“The line between federal and state jurisdiction over the electricity sector is shifting,” according to the report. “FERC once played a limited role in sector oversight, but regionalization of the electric grid and development of interstate markets for electricity, electric capacity, and transmission development have expanded its responsibilities.”
There has been a series of Supreme Court decisions addressing state and federal power markets, demand response, and states’ ability to encourage new generation. But the report said “tensions between state and federal policies are likely to continue.” In particular, environmentalists have targeted FERC for protests in recent years, pushing the commission to take ecological considerations more into account when evaluating energy infrastructure proposals, particularly pipeline construction.
Peskoe said other issues FERC will face include how to incorporate state renewable policies into wholesale markets, and whether to address renewables issues and the Public Utilities Regulatory Policies Act comprehensively, or to continue with case-by-case determinations.
Climate policy
The next President will hold enormous sway over the nation’s climate policy, but they will also face commitments the United States has already made.
The most immediate decisions are likely to be questions of appointments — who will lead the U.S. Environmental Protection Agency, Department of Energy and White House Office of Budget and Management. Those agencies will make the decisions over how to address the Clean Power Plan, and whether to challenge the D.C. Circuit Court decision when it is issued.
CPP compliance is a large chunk of the federal government’s plan to abide by the Paris climate treaty, but Christina Reichert, policy counsel for the Climate and Energy Program at Duke University’s Nicholas Institute for Environmental Policy Solutions, said “existing regulations may not be sufficient to meet the full commiment.”
The administration will also need to determine how to incorporate the social cost of carbon into its federal rulemakings and policy decisions, following a court decision in 2008 by the 9th Circuit Court of Appeals. The Department of Energy’s use of that metric for commercial refrigeration standards was upheld this year.
“Agencies that do not include a social cost of carbon in their policies risk litigation,” Reichert said.
Nuclear policy
The nation’s aging nuclear fleet, whether to support the plants economically and keep them running long past their initial licenses, will also be an issue the next president will face.
The two major policy points the next administration will focus on are licensing and financial support: how to approach operating extensions out to 60 and 80 years, and subsidies needed in some markets to keep them online, thanks to low gas prices. Nuclear waste storage and the development of smaller, modular facilities will also be up for debate.
The next president will have the opportunity to appoint at least three members to the U.S. Nuclear Regulatory Commission. The NRC is in the process of developing a framework to review 80-year license extensions, and “the next administration will inherit that unfinished guidance,” said Sarah Adair, a senior policy associate at Duke’s Nicholas Institute.
But even if safety concerns about keeping nuclear power plants operating are assuaged, market forces are endangering many. Several nuclear plants have retired in recent years, five will retire by 2019, and more are at risk, according to the report.
“We see a potential role for FERC here, which may be asked to weigh in on policies,” said Adair.
New York’s Clean Energy Standard, which directs investor owned utilities to purchase nuclear power credits, may be the next battleground. FERC has been asked to block the sale of Entergy’s Fitzpatrick nuke plant to Exelon, part of an arrangement to keep the state’s carbon-free fleet running as long as the state is subsidizing the generation.
While FERC has traditionally not favored specific fuels, the changing utility landscape could mean a broader review of RTO and ISO market issues where nuclear plants are involved, and the possibility that regulators could “break with tradition,” said Adair.
Natural gas
Shale gas was 5% of the nation’s production in 2004, and by last year it was more than half. “This is the forseeable future of natural gas in the United States,” said Konschnik.
The rapid rise of production, enabled by hydraulic fracturing, has created several policy questions regarding production and whether to continue to rely on gas as a bridge away from coal. Whether the next administration presses for renewable tax credits could also impact natural gas demand. And in addition to appointing a new EPA head, the next president will also appoint someone to direct the Bureau of Land Management, which sets policies for energy production on federal lands.
