Category: Regulation and Risks

California’s Renewable Portfolio Standard

California’s 2002 Renewables Portfolio Standard (RPS), Senate Bill No. 1078 mandated that electric providers procure renewable power from eligible sources at 17% of customer sales by 2017. The bill also required the Public Utility Commission (PUC), being the regulatory agency for electricity providers, establish a certification and monitoring program through the state Energy Commission. Subsequently, Senate Bill No. 107, along with executive orders, accelerated the program to require a 20% renewable procurement by the end of 2010 and 33% by the end of 2020. Recently, Governor Jerry Brown announced his proposal to further increase the portfolio standard to 50% by 2030. According to the RPS Program Overview page, California’s goal is to be, “One of the most ambitious renewable energy standards in the country”. It appears the state may have succeeded in that effort.

Currently, federal funds nurse CA’s renewables mandate in the form of subsidies like the Production Tax Credits (PTC) and American Recovery and Reinvestment Act (ARRA). However, revenue from these federal programs are not expected to continue, and pressure is mounting for the renewable fuel industry to stand on its own. In fact, several states are reconsidering their programs’ viability.

So, how will proponents peddle the program to consumers when the federal subsidies end? The full cost associated with RPS programs are difficult to evaluate. A 2015 study by the National Renewable Energy Laboratory (NREL), and prepared for the U.S. Department of Energy (DOE), estimates an expected 10% increase in electrical energy costs to consumers as a result of the state’s RPS. This, to a state with consistently the highest electricity cost in the nation. Still, the consumer impact aspect of continuing, even expanding the mandate, does not appear to be the primary consideration. The report suggests the methodologies used to discover the true costs are demonstrably inappropriate. As well, outlays for integration, transmission, and administrative expenditures are not included in the cost analysis.

NREL suggests to policymakers that going forward, they should look beyond “simply a narrow consideration” of the costs of the program to ratepayers. Instead, the report promotes the development of a means to recognize program value based on “broader societal impacts”.

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Aug 31, 2015 | Leave a Comment | by

EPA Regulations Overruled by Supreme Court

In a 5-4 ruling, the Supreme Court ruled that the Environmental Protection Agency (EPA) had not adequately considered the costs of its regulations before enacting them. Limits finalized in 2012 as part of the Clean Air Act on toxic air pollutants proved to be a prohibitive cost on coal utility plants. They were also a main feature in the Obama administration’s environmental policies.

The case, Michigan v. EPA, centered on the first ever limits on mercury, arsenic, and acid gases emitted by coal-fired power plants. While the EPA had estimated the new rules would cost $9.6 billion, placing it among the costliest regulations ever instated.

Prior to the ruling, the head of the EPA Gina McCarthy had said she felt confident the Supreme Court would rule in their favor. However, were that not to be the case, she said:

But even if we don’t [win], it was three years ago, most of them are already in compliance, investments have been made, and we’ll catch up. And we’re still going to get at the toxic pollution from their facilities.

With most coal plants already in compliance, the ruling does little to slow emission curbs in the coal industry. Regulations on interstate air pollution were already upheld last year by the Supreme Court, ensuring that most utilities will need to control future pollution regardless of the new ruling. Furthermore, in the majority opinion, written by Justice Scalia, the Court ruled that the EPA could reconsider the regulations with better cost assessments before reinstating such rules.

 

Jun 29, 2015 | 5 comments | by

Obama Takes Aim at Big Trucks

On Friday, the Obama administration officially announced plans to further lower carbon emissions in the United States. This new rule, issued by the Environmental Protection Agency (EPA) and the Transportation Department, aims to increase the fuel efficiency of the large trucks crossing the country everyday. New regulations will also affect other trucks, such as delivery vehicles, dump trucks and buses.

Two categories of standards were created, one for the front part of big trucks, called tractors, and one for trailers that trucks haul. The tractor standard will be implemented for those built in 2021 and require efficiency increases of up to 24 percent. This will be the first time, however, that regulations extend to trailers. The first federal standards for big trucks were announced in 2011 for any truck models built between 2014 and 2018.

The rules threaten to impose undue burdens on the trucking industry — an industry responsible for the transportation of food, raw goods, and most freight in the country. Adjusting to these new rules will require improvements in aerodynamics and the use of lighter materials as well as tweaks in current engine and transmission technology. The EPA stated the industry would be able to recoup their costs within two years for trucks with trailers. For smaller trucks and buses, the recoup time may be as long as three to six years.

These new regulations are just the next step in a long line of new rules implemented under the Obama administration. In his first term, President Obama discussed limitations on automobile emissions. These were followed by new rules set by the EPA for power plants and more recently potential regulations on airplane engine emissions.

 

Jun 22, 2015 | 2 comments | by

Energy Security Must Include Reliable Power

A similar version of this blog post appeared in Newsmax:

Unlike populations in most other parts of the world we Americans take vital benefits of dependable electricity for granted. We simply plug into an outlet or flip on a switch and fully expect that our lights will go on, our computers will charge, our coffee will heat up, our air conditioners will function, and yes, our generous taxpayer subsidized plug-in vehicles will run again until tomorrow.

This wonderful, finely balanced round-the-clock empowerment required planning and development which didn’t occur overnight. The same will be true of future efforts to restore adequate capabilities after the Obama EPA’s Clean Power Plan takes an estimated one-third of all U.S. coal-fired plants off the grid over the next five years. This amounts to a loss of generating capacity sufficient to supply residential electricity for about 57 million people.

The North American Electric Reliability Corp, a nonprofit oversight group, emphasizes that the plan constitutes “a significant reliability challenge, given the time required for implementation.” The timeline to convert or replace a coal-fired power plant with natural gas requires years, whereby siting, permitting and development to meet EPA’s interim target would need to be completed by 2017.

Even if a state were able to submit a compliance plan by 2017 or 2018, EPA has admitted that it may take up to another year to approve it. New and upgraded natural gas plants will require additional pipeline infrastructure which may take five years or longer. More expansive transmission lines will also be required to connect that capacity to the grid, with full implementation potentially taking up to 15 years.

EPA’s latest climate alarm-premised war on coal assault calls for states to cut CO2 emissions by 30 percent from 2005 levels by 2030 despite satellite-recorded flat mean global temperatures over the past 18 years and counting. This federal usurpation of state responsibility dating back to the invention of the modern steam engine in the 1880s is unprecedented.

A “finishing rule” expected to be issued in June or July will require states to meet agency carbon-reduction targets by reorganizing their “production, distribution, and use of electricity.” In complying, 39 states must achieve more than 50 percent of EPA’s reduction targets by 2020.

Not only are EPA’s mandates unfeasible, they also demand that states operate “outside the fence line” to force shut-downs of coal (and eventually natural gas), establish minimum quotas for renewables (wind and solar), and impose energy conservation mandates. Never mind here that last year the D.C. Court of Appeals ruled against the Federal Energy Regulatory Commission’s claim of authority over “demand response” of the national energy grid.

Even liberal Harvard constitutional authority Larry Tribe has observed being stunned at this effort to nationalize U.S. electricity generation by coercing states to pass new laws or rush through new compliance rules that exceed EPA’s legal jurisdiction. President Obama is clearly eager for such policy changes to be quickly put into effect which a future Republican president can’t reverse. This will also provide bragging rights for a climate initiative he can announce at the Paris climate conference later this year.

Fortunately, while states are invited to draw up implementation plans for EPA approval, they really have no legal obligation to do so. And while EPA can attempt to commandeer a federal plan if states resist, there are good incentives for them to band together in calling EPA’s bluff — reasons which can otherwise bear dangerous and costly consequences.

An April 7 Washington, D.C., power outage caused by a mechanical failure and fire at a transfer station temporarily disrupted electricity to the White house, Capitol, government agencies (yes, including the Energy Department), businesses/residents, and street lights. While relatively minor, it most likely could have been avoided if a 60-year-old coal-fired plant called the Potomac River Generating Station in Alexandria, Va., which provided backup capacity to balance the grid, hadn’t been shuttered.

It was one of 188 plant closures credited to former New York City Mayor Bloomberg’s activist “Beyond Coal” campaign which he has supported with $80 million in donations to the anti-fossil Sierra Club.

A far more damaging 2003 Northeast blackout resulted in costs of about $13 billion. Referring to the Clean Power Plan, the New York Independent Systems Operator (NYISO) now reports that EPA’s “inherently unreasonable” reductions “cannot be sustained while maintaining reliable electric service to New York City.” NYISO further projects unacceptable plan consequences which “no amount of flexibility can fix.”

States should collectively heed this reality. Rather than accept EPA’s dirty work, it’s imperative that federal hijacking of state sovereignty be resoundingly rejected.

Apr 29, 2015 | 2 comments | by

White House Releases Quadrennial Energy Review for Earth Day

Yesterday, the Obama administration released the first installment of the new Quadrennial Energy Review (QER), a four-year cycle of assessments deigned to provide a roadmap for U.S. energy policy. This first installment focuses on the needs and opportunities for modernizing the nationwide infrastructure for transmitting, storing, and distributing energy. Dr. John Holdren and Dan Utech said:

Today, America has the most advanced energy system in the world. A steady supply of reliable, affordable, and increasingly clean power and fuels underpins every facet of our nation’s economy. But the U.S. energy landscape is changing dramatically, with important implications for the vast networks of pipelines, wires, waterways, railroads, storage systems, and other facilities that form the backbone of America’s energy system.

The administration hopes that careful analysis and modernization of energy infrastructure will promote economic competitiveness, energy security, and environmental responsibility.

This first QER installment comes just in time for Earth Day, which has spurred many sectors of the government into action. Over the past two days, the House of Representatives sent an energy efficiency bill to the president’s desk, the Department of Justice and the EPA levied $5 million in penalties against ExxonMobil for a 2013 oil spill, Democratic House members introduced the “strongest anti-fracking” bill yet brought to the House, which would ban fracking on all federal lands. The president is also doing his part, touting his plans to impact climate change at debates in Florida.

Though Earth Day has a tendency to bring out people’s far-fetched energy plans, it does do some good as well. According to the Annual Energy Outlook, improvements in energy efficiency, increases in energy demand, and the stabilization of energy-related carbon dioxide emissions have all benefited since the first Earth Day 45 years ago.

 

Apr 22, 2015 | Leave a Comment | by

Ozone Regulation Could Cost Trillions

In a flashback to 2011, Obama is once again staring down the barrel of a controversial regulation to limit smog-creating ozone pollution. The EPA’s proposed regulation ― which would lower the threshold of ground-level ozone pollution considered healthy to breathe ― is already being decried by opponents as “the most expensive regulation ever.”

Obama nixed a similar version of the rule in 2011, claiming that he was acting to “underscore the importance of reducing regulatory burdens and regulatory uncertainty.” Yet with his recent actions on immigration, education and health care, many are left wondering whether Obama will keep his commitment to “reducing regulatory burdens” in the face of the EPA’s new proposal.

The proposal itself would lower the existing acceptable ozone standard from 75 parts per billion (ppb) to somewhere between 65 and 70 ppb ― though the EPA’s science advisers would rather see limits closer to 60 ppb. According to the EPA and environmentalist groups, lowering the amount of acceptable ozone would increase public health, reduce illness and premature deaths, and lead to $21.2-$42.1 billion in benefits, contrasted with $16.6 billion in costs.

Opponents of the regulation warn that lowering the limit would stifle economic growth, drastically reduce jobs, and wipe out trillions of dollars in economic output. A July study by the National Association of Manufacturers estimated that a strict version of the rule ― setting the limit to around 60 ppb ― would eliminate $3.4 trillion in economic output and cut 2.9 million jobs by 2040.

The EPA must make a final decision on the rule by October 1st of next year. While many argue that it’s too early to truly estimate the costs of the proposed regulation, the initial forecasts put millions of jobs, billions of dollars in investment, and trillions of dollars of economic output at risk.

“By any measure, the revised ozone rule will represent one of the costliest rules ever issued by EPA,” Louisiana Senator David Vitter told Politico. The EPA’s proposal could be “one of the most devastating regulations in a series of over-reaching regulatory actions taken by this administration.”

 

Dec 03, 2014 | 2 comments | by

Clean Power Plan Regulations have High Expectations

Advanced Energy Economy (AEE) has come up with a number of recommendations for the Clean Power Plan. The AEE sees these new federal regulations as a great benefit to the electric power system and an added opportunity to the energy industry. Here is a brief summary of AEE’s recommendations for the Clean Power Plan:

Part of the problem is simply the difficulty of predicting the technological progress that will take place by 2030 and beyond. For this reason, we called on EPA to regularly review and revise its emission targets given the steady improvement of advanced energy technologies, which will enable greater emission reductions over time.

Besides ways to strengthen the targets associated with advanced energy, we also urged EPA to take several actions to encourage the use of advanced energy technologies by states.

One way to do this is to explicitly approve more emission-reducing technologies for compliance. We called on EPA to expand the range of options to include the 40 technologies described in AEE’s Advanced Energy Technologies for Greenhouse Gas Reduction. The full report is available here.

In order to avoid uncertainty on the part of states about eligible technologies and how to incorporate them into compliance plans, EPA needs to clarify the crediting of emission reductions from renewable energy and energy efficiency actions in a variety of ways. Specifically, we urged EPA to develop a non-exclusive list of protocols for evaluation, measurement, and verification (EM&V), so that states could employ energy efficiency in their compliance plans with confidence.

We also asked that EPA provide clarity as to the crediting of renewable energy across state lines, in order to encourage the continued expansion of interstate markets. EPA should also improve the crediting of energy efficiency investments in states that are energy exporters, as well as clarify the crediting of emission reductions that occur in one state as a result of efficiency investments made in another state.

Finally, AEE urged EPA to accelerate advanced energy markets, and their associated emission reductions, by crediting emission reductions achieved prior to 2020 by new projects stemming from state compliance plans.

In sum, we are urging EPA to build upon the solid foundation of the Clean Power Plan by making changes in the final rule to fully realize the benefits of advanced energy technologies for emission reduction and economic growth. With the formal comment period open until December 1, we hope other supporters of a better energy future will do the same.

How do you feel about the Clean Power Plan and about AEE’s recommendations?

Nov 26, 2014 | 2 comments | by

EPA’s Climate Change Adaption Plan

The Environmental Protection Agency has released their plans to reduce human greenhouse gas emissions and prepare for the effects of climate change. The EPA Sustainability Plan and Climate Change Adaptation Plan coincides with President Obama’s 2009 Executive Order on Environmental, Energy and Economic Performance, which set aggressive energy, climate and environmental targets for agencies, and detail how.

In the Climate Change Adaptation Plan, the EPA identifies priority actions the agency will take to incorporate considerations of climate change into its programs, policies, rules and operations to ensure they are effective under future climatic conditions. This includes:

  • Incorporating climate adaptation criteria in the Brownfields grants process to ensure cleanup actions taken by communities are effective as the climate changes.
  • Integrating considerations of climate change into the Clean Water State Revolving Funds process and continue working with states to ensure investments in water infrastructure are resilient to changes in climate.

For example, a stormwater calculator and climate adaptation tool empowers community planners to estimate the amount of stormwater runoff.

Up to this point, the aggressive regulations of the EPA have:

  • Reduced the federal government’s greenhouse gas emissions by more than 17 percent since 2008.
  • Exceeded the 24 percent energy intensity reduction from its 2003 baseline.
  • Reduced 2013 energy intensity by 25.6 percent from 2003.
  • Reduced fleet petroleum use by 38.9 percent compared to the 2005 baseline.

Federal regulations, in general, and specifically by the EPA may have good intentions, but inevitability do much more harm than good. Many examples of how these types of regulations do great harm are already well published. We can only assume that further action by the federal/state/local governments will only do more damage.

Nov 03, 2014 | 3 comments | by

Bag Bans are Bad Business

This past year the NCPA published numerous studies on how both bag bans, and bag regulations were harming consumers. The details of the studies revealed that not only were the local governments cashing in on taxpayers, but that the environment would still be suffering as a result. How can this be? Wouldn’t a decrease in the plastic bags being sold help the environment? After all, ecosystems suffer from trash and pollution daily, this could be the next steps towards cleaning up the country. However, this is a free market, and unintended consequences from government interaction has been an issue since people started submitting themselves to others.

Paper Bags: Plastic bags were at one time our nation’s solution to paper. Deforestation was running rampant in the world, and environmentalists were demanding paper bag removal from stores. Plastic bags, which were more efficient, cheaper and did no harm to any forests or the ecosystems within. It is also extremely important to note that paper bags create a far bigger environmental footprint than plastic, and are not able to decompose in landfills. As we approach an alternative to plastic it seems that reusable bags are in. Despite numerous reports of E.coli collecting on them, and the fact that stores are able to sell them for a bigger profit than free plastic bags, our economy is not ready to suddenly change overnight.

Increasing Taxes: Many local governments decided that instead of a ban they would propose a tax on every plastic bag used. DC for example, utilized a 5 cent fee on every plastic bag sold to consumers. The more groceries you bought, the more you would be charged. While it seemed like a good idea at the time, other countries who did the same thing ended up having to raise the tax repeatedly over time. Their tax began at 15 cents in 2001 and jumped to 22 cents in 2007. The government was forced to raise the tax after they noticed that bag use was increasing as consumers began absorbing the cost of the bags. This exact identical situation also happened to Ireland.

Sep 08, 2014 | Leave a Comment | by

The Troubling Murkiness of Sustainability

What does the phrase “sustainable development” mean to you? Your answer is particularly important, because our government is asking us to make many sacrifices to our personal freedoms in its name. We need to know if it is all worthwhile. Consider the following:

Where did this phrase originate? The United Nations World Commission on Environment and Development (also known as the Brundtland commission) first coined the phrase in a report published back in 1987, and it has since taken on a life of its own ever since.

The Environment Protection Agency (EPA) uses this definition: “Sustainability creates and maintains the conditions under which humans and nature can exist in productive harmony, that permit fulfilling the social, economic and other requirements of present and future generations.”

What is required for promoting sustainability? Setting aside the notion of “productive harmony” between humans and nature (whatever that means), finding the best way to fulfill the resource demands of both our present and future generations certainly sounds appealing.

Yet, based on the hue and cry for greater regulation over energy production and natural resource use in our economy, it appears that the voluntary interaction between people engaged in production and exchange in the private marketplace is an unsustainable system that has been found wanting.

Is there a better alternative than voluntary exchange? It is assumed by many that abandoning the marketplace and embracing a democratically designed regulatory process for allocating our nation’s resources will create a superior balance to this intergenerational tug-of-war over alternative resource uses.

However, in two earlier articles appearing in this blog, I give many reasons why we cannot presume that a centralized and involuntary approach toward managing our nation’s resources — even through a democratic process — will necessarily create a more sustainable outcome to the private marketplace.

Why? The same misalignment of incentives and imbalance of influence over resource use decisions that critics claim corrupt the market process are also quite prevalent in any democratic process that directs public resource use. But there are still other issues with relying on public policy to effectively deliver sustainable development.

What are the costs and benefits of sustainable development practices? Whenever the voluntary interactions between people are curtailed, they bear the lost benefits that could have been enjoyed by both parties had they been free to continue their activity. These costs are real and can only be revealed by those who willingly abandon this activity. Like the homeowner who relinquishes her house title to a buyer willing to pay the right price, the true value that is lost from this forgone activity is revealed only when a person receives sufficient payment to voluntarily stop the activity.

Even when market activities do not impose any burdens on third parties (like pollution), restricting human freedoms in the name of sustainability is usually justified by the claim that benefits need be preserved for future generations to enjoy. Yet, these benefits can only be accurately measured by those who voluntarily pay to preserve them for others to consume. Like the ratio of income that parents save for their children’s college education, the value of these future benefits is revealed only when each person voluntarily pays a price sufficient to acquire them for someone else.

This all implies that if our federal agencies claim to know the true costs that are borne by everyone who is forced to abandon their beneficial activities, or to know the true value of benefits that are funded by many people today but reserved for future generations to enjoy, then our democratic government suffers from a hubris that Friedrich von Hayek termed “the fatal conceit.”

Hayek understood that only the voluntary, decentralized interactions of millions of individuals in the marketplace can create the spontaneous and orderly outcomes that incorporate the greatest amount of cost and benefit information that could possibly be considered in order to create the best possible outcomes for the greatest number of people in society.

One of the reasons we value freedom so highly is that we instinctively know that nobody else can manage our own lives to produce as much joy as we can obtain by freely making our own decisions. Indeed, the concept of sustainable development has been applied with great rhetorical fervor to just about everything we find valuable in society — except the joy from exercising our personal liberty.

Which brings us back to our initial query: Is sustainable development — at least as it is being promised and delivered by our federal bureaucracy — worth the price that we are being asked to pay? How would you know?

Aug 20, 2014 | 1 comment | by
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