Regulations Are Making It Harder To Meet the Nation's Power Demands

Federal regulators have rejected a proposal to increase electricity generation from a nuclear power plant to a large data center in Pennsylvania.

By Jeff Luse of Reason. 

"The Federal Energy Regulatory Commission (FERC) recently rejected a request to increase power generation for a data center located next to a nuclear power plant in Pennsylvania. The U.S. will need to rapidly scale up power generation to meet future demand from AI and large data centers. This decision shows how challenging this task will be.  

In March 2024, Talen Energy sold its 960-megawatt (MW) data center to Amazon Web Services (AWS) for $650 million. The data center is a co-located facility, meaning it will draw electricity directly from Susquehanna Steam Electric Station—a nuclear power plant that generates 2.5 gigawatts of power annually—rather than from the grid. 

Under the agreement between Talen and Amazon, AWS must adhere to contractual power commitments that were slated to increase in 120 MW increments over the next few years, eventually reaching 960 MW. In June, PJM Interconnection, the organization that oversees wholesale electricity markets in Pennsylvania and 12 other states, filed a request with FERC to allow the nuclear power plant and local utility to increase the amount of electricity going to the data center from 300 MW to 480 MW. 

The proposal was denied for being too vague and failing to demonstrate why 300 MW is inadequate to meet AWS' needs. FERC's decision does not void the agreement between AWS and Talen. Instead, it limits the amount of electricity that Susquehanna Steam Electric Station can provide to AWS' data center to 300 MW until federal regulators decide otherwise. 

Travis Fisher, director of energy and environmental policy studies at the Cato Institute, tells Reason that FERC made the right decision. As Fisher and other opponents of the measure see it, approving the request would have allowed AWS to draw more electricity from the grid without paying for it. This could incentivize more co-located facilities to do the same. 

Co-located facilities have received support from some utilities and industry experts who contend that they can bring generation to large-load customers, such as data centers, more quickly than through the standard regulatory process. And, because additional transmission doesn't need to be built—the cost of which gets passed on to consumers through higher rates—co-location facilities can lead to cost savings for ratepayers. 

FERC's decision will not likely impact big tech's interest in nuclear power to meet the energy needs of data centers. "The power-hungry demand from big tech is still there and likely growing. FERC's decision narrows the contractual options slightly, but even co-location is still on the table if co-located loads are willing to pay for network transmission service," Fisher says. 

While co-locating facilities can be an innovative solution to expedite new generation, the real issue that needs to be addressed is reforming the country's burdensome permitting process, Kent Chandler, a resident senior fellow in energy and environmental policy at the R Street Institute, tells Reason. 

The interconnection queue, which is the backlog of energy projects that are seeking approval to connect to the grid, has increased "eight-fold over the last decade, and is now more than twice the total installed capacity of the existing U.S. power plant fleet," according to the Lawrence Berkeley National Laboratory. 

Developers also face a rigmarole of state and federal environmental reviews, restrictive regulations, and NIMBYism that make it nearly impossible to build projects on time and within budget. For instance, the 550-mile SunZia transmission project, first proposed in 2006, only broke ground last year and is expected to start commercial operation in 2025.  

A second Trump administration, which will likely strike down the Environmental Protection Agency's greenhouse gas rule for power plants and roll back parts of the Inflation Reduction Act "will improve grid reliability, make wholesale markets more efficient, and keep costs in check for consumers, all of which will make FERC's job easier," says Fisher. 

Still, absent a comprehensive permitting reform bill that shrinks the role of the federal government, developers in the U.S. will be unable to rapidly build out power generation to meet future demand."

A Washington State Revolt Against the Gas-Stove Grabbers

Initiative 2066 would preserve the right to use natural gas against an errant electrification plan.

By Megan K. Jacobson of The WSJ. Excerpts:

"Last year the Building Code Council amended the state energy code to make it prohibitively costly to install gas appliances in new buildings. In March the Legislature passed a law allowing the state’s largest natural-gas and electricity utility, Puget Sound Energy, to pass the costs of going green onto consumers and mandating the utility files a plan “to achieve all cost-effective electrification of end uses currently served by natural gas.”"

"Anthony Anton, CEO of the hospitality association, [the Washington Hospitality Association] says 84% of the restaurateurs he represents rely on natural gas. Remodeling to go electric is a “massive cost at a time where operators just can’t afford it,” he says. Some say the quality of their product would suffer, as some cooking methods, such as stir-frying, are difficult to perform on lower-heat electrical stoves. Most of the association’s members are very small businesses with substantial debt from Covid lockdowns.

The building association [the Building Industry Association of Washington] worries the new energy code will raise the state’s already high housing costs, locking out potential buyers. The code requires that new buildings meet a certain environmental “score.” Without the points from an electric heat pump, a builder will have to make up the difference with other green measures that run between $15,000 and $20,000 in a single-family home. “Every time they raise the price $1,000, it prices out another 500 Washington families,” says Greg Lane, the association’s executive vice president."

"Everything from a haircut to a ballgame would become more expensive as the price of electricity rises. Climate advocates argue that Washingtonians will recoup their costs over time thanks to efficiency gains. But a 2021 report from Home Innovation Labs estimates that recovering the cost of a heat-pump installation could take 47 to 49 years. It’s worse for existing gas customers. The Building Industry Association of Washington estimates that switching from natural gas to electricity in a single-family home would cost as much as $70,000. Heat pumps also tend to fail in the sort of frigid weather that hits rural Washington in winter."

Ford Motor’s EV October Surprise

Auto workers could lose $5,000 from EV losses. Thanks, Shawn Fain.

WSJ editorial. 

"Talk about an October surprise for Michigan auto workers. Ford Motor Co. on Thursday said it will idle production of its F-150 Lightning electric truck in Dearborn from mid-November through the end of the year.

Ford’s production stoppage follows a string of ominous announcements, starting in October 2023 when it announced plans to lay off about 700 workers who build the Lightning. In the spring Ford said it would eliminate two of three work crews at the Dearborn plant. In August it scrapped a planned electric SUV.

“We continue to adjust production for an optimal mix of sales growth and profitability,” Ford said Thursday. As any business should. Ford’s EV sales have lagged projections despite steep price cuts. Blame in part a market glut caused by government EV mandates.

Ford has sold a mere 22,807 Lightnings so far this year—a far cry from the 180,000 the Dearborn factory was originally supposed to produce. The EV lobby and its friends in the press fawned over the Lightning when it debuted two years ago. The Lightning supposedly signaled that EVs had finally gone mainstream. Not quite.

Chief Financial Officer John Lawler this spring explained that battery advances are needed for mass adoption. “The bigger the vehicle, the bigger the battery. And the battery is the most expensive thing in the vehicle. And then the bigger the battery, the more weight. The more battery you need, the less efficient the vehicle is,” he said. “So the costs just spiral out of control.”

Ford’s EV division has lost $3.7 billion during the first three quarters of this year—about $55,000 per EV—and expects $5 billion to $5.5 billion in losses this year. Under the UAW contract, workers earn a $1,000 bonus for every $1 billion in company profit. The EV losses could result in $5,000 in reduced pay for Ford workers.

They can thank United Auto Workers boss Shawn Fain for backing the Biden Administration’s force-fed EV transition. Stellantis and GM have also reduced shifts and laid off thousands of workers who make internal-combustion engines. Yet Kamala Harris and Michigan Democratic Rep. Elissa Slotkin, who is running for Senate, keep saying EVs will be fantastic for auto workers.

One reason the election polls have narrowed in Michigan is that auto workers watching the EV transition from the front passenger seat don’t believe them."

Gavin Newsom Wants a Climate Bailout

The California Governor has a revelation about rising electric rates

WSJ editorial. 

"Tuesday’s election appears to have turned on an LED bulb switch in Sacramento. Lo, California Gov. Gavin Newsom has discovered that his state’s high electric rates are hurting Democrats and now—get this—he wants folks in Waukesha, Wis., to pay for his state’s climate folly.

Electric rates in California have risen on average by 57% in the last five years, more than twice as much as nationwide. Enter Mr. Newsom, who on Wednesday issued an executive order to ensure “electric service remains affordable, reliable, and safe for all Californians during our clean energy transition.” Electricity now is neither reliable nor affordable.

It’s nice of Mr. Newsom to concede in his order a point we’ve made for years: “Californians’ electric rate increases have been driven largely by the cost of some programs added over time, such as the subsidy provided through the legacy Net Energy Metering program for rooftop solar photovoltaic systems.”

California’s net-metering program pays utility customers with rooftop solar panels for excess power they generate and remit to the grid at retail rates, which are two to three times as high as the wholesale cost of power. The average utility customer without rooftop solar pays 10% to 20% of his electric bill to subsidize rooftop solar customers.

Mr. Newsom also singles out wildfire mitigation as a cost-driver. But other Western states must protect their grids from the same danger [wildfire], and their electric rates are less than half of the Golden State’s. What’s the matter with California? Answer: Its aggressive renewables mandate, which requires utilities to procure solar and battery power at higher cost.

California’s cap-and-trade program also requires natural gas-fired plants to pay for CO2 emissions permits. The state Public Utilities Commission (PUC) says the program raises electric rates, though customers receive biannual “climate credits” on their bills to offset some of the program’s cost—in April (when taxes are due) and October (before elections).

The PUC says the credit “helps to offset [rate] increases while preserving the incentive for customers to conserve energy and reduce GHG emissions.” In other words, the purpose of cap and trade is to raise energy prices to force people to use less energy.

Mr. Newsom now wants his energy commission to identify programs and regulations “that may be unduly adding to rates, for which the electricity system benefits may not be justified by the costs.” This applies to all of the state’s climate mandates and programs.

Unwilling to renounce climate religion, he directs his regulators “to pursue any federal funding available to help lower electricity costs for Californians.” That sounds like he wants people in states with more sensible energy policies to subsidize progressive lunacy. That’s what the Biden Federal Energy Regulatory Commission is trying to do via a regulatory back door.

It’s possible Mr. Newsom could get a job in a Harris Administration. Americans stung by surging electric rates these past few years, look out. It can always get worse."

Climate Coercion Meets Washington State Voters

Two ballot measures would roll back rules that raise energy prices

WSJ editorial. 

"Progressive climate dreams tend to crash and burn when voters are confronted with their real costs. That collision is playing out in Washington state this year in a pair of ballot measures that would repeal extreme climate policies.

Prop. 2066 would strike down large parts of rules designed to cripple natural-gas use by consumers. The first rule by the state Building Code Council in 2023 made it cost-prohibitive to put natural-gas appliances in new buildings. The Building Industry Association of Washington says the rule will raise the cost of a single-family home with gas appliances by $15,000-$20,000.

The ballot measure would also push back against a March law that lets Washington’s largest natural gas and electricity provider, Puget Sound Energy (PSE), shift the costs of meeting the state’s climate goals onto consumers. It also mandated that PSE by Jan. 1, 2027 file a plan to “achieve all cost-effective electrification of end uses currently served by natural gas.”

Both climate measures reveal the animus of the left to any fossil fuels, even natural gas that is reducing CO2 emissions as it replaces coal. Washington state contributes a mere 1.5% of all U.S. emissions, and the rules would have no effect on the climate.

But they would punish Washington residents already hurt by rising prices. Prop. 2066 attracted the second most signatures of any initiative petition in state history. An October poll by Cascade PBS and Elway Research found 51% of registered voters supported the initiative while 28% opposed it.

The second ballot initiative, Prop. 2117, would repeal the state’s carbon credit system and stop state agencies from implementing future cap-and-trade programs. Implemented in January 2023, the current system aims to reduce greenhouse gas emissions on a radical schedule that requires a 95% cut below 1990 levels by 2050. Businesses that emit more than 25,000 metric tons of carbon a year are covered. They can purchase a diminishing supply of credits in quarterly auctions—the most recent of which had a price of $29.88 per credit.

The cap-and-trade auctions provided a $2 billion windfall for politicians, which explains why opponents of Prop. 2117 have poured more than $16 million into fighting it. But as in California, cap-and-trade is raising energy costs for consumers. In January the Association of Washington Businesses estimated that the program has raised the price of gasoline by $0.45 a gallon. Average Washington gas prices are the fourth highest in the nation at $4.05 a gallon.

Supporters of Prop. 2117 are being greatly outspent, and the Cascade PBS/Elway poll found it trailing 46%-31%. But the rest were undecided, and Washington voters have rejected costly climate measures in the past. They shot down ballot initiatives to create a carbon tax in 2016and an emissions fee in 2018.

Lawmakers in Olympia are living in an energy fantasy land in which they pretend they can bend the world’s climate at little cost. They’re deceiving the public on both counts. The state’s energy use is likely to double in 20 years, and that probably underestimates demand from artificial intelligence. Voters can send a message about reality by passing both ballot measures."

America Can’t Do Without Fracking

Shale is crucial to the U.S. economy, and it allows Washington to buttress our allies across the globe

By Daniel Yergin. Excerpts:

"the first two decades of this century . . . The U.S. was then the world’s largest importer of oil. Today it is energy-independent with, S&P Global estimates, more than 70% of its oil and more than 80% of its natural gas produced through fracking."

"For more than four decades every president aspired to it, but their goal seemed unattainable."

"In recent years, however, America has achieved energy independence on a net basis. U.S. output is closing in on 13.5 million barrels of crude oil a day, exceeding that of perennial big producers Saudi Arabia and Russia by several million barrels per day. Add what are called natural-gas liquids, and the U.S. produces around 20 million barrels per day.

Textbooks used to hold that commercial production of shale was impossible. Innovation and investment over decades have proved otherwise."

"battery-powered and plug-in hybrid electric vehicles will account for about 2% of the U.S. on-road light-vehicle fleet in 2024. If fracking were banned, the U.S. would need to import extraordinary amounts of oil to fuel our gasoline- and diesel-powered cars. In 2008, before shale-oil production began in earnest, the net bill for importing petroleum was $388 billion—more than 40% of the total merchandise trade deficit. Today the same bill, by contrast, is virtually nothing."

"If the U.S. were to start importing again, the price of oil would doubtless rise, as we would be forced to compete for supplies with countries such as China"

"The U.S. also exports a large amount of liquefied natural gas, mostly produced from shale. Without it, LNG’s positive effect on the trade balance would disappear too."

"In previous decades, such upheavals as Ukraine’s war against Russia and Israel’s war with Iranian proxies would have spiked global prices. In recent years the scale of U.S. production has helped offset any such surges." 

The robustness of coal?

From Tyler Cowen.

"Coal consumption in 2030 is now estimated 6% higher than only a year ago. That may sound small, but it amounts to adding the equivalent of the consumption of Japan, the world’s fourth-largest coal burner. By 2030, the IEA now believes coal consumption will remain higher than it was back in 2010…

One notable statistic: Two-thirds of the total increase in energy demand in 2023 was met by fossil fuels, according to the IEA.

Here is more from Javier Blas at Bloomberg.  Via Nicanor."

Feds Admit Fossil Fuels Are Still the Cheapest

A Department of Energy analysis found natural gas is the cheapest residential energy source on the market

By Jeff Luse of Reason. 

"The International Energy Agency (IEA) has released its 2024 World Energy Outlook, an annual market forecast regarded as the authoritative standard for global energy analysis. This year's report predicts that fossil fuel demand will peak by 2030, that clean energy sources will generate more than half of the world's energy by the end of the decade, and that global energy prices will decline as traditional energy use phases out.

As many cheered the IEA's report, the U.S. Department of Energy (DOE) quickly tempered expectations with its own study identifying natural gas as the cheapest residential energy source available. Electricity (energy derived from an electrical current rather than a pipeline) was the most expensive, costing 3.5 times more than natural gas. In real-world terms, households that heat their homes with electricity this winter will pay 75 percent more than those that use natural gas.

The DOE's report tells an inconvenient truth that many governments, including the Biden administration, want to ignore: Fossil fuels are cheap, abundant, and critical to meeting the world's energy needs. Restricting access to these sources will increase costs for consumers, stifle global economic development, and do little to curb greenhouse gas emissions.

Fossil fuels meet more than 80 percent of global energy demand, a dominant position that they will likely hold as emerging economies become more industrialized. As people become more prosperous, they will be able to transition away from heating and cooking with dung, which is estimated to prematurely kill 3.7 million people per year through indoor air pollution. Higher levels of wealth allow societies to focus on basic needs, such as sanitation and infrastructure.

Forcing countries to use more expensive forms of energy will keep poor nations poor and hurt industrialized ones too.

In the U.S., consumers are beginning to feel the impacts of state and federal policies that favor certain technologies over cost and reliability. In July, PJM Interconnection, the organization that regulates electricity in the Midwest and Mid-Atlantic regions, announced it was increasing its rates by more than 800 percent. Dwindling supply is driving these cost increases: Baseload power sources have been forced to close because of state-implemented green energy mandates and steep demand forecasts from electric vehicles and data centers.

The U.S. electric grid is not the only one experiencing supply shortfalls. The European Union (E.U.) is expecting total electricity consumption to rise by 60 percent through 2030. To meet demand, the E.U. says it needs to invest 584 billion euros ($632 billion) by the end of the decade. The IEA, meanwhile, projects global consumption will increase by as much as 34 percent. Without access to abundant and affordable energy, consumers will be left paying more for less reliable electricity.

The steep cost of government preferences for renewable energy sources will come with negligible environmental benefits. European countries whose penchant for solar and wind led to the forced closure of nuclear power plants are increasingly turning to coal to provide backup generation when the sun isn't shining and wind isn't blowing. 

While the IEA's utopian world may seem nice, the DOE's report shows that natural gas is still the most affordable energy source available. A rushed transition to renewable sources will increase energy costs while hurting grid reliability and economic mobility."

Harris Stops Talking About Climate Change

As the high costs of green policies hit, it’s becoming a lose-lose issue for politicians of the left

By Bjorn Lomborg. Excerpts:

"It’d be one thing to ask for sacrifices that could save the planet. But even at a whopping official price tag of $369 billion over 10 years, the Inflation Reduction Act’s climate measures as written were likely to lower the projected global temperature in 2100 by less than 0.03 degree Fahrenheit."

"The cost has rapidly ballooned to somewhere north of $3 trillion over 30 to 40 years, even as emission cuts have been slower and smaller than predicted. No wonder Ms. Harris isn’t trumpeting it."

"The truth of the matter is that nothing Ms. Harris does to cut carbon can stop climate change. It’s developing nations that are driving emissions in this century. Even if the U.S. achieved net-zero carbon emissions overnight and stayed that way for the rest of the century—basically destroying its economy and much of American quality of life—the 2100 projected global temperature would only drop 0.3 degree Fahrenheit based on the United Nations’ climate model."

Democrats Make Elon Musk’s Pay Day

‘Regulatory credits’ boost Tesla profit and its CEO’s wealth.

WSJ editorial.

"Elon Musk on Thursday became billions of dollars richer after a strong earnings report caused Tesla Motors’ stock to pop. Congratulations to Democrats, whose green-energy subsidies and mandates are enriching the man they hate most after Donald Trump.

Tesla beat forecasts with a $2.2 billion profit in the third quarter, a 17% increase from a year earlier. Look under the hood, and you’ll find subsidies are driving its profits. Auto sales increased by a mere 1% compared to the same quarter last year while “regulatory credits” grew 33%. Such credits accounted for a third of its profit.

If auto makers fail to meet California’s electric-vehicle quotas or the Environmental Protection Agency’s greenhouse gas emissions standards, they must buy compliance credits from manufacturers with a surplus—namely, Tesla. More auto makers are struggling to meet these EV mandates amid slowing demand and an EV market glut.

They are scaling back EV production plans and instead buying credits from Tesla because this is less expensive than making cars at a hefty loss. Tesla says it is booking more regulatory credit sales “as other automobile manufacturers scale back on their battery electric vehicle plans.” Their EV woes are Tesla’s gain.

As EV mandates ratchet up—California requires that they [EVs] make up 68% of auto maker sales by 2030—the value of Tesla’s regulatory credits will increase. Could this be one reason Tesla is trading at two to three times the forward earnings multiple of high-flying tech stocks? Investors may be betting on rising government mandates and subsidies.

Tesla also benefits from the Inflation Reduction Act’s $7,500 per EV tax credit, which we calculate amounted to about $1.25 billion this past quarter, and consumer EV rebates in some states. Tesla says it was owed $315 million in rebates at the end of the last quarter. And don’t forget the IRA’s manufacturing tax credits for solar panels and batteries, which is Tesla’s fastest-growing and most profitable business.

These credits can offset more than a third of the cost of producing batteries for EVs and power storage units. California and other states are using Tesla batteries to back up their grids as they strive to meet climate mandates. Tesla says IRA manufacturing credits boosted its energy generation and storage margins and that it expects this business to more than double this year.

It’s amusing to hear Democrats now howl that Mr. Musk is benefiting from their government largesse. Here’s a novel idea: Scrap all climate mandates and subsidies. That way Tesla can succeed or fail on its own merit."

Cuba Can’t Keep the Lights On

The socialist model is beset by constant food and energy shortages

WSJ editorial. 

"In the socialist and healthcare paradise that is Cuba, the regime can’t keep the lights on. Another failure of the electricity grid struck Saturday evening and continued into Sunday, blacking out much of the island including the capital of Havana.

The country has been enduring weeks of periodic blackouts that can last for 10 to 20 hours at a time, as the Communist government struggles to provide even basic services. The regime blames deteriorating equipment, fuel shortages and rising electricity demand. It also blames the U.S. trade embargo, as it always does for every ill on the island.

But nothing stops Cuba from importing the parts it needs from the rest of the world. The real problem is a regime that can’t make much of anything work except exporting its people. Russia and Venezuela have reduced fuel sales to the island, which can’t pay its bills. Shortages of food and medicine are rampant.

Cuba’s dictatorship is a human tragedy and its people deserve much better. But they won’t get it as long as Communists run the place and enrich themselves at the expense of the people they impoverish."

Washington state's cap-and-invest plan caused higher gas prices

See Gas Station Stunts and Tech Billionaires: The High-Stakes Battle Over Washington’s Climate Law: The move to repeal the state’s cap-and-invest plan is being watched by other states considering similar emissions reduction efforts by By H. Claire Brown of The WSJ. Excerpts:

"Washington gas prices hovering at around $3.91 a gallon"

"Under the law, the state auctions off greenhouse gas emissions allowances to polluting companies. The plan has generated more than $2 billion in revenue for the state, but the rollout also coincided with higher-than-expected increases in prices at the pump, leading to concerns about its impact on household wallets.

Estimates of the impact of the state law on gas prices vary, but some put it as high as 60 cents a gallon. Washington gas prices routinely exceed the U.S. average, which recently was $3.17 a gallon."

Washington’s cap-and-invest law applies to businesses that operate in the state and are responsible for the equivalent of at least 25,000 tons of carbon dioxide a year, such as fuel suppliers and utilities. It covers an estimated 75% of statewide emissions.

Each quarter, the state offers a set number of emissions allowances through an auction system. Companies bid for allowances, which give them the right to emit a certain amount of greenhouse gas. Over time, the state will auction off fewer allowances each quarter, and by 2050, the idea is that the program will reduce emissions by 95%.

Cap-and-invest programs are designed to ensure that businesses reduce carbon where it is most efficient, and the auction system helps set a market price for carbon. In 2023, the prices landed between $48.50 and $63.03. Companies that can slash emissions for less are motivated to do so, and others may opt to purchase allowances rather than adjust their operations. The allowances can be bought and sold on a secondary market.

The state has used the proceeds from the auctions on decarbonization initiatives like public transportation infrastructure.

Before the law rolled out, the state’s Department of Ecology estimated it might boost gas prices about 4 to 12 cents a gallon. Instead, they went up by 20 to 60 cents. Economic analyses attempting to quantify exactly how much of this increase was the result of the cap-and-invest law have varied widely, in part because the names of companies participating in the cap-and-invest program are confidential, so independent analyses are difficult to execute."

Biden’s Missing Electric-Vehicle Chargers

Union and equity rules bog down the $5 billion program

By Judge Glock. He is director of research at the Manhattan Institute.

"regulations and lavish handouts to favored groups have turned the EV charger program into another ineffective part of Mr. Biden’s equity and social-services agenda."

"Congress [in 2021] provided $5 billion over five years to fund a national network of EV charging ports. Almost three years later, the program has created 69 ports"

"The delays are due in part to regulations encouraging unionization, as well as the administration’s goal that at least 40% of clean-energy investments benefit “disadvantaged communities,” the areas that need EV chargers the least."

"To receive full subsidies, companies must abide by prevailing-wage and apprenticeship standards. But the IRS says companies can avoid penalties for violating these standards if they sign “project labor agreements,” which favor union workers and include “monitoring and administration by union officials.”"

"Last month the government proposed new accessibility standards for EV charging stations, requiring special communications features and lighter cables. The government estimates the regulation would cost almost $1 billion over the next seven years."

"This year, the Biden administration announced another $1.3 billion in grants for alternative fuel stations"

"Grant applicants are evaluated on whether they use project labor agreements, whether they use a “Climate and Economic Justice Screening Tool,” and whether they give priority to “minority-owned businesses” for contracts and “people of color” for hiring."  

"newly installed federally funded chargers must be made domestically."

SCOTUS Stumbles: EPA’s Power Plant Rule Is Inflicting Irreparable Harm

By Travis Fisher and Joshua Loucks of Cato.

"Last week, the Supreme Court issued an order that left many in disbelief. The Court denied several motions for stay (a legal pause) regarding the Environmental Protection Agency’s (EPA’s) Clean Power Plan (CPP) 2.0 rule after granting a stay of the original CPP in 2016 and elaborating on the Major Questions Doctrine in overturning the CPP on its merits in West Virginia v. EPA in 2022.

The EPA rule, which we call CPP 2.0 because it’s the second attempt at a CPP under section 111 of the Clean Air Act, hurts the reliability and affordability of electricity when both are already at risk. The EPA now requires existing coal and new natural gas power plants to significantly change their operations or shut them down entirely. CPP 2.0 is a costly and unlawful mandate for the unproven technology of carbon capture and sequestration/​storage (CCS).

The fate of CPP 2.0 will be the same when the Supreme Court reviews it on the merits—it will be overturned because it plainly violates the statute it cites as authority from Congress. But it will hurt many more Americans than it needs to because the Supreme Court took a narrow view of “irreparable harm.”

The irreparable harm ignored by the Supreme Court is that demand for electricity in the United States is growing again in exceptional ways (in part due to unforeseen growth in computing load), and CPP 2.0 is preventing economic growth—and possibly causing electricity shortages—by mandating impossible standards for existing and new electricity supplies.

The CPP 2.0 Mandate

In its most basic form, CPP 2.0 requires existing coal and new natural gas power plants to implement CCS on an unprecedented scale. For existing coal-fired power plants, CPP 2.0 requires the owners of any plant that might remain operational after 2039 to capture and store 90 percent of its carbon dioxide emissions by 2032. (Some less stringent options are available for coal plants that will be closed by 2032 or 2040.)

Likewise, the rule requires any new combined-cycle natural gas–fired power plants operating above “baseload” levels (at an annual capacity factor above 40 percent) to reduce their carbon emissions by 90 percent by 2032 by implementing CCS.

How did the EPA come up with this rule? Dating back to the 1970 Clean Air Act amendments, Congress authorized the EPA to issue nationally binding emissions standards for stationary sources like power plants through section 111 using proven technology as a baseline.

Specifically, EPA’s standards of performance under section 111 must be based on “the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.” (emphasis added)

In CPP 2.0, the EPA claimed CCS at a 90 percent capture rate had been adequately demonstrated, which is a patently false account of the facts on the ground. This is the key issue of statutory interpretation relevant to CPP 2.0, and we believe the rule will fail on EPA’s fundamental misreading of the statute and/​or its misreading of the facts in the record.

The short version of the merits argument is this: CCS depends on a mind-bogglingly large set of new infrastructure (rivaling the existing network of fossil fuel infrastructure itself), including CO2 pipelines to carry enormous amounts of CO2 from power plants to injection sites. Such infrastructure may be impossible to build and certainly has not been “adequately demonstrated.” For more detailed legal and technical arguments, see comments on the proposed rule.

The only power plant in the United States that captures anywhere near 90 percent of CO2 emissions is perhaps the Petra Nova plant in Texas, which has not operated continuously and does not technically sequester CO2 at all—it injects CO2 into oil wells in a process known as enhanced oil recovery. Another power plant often cited by proponents of CCS (and explicitly cited by the EPA) is the Boundary Dam project in Canada, which has consistently underperformed on its CCS goal of—you guessed it—90 percent.

Thus, EPA’s emissions standard is far too stringent because it is based on plants that are located near profitable CO2 injection and storage sites or are falling woefully short of the EPA’s goal. A rule mandating 90 percent CCS nationwide is therefore at odds with the part of the statute that says the “best system of emission reduction” must be “adequately demonstrated.”

CPP 2.0’s Irreparable Harm

The mandate to close existing coal plants and prevent the building of new “baseload” natural gas plants is a recipe for electricity shortages, skyrocketing electricity prices, or a mix of both. The lack of certainty regarding which set of rules a power plant owner is likely to face in the coming years is itself a deterrent to building or retaining needed supplies.

In practice, the much-needed new electricity supplies are likely to come from less efficient simple-cycle natural gas power plants—essentially methane-fueled jet engines—which will increase costs and preclude more efficient investments until CPP 2.0 is finally overturned.

At the wholesale level, prices will be set more often by these less efficient units with higher marginal costs, meaning wholesale electricity prices will be higher than necessary. Further, the US Energy Information Administration (EIA) estimates only 2.6 gigawatts of new natural gas–fired power plants will come online in 2024, while 3.8 GW will be retired.

Coal plant closures will also reduce power supplies. PJM Interconnection Inc., the largest electricity market in North America by revenue and volume, has issued stark warnings about the collision course we are on between growing demand and falling supply, stating that there is a “timing mismatch between resource retirements, load growth and the pace of new generation entry.” CPP 2.0 exacerbates such a mismatch because it would force the retirement of coal units, which produced 16 percent of the electricity in the United States last year.

To be clear, we don’t expect anyone at the EPA, the Supreme Court, or any government agency to accurately predict the timing and scale of Americans’ future electricity needs. Efforts to centrally plan electricity markets are likely to lead to supply shortages, increased costs, top-down rationing, and rolling blackouts. But that is precisely why CPP 2.0 is so harmful—it allows the EPA to be the national gatekeeper for new electricity supplies, which will have disastrous consequences.

The Court’s Mistake

In his statement about the denial of applications for stay, Justice Brett Kavanaugh argued that applicants “are unlikely to suffer irreparable harm before the Court of Appeals for the DC Circuit decides the merits” because “applicants need not start compliance work until June 2025.” Unfortunately, that is untrue. For would-be builders of new natural gas power plants, the irreparable harm likely began in May 2023 (the date of the proposed rule) and was cemented in the final version of CPP 2.0, which featured an effective date of July 8, 2024.

While Justice Kavanaugh’s approach may make sense in the legal compliance world, it ignores economic decisions that predate compliance. As Frederic Bastiat might say, the court focused on what is seen—the compliance measures undertaken by plants that are already built—and failed to recognize the unseen harms. We cannot see, for example, the business activities or consumer savings that might have occurred if the Supreme Court had granted the motions for stay. In other words, CPP 2.0 is already causing irreparable harm because it’s preventing much-needed electricity supplies that would be built in its absence. (We note that Justice Clarence Thomas would have granted the applications for stay, and Justice Samuel Alito did not participate.)

PJM and other grid operators articulated this harm in their amicus brief, stating that the EPA has “failed to adequately consider the impact of premature retirements driven by the Rule’s compliance timelines.” They also highlighted how investments in the grid, particularly large power plants, are based on “the expected revenues associated with continuing operation of the unit. Unit owners may decide to retire units early rather than incur additional expense and risk.” Premature power plant closures—and the stalling of new supplies in an era of demand growth—are the irreparable harm the Court failed to see.

Conclusion

Supreme Court justices clearly understand the law. However, the order in this case demonstrated that many of them do not understand market processes and fall into the knowledge problem trap of attempting to assume the unknowable. By denying the motions to stay CPP 2.0, the Supreme Court squandered a perfect opportunity to limit executive branch overreach in the new post-Chevron era and protect millions of Americans from government-induced harm."

Gavin Newsom Raises Gas Prices Again

A new law and tighter rules may drive refiners out of California

WSJ editorial. 

"Is California Gov. Gavin Newsom trying to raise gasoline prices? It’s hard not to wonder after he signed legislation this week that does precisely that. Meantime, his climate regulators next month plan to raise prices even more.

“You’re seeing gas prices drop across the rest of the country, but spike in California,” Mr. Newsom declared on Monday as he signed a bill imposing onerous new mandates on refineries. Oil companies “buy all these ads saying somehow it’s California’s fault. They’ve been manipulating you. They’ve been lying to you.” 

The truth is that California’s gasoline prices are on average $1.47 a gallon higher than the national average owing to its gas taxes—the highest in the country—and environmental regulations, including cap-and-trade and low-carbon fuel standard. High operating costs have spurred seven California refineries to cease production over the last decade. On Thursday, Phillips 66 announced plans to cease operations at its Los Angeles-area refinery, which constitutes about 8% of the state’s refining capacity.

This has contributed to a tight market and price spikes whenever a refinery has problems. California’s new law will require refiners to maintain larger stockpiles of fuel, supposedly to mitigate supply shortages. But even Mr. Newsom’s energy commission warns that the mandate could “increase average prices.”

That’s because refiners will have to spend hundreds of millions of dollars building and maintaining more inventory, which they will have to replenish continuously since gasoline has a shelf life of only a few months. Refineries already maintain about two weeks of supply. Some may shut down to avoid the new and costly burden.

Refinery union leaders warn that the mandate will harm their workers. “Profit employs our members and allows them to feed their families,” they wrote to legislative leaders last week. “It should not be deemed villainous to operate legal and needed industries that turn a profit for shareholders, especially when they employ hundreds of thousands of Californians and contribute billions of dollars in tax revenue.”

Mr. Newsom disagrees. His goal is to drive oil and gas companies out of business, or at least out of the state. California’s oil production has declined about 35% since he entered office in January 2019 and by half over the last decade. Last month he signed a bill letting localities block new wells.

Now the California Air Resources Board (CARB) is preparing to ratchet up the state’s low-carbon fuel standard, which requires refiners to blend increasing amounts of renewable fuels into diesel and gasoline. CARB last September projected that the stricter standard would increase gas prices by 47 cents a gallon next year.

Danny Cullenward of the University of Pennsylvania’s Kleinman Center for Energy Policy last week estimated prices could climb 65 cents a gallon in the near term and by nearly $1.50 by 2035. Stanford University researchers forecast that the combination of the low-carbon fuel standard and cap-and-trade program would raise prices by $1.50 a gallon by 2030.

The kicker is that CARB plans to vote on the rule three days after the election. That’s politically convenient timing for Democrats in close-fought House and legislative races where Republicans have campaigned against the state’s high gasoline prices. While Mr. Newsom vilifies Big Oil, voters are starting to figure out that the real prices villains are in Sacramento."

San Francisco vs. the Biden EPA

The city of good liberals asks the Supreme Court for regulatory relief

WSJ editorial. 

"Well, well. Look who’s asking the Supreme Court for help against overreaching regulators. On Wednesday the Justices will consider whether the Environmental Protection Agency can punish the city of San Francisco for dirty water in the Pacific Ocean.

City and County of San Francisco v. EPAinvolves a permitting scheme under the 1972 Clean Water Act. The law requires localities and businesses to obtain permits to discharge pollutants into waterways.

San Francisco operates a sewage and stormwater treatment system that experiences overflows during heavy storms, resulting in effluent discharges into the Pacific. The EPA in 2019 imposed conditions on its permits that hold the city’s system responsible if its discharges “cause or contribute” to water in the Pacific that violates federal and state standards.

EPA and the environmental group San Francisco Baykeeper then sued San Francisco for sewage discharges since 2013 that they say contributed to dirty water in the Pacific. Each permit violation is punishable with fines of more than $66,000 a day. San Francisco’s potential liability runs into the hundreds of millions.

San Francisco says it’s unfair to hold it responsible for the ocean pollution since there are hundreds of other culprits. The city adds that the Clean Water Act lets EPA specify limits only on discharges or technology to control pollution from so-called point sources.

EPA’s generic permit conditions makes compliance with the law “elusive, because a waterbody’s ability to meet water quality standards at any time depends on pollutants that all sources—not just San Francisco—contribute,” San Francisco says in its brief. “The City consequently lacks advanced notice of how much it must control its discharges.”

While seeking enormous penalties, EPA is leaving the city “in the dark about what it allegedly did wrong,” San Francisco says. In short, EPA has set a moving target that the city has no way of meeting, short of shutting down its sewage system.

EPA cites language in the Clean Water Act that lets it impose permit conditions that set “effluent limitations” and “any more stringent limitation, including those necessary to meet water quality standards.” But San Francisco says such unbridled regulatory authority conflicts “with the text, structure, and historical context” of the Clean Water Act.

That law’s predecessor, the Federal Water Pollution Control Act, notably applied the same permitting approach as the EPA is trying to apply now. This resulted in endless litigation that failed to improve water quality. Congress repealed the law and replaced it with the Clean Water Act’s permitting scheme that directs the EPA to set specific limits on discharges.

Citing the Court’s landmark Loper Bright Enterprises decision last term, San Francisco parses the text of the Clean Water Act to rebut the EPA. Sundry industry groups warn in friend-of-the-court briefs supporting San Francisco that letting the EPA’s expansive interpretation prevail would create enormous uncertainty that harms business.

You have to smile at San Francisco’s good liberals howling about regulators and invoking the Loper Bright opinion that most of them derided. Maybe they’ll tell the Senate Democrats who want to end independent judicial review."

A recent surge in global warming is not detectable yet

By Claudie Beaulieu, Colin Gallagher, Rebecca Killick and Robert Lund & Xueheng Shi. 

From https://www.nature.com/articles/s43247-024-01711-1.

Communications Earth & Environment volume 5, Article number: 576 (2024).

"Abstract

The global mean surface temperature is widely studied to monitor climate change. A current debate centers around whether there has been a recent (post-1970s) surge/acceleration in the warming rate. Here we investigate whether an acceleration in the warming rate is detectable from a statistical perspective. We use changepoint models, which are statistical techniques specifically designed for identifying structural changes in time series. Four global mean surface temperature records over 1850–2023 are scrutinized within. Our results show limited evidence for a warming surge; in most surface temperature time series, no change in the warming rate beyond the 1970s is detected despite the breaking record temperatures observed in 2023. As such, we estimate the minimum changes in the warming trend required for a surge to be detectable. Across all datasets, an increase of at least 55% is needed for a warming surge to be detectable at the present time."

US per-capita CO₂ emissions have fallen below WWI levels

Posted on Twitter by Alec Stapp. He is a Co-founder of the think tank Institute for Progress.

To be clear, this is not because we outsourced our emissions to China. Consumption and production based measures of emissions show similar results: