President Biden's aggressive goal to completely decarbonize the power sector in the next 15 years brings him directly in conflict with natural gas, the resource that has largely driven U.S. emissions reductions to date.
Biden faces a remarkably different landscape than the Obama administration when it unveiled the first-ever carbon controls for power plants, known as the Clean Power Plan, in 2015.
Coal power has been on a steady decline, replaced largely by natural gas, which is cheaper. Renewable energy costs have dropped dramatically. The result has seen the power sector reducing emissions on par with the trajectory the Clean Power Plan, which was paused by the Supreme Court and ultimately scrapped by the Trump administration, would have required.
In addition, many states have put in place their own policies to drive toward 100% clean energy or higher percentages of renewable power. Utilities that once vigorously fought the Obama administration over emissions mandates have now set individual targets to reach net-zero emissions by midcentury.
Nonetheless, as the power sector has become cleaner, Biden has moved the goalposts to target carbon-free power by 2035, a more aggressive timeline than most states and utilities. Biden has also ratcheted up the stringency of the target to eliminate carbon entirely, rather than simply striving for a cleaner grid.
Biden setting the goal at zero-carbon "means we can't continue to just think about the technologies that we know about already, i.e. gas, wind, and solar and their interaction," said Tom Rowlands-Rees, Bloomberg NEF’s head of research for North America. "We have to think of what are the new technologies that will displace gas completely."
The low-hanging fruit for utilities — retiring coal-fired power and replacing it with cheap gas — has largely been picked. Decarbonizing or eliminating that natural gas will be a tougher challenge for Biden.
Environmentalists, though, say the Biden administration can issue more aggressive emissions mandates for the power sector because they aren't fighting inertia from much of the industry, as the Obama administration was. Many utilities already have their own plans to slash nearly all of their emissions by retiring more of their coal units and bringing on more renewables over the next couple of decades.
“There’s a big opportunity for the Biden administration, probably more so than there ever was for even the Obama administration just because the electricity sector is getting cleaner on its own,” said Kathryne Cleary, a senior research associate at Resources for the Future.
Lower renewable energy prices, too, open the door for the Environmental Protection Agency, which sets its emissions standards predominantly based on whether there are appropriate and economically available compliance technologies, said Nat Kreamer, CEO of Advanced Energy Economy.
“What has changed over time is the costs of substitutes have come way down,” he said, referring to wind, solar, energy efficiency, and battery storage. “My fundamental perspective is that regulations can be tighter on emissions because there are economically viable substitutes that are cheaper and cleaner in the marketplace.”
Kreamer and others say if Biden is going to do the hard work of lowering natural gas emissions, he should start with EPA regulations that put controls on leaking methane, a potent greenhouse gas, from the sector. Biden, in his climate executive order, has already directed the EPA to explore options to do so.
“If the target is decarbonization, unabated gas would not be consistent with that system,” said Conrad Schneider, advocacy director for the Clean Air Task Force.
Where the Obama EPA had been looking to encourage utilities to switch from coal to cleaner-burning natural gas, the Biden administration will have to dampen the growth of natural gas to avoid adding more emitting resources to the electricity grid and to avoid investments in facilities that would ultimately have to be shuttered.
“We can’t get rid of gas overnight, but the sector needs to start planning for its decline,” said Eric Gimon, a senior fellow at the research firm Energy Innovation.
“I forecast a very diminished role for gas as an energy resource over the next 10 to 15 years, with the remaining fleet mostly kept on for capacity and reliability purposes,” he added. “But eventually cleaner options will displace even that.”
Gimon, Rowlands-Rees of BNEF, and Kreamer of Advanced Energy Economy all said it is possible to reach around 80% to 90% renewables and battery storage without experiencing risks to grid reliability.
That last 10% to 20% would need to be largely natural gas until it is replaced by technologies that aren't commercialized yet, such as carbon capture and storage, hydrogen, or advanced nuclear, to provide zero-carbon baseload power to balance out variable wind and solar.
Utilities, though, disagree. They have much more immediate concerns about grid reliability. They’re cautioning the Biden administration not to box out natural gas or existing nuclear power, both of which they see as vital to keeping the lights on and keeping electricity affordable.
“We still need to be able to use natural gas to achieve those clean energy targets,” said Brian Wolff, executive vice president of public policy and external affairs for the Edison Electric Institute, the major utility trade group, during a Feb. 10 briefing with Wall Street investors. He added gas can even help “accelerate” renewable energy deployment.
Coal industry groups, too, say there is still a role for their fuel source, despite its dwindling number of facilities.
“We certainly understand that the grid is going through a transition, but we believe that coal will be needed for the foreseeable future,” said Michelle Bloodworth, president and CEO of America’s Power, a trade group that represents coal-fired power.
Bloodworth said the power grid is likely to face reliability risks at much lower levels of renewable energy penetration. She pointed to a study released last week by the Midwest grid operator that she said identifies reliability risks looking at “scenarios of accelerating coal retirements with 30% renewables.”
Energy analysts, for their part, say the Biden administration shouldn’t bank on cheap natural gas continuing to push coal out of the power market.
Rowlands-Rees said his team at BNEF has modeled various future scenarios of the power sector, and when natural gas prices increase, it “gave a lifeline to coal” instead of leading to an acceleration of renewables. The scenario meant some coal plants became cheaper to dispatch for power than higher-priced gas plants, he said.
“This assumption that coal just closes because of cheap gas may or may not hold,” Rowlands-Rees said. “In which case, there would need to be policies to address coal as well.”
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