We are just one week away from the election. That means in one week, America's energy future could play out in two very different ways. In the following conversation -- a transcript of a discussion we had at last week's Solar Market Insight conference -- we're talking about the many complicated energy-related decisions the next administration will need to make.
If you're like a lot of Americans, you might not be thrilled with your choices. But despite what you think of the candidates, they couldn't be any different on energy policy.
On one hand, you have Donald Trump, who believes climate change is a hoax perpetrated by the Chinese, who has said numerous times that renewable energy does not work, and who intends try to scrap the Paris climate agreement and bring back the coal industry.
On the other hand, you have Hillary Clinton, who made climate a top priority at the State Department, who has put forward a series of ambitious targets on renewables, and who has signaled that she'll make climate change action a top priority as president.
How would these two very different candidates handle federal electricity policy, an area where change is occurring most rapidly?
A new report from experts at Harvard, the University of North Carolina, and Duke looks at the many important decisions the next president will influence over the next four years.
The authors looked at six areas, electricity regulation, climate policy, nuclear energy, shale gas oversight, economic development in communities where coal is declining, and government procurement. We use a few of those areas as a basis for the discussion.
This is an edited version of our live podcast at SMI 2016. The text has been modified for clarity. You can access un-edited videos of all our panel discussions at the event here.
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Stephen Lacey: Shayle, to you first. Presidents are either given too much credit for or blamed for the macroeconomic forces that shape this country. Looking forward, this paper argues that the next president will appoint people who will directly influence the energy industry, and will make decisions personally that will directly influence the energy industry. Do you believe that we're talking about a series of decisions that will fundamentally remake the electricity market -- and is that a presidential responsibility?
Shayle Kann: Or a federal responsibility, right?
Stephen Lacey: Federal responsibility.
Shayle Kann: We spend a lot of time talking about state-level issues. And in solar in particular, a lot of important decisions that get made are at the state level, whether it's at the public utilities commission or state legislatures. We don't talk as much about the federal government's role. But there's actually a lot that the federal government and the president, or the White House, will have to deal with. You mentioned appointments. There's two open seats at FERC that are going to have to get filled. I'm sure we'll talk about this, but FERC is going to have a bunch of decisions to make that are going to get increasingly complicated over the next couple of years. Those appointments are going to be big -- but also the nuclear regulatory commission.
Then there are big things that the federal government has to do on the Clean Power Plan for example, and what to do with implementation of the Paris climate accords. There's a lot, actually, at the federal level.
Stephen Lacey: Indeed. Julia, let's talk about the big one first -- the continuation of President Obama's climate policies. Do you see [Hillary Clinton] making decisions that will be a continuation of the Obama administration, or will she do something fundamentally different?
Julia Pyper: On the whole, it will be a continuation and a ramping up of its policies. On jobs, for instance, he had a transition plan for coal workers. It was $9 billion, and she has a $30 billion plan.
Some things will be tricky, like Keystone, that Obama didn't address or decided to rule against. There are still people pushing for that pipeline and the Dakota pipeline. That was a huge legacy issue for Obama. Where will Hillary Clinton fall on that, or Donald Trump? That'll really be one of the big determining factors of their legacy.
Stephen Lacey: Right, and that brings us to the thin line that President Obama has had to walk as a centrist on these issues. He's been under pressure from environmentalists on the left, to abandon some of these major fossil fuel projects, to cut oil and gas drilling on federal lands, to avoid approving LNG export facilities. The next president is going to have to deal with these issues.
Let's say that it's someone like Hillary Clinton. She is a centrist just like Obama. It's very clear that she doesn't believe that we can just get rid of fossil fuel infrastructure overnight. She always wanted to approve the Keystone Pipeline until it was politically prudent not to support the pipeline publicly. She's going to have -- assuming that Secretary Clinton is president here -- a lot of difficult decisions to make around whether to approve fossil fuel infrastructure. I agree with that point.
Shayle Kann: I'm not sure I agree with that characterization of her politics though. You called her a centrist. Especially on this issue, I'm not clear that she's actually a centrist. She might use a term like pragmatic, progressive, or something like that. She has actually a pretty long history as it pertains to climate and energy. The other thing that's been fun to see -- I feel guilty about reading it -- is all the WikiLeaks emails that are coming out from John Podesta's email, where there's a lot about climate change and energy.
Stephen Lacey: Let's not forget John Podesta came into the Obama transition team, and he made climate change a huge issue for the Obama administration, when he wasn't necessarily talking about it on the campaign trail.
Shayle Kann: I don't think he started that. Climate change was an early issue for Obama. You remember when Obama took office, right? There was some debate that the first big thing he was going to do might be cap-and-trade. The reason that he didn't ultimately do cap-and-trade, or at least one reason that he didn't, is he took on healthcare first, and spent all his political capital on that. But he's taken climate change seriously throughout.
Obviously, John Podesta is a great bridge there, because he cares a ton about climate change, and did come in toward the end of the administration, focused on that issue and then became Hillary Clinton's campaign chairman. I actually think she would like to do a lot on climate change, but she does take a pretty pragmatic approach to it. That was the issue in the primary campaign between her and Bernie Sanders and Martin O'Malley, who was talking about 100% renewables by 2050. She had to respond to that.
Julia Pyper: We have more material on her. Thinking of how she might lead if she is elected, her answer on fracking -- she gave this long answer in the debate against Bernie Sanders. 'I oppose it if the locality opposes it, if there is methane or contamination present, or if they don't tell us what the chemicals are.' Bernie Sanders was like, 'I just oppose it.' That shows the way she thinks.
Maybe it's good and inclusive. It could also end up being slow. We've got to wonder how that will play out. If you take that approach where you factor everyone in as opposed to having a hardline stance on it, I wonder if that will slow down the decision-making process on some of these big-ticket items.
Stephen Lacey: Right, let's just be clear. Banning fracking right away is insane. Getting rid of all nuclear plants like Bernie Sanders wants is insane. Opposing all fossil fuel infrastructure is insane. This is going to come from bold but incremental decisions -- not an outright banning of things like fossil fuels overnight and nuclear.
Shayle Kann: You can look at what she has done historically. You can look at what her campaign promises are, for whatever they're worth. They mean something in the context of an election season. She's made some pretty bold campaign promises, certainly as it pertains to solar. She has a plan that's relatively specific and detailed, that calls for getting to 140 gigawatts of solar capacity installed by 2020. It probably isn't going to happen, but that's an ambitious goal that's not crazy. She put thought into that.
Stephen Lacey: Is there merit to that goal, even though it's not achievable? How do you see that as a political messaging tool?
Shayle Kann: I wrote a piece on this when the plan came out. That's an absolutely perfect campaign goal, because it probably won't happen. To get that far we'd have to be installing 20+ gigawatts a year for the second half of this decade. We're not going to get there, but it's also not completely impossible.
Within that, remember, this was pre-ITC extension. She had a number of specific plans of how to get there -- one of which was extend the ITC, which obviously happened anyway. It was a great campaign goal. You don't want it too high so that it obviously doesn't make any sense, and you don't want to see it be something that's going to be achieved anyway.
Stephen Lacey: We're talking about some very high-level stuff here. I want to get into a few more details. First, let's assume we have a President Trump. Julia, what is the argument for bringing back the coal industry under his administration?
Julia Pyper: Donald Trump has said that he wants to save the coal industry or bring those jobs back. Wood Mackenzie recently had a blog post. Some of their analysts wrote about some of the ways he could do that, rolling back EPA's endangerment finding that underpins the Clean Power Plan, rolling back existing EPA coal regulations, undo renewable incentives, end the moratorium on federal coal leasing, and reduce federal severance, royalty, and tax rates.
Stephen Lacey: In theory, if you wanted to stymie this regulation, you'd take the EPA and slash staffing, and make sure that you don't have the resources to enforce the rule.
Shayle Kann: Right, but coal isn't losing strictly because of the EPA. It's losing on economics.
Stephen Lacey: Right. I think everyone agrees that you're not going to bring the coal industry back.
Julia Pyper: We should probably talk about Ken Bone, the coal worker who brought up the question [at the presidential debate]. The coal industry may not be coming back as robust as it once was. No matter who takes office, you have to bring those workers in. You have to engage them; you have to engage those communities. She's got a plan for that -- to replace that tax money that will no longer be coming from the coal industry and help the school districts, for instance. That's a level of detail you have to think about.
Shayle Kann: It is. That's a serious thing that we've got to deal with. There are real communities and a lot of workers who will be displaced or out of work as a result of regulation.
Stephen Lacey: Government training programs have sucked historically.
Shayle Kann: Exactly, and so it's easy to pay lip service to retrain all these workers and they're going to become solar installers or something like that, but right. The track record isn't great there. That's a tough challenge that the president absolutely is going to have to face.
Stephen Lacey: Yeah. Let's go into some details that are probably a little more relevant to the folks sitting in this audience. You mentioned the Federal Energy Regulatory Commission. Again, we have two Republican appointees.
Shayle Kann: We will have two. For anybody who doesn't know, FERC has five commissioners, and there will be two open seats in the next presidency. Those two seats, because of how FERC is built, they have to be filled with either Republicans or Independents. The other three are all Democrats.
Stephen Lacey: One of which I hope is Travis Kavulla, who was up onstage with me yesterday.
Shayle Kann: Right, we can all make a plug here. He would be great. In my view, FERC in the next administration is going to play a much bigger role in influencing the future of solar than it ever has in the past, in a couple of different ways. One, we've talked about the Public Utility Regulatory Policies Act a fair bit at this conference, but FERC is more likely than not going to take some action to change the rules around PURPA, and PURPA currently is the single largest source of new utility-scale solar contracts in the country. In the pipeline for 2017, PURPA is the biggest part of that pie. Anything that FERC does to change that will make a big difference for utility-scale solar. That's one thing.
Even more importantly than that, we have this challenge that we're going to be facing increasingly as time goes on, where the line between retail and wholesale electricity is getting increasingly blurry. What the states have jurisdiction over and what FERC has jurisdiction over is going to become less and less clear.
FERC is going to have deal with what it thinks it needs to be regulating. Examples of that, we can talk about Order 745, which was a demand response thing that was the first that went to the Supreme Court. The Supreme Court has actually had to deal with two or three FERC things in the last year. It's already becoming a big issue. In addition to that, think of all the ways that we talk about retail assets, solar, energy storage, load control, playing in wholesale markets, DER aggregation. We're starting to see this happen in places like California and New York. Every time that something like that happens, it starts to blur what used to be a very clear line between the retail side, which is regulated by the states, and the wholesale side, regulated by FERC.
FERC is going to have to make a bunch of decisions on things like that that could actually have a big impact on whether distributed solar has a real role to play in the wholesale markets.
Stephen Lacey: This has an influence geographically, because we are seeing regional markets expand as well. Places like New England are creating forward markets for renewable energy. You're seeing the Western [Regional Transmission Organization] expand.
Shayle Kann: Capacity market rules and PJM are being debated in a big way. We talked a little bit about that yesterday. That has a big impact on storage, more than anything else, and demand response, but could impact solar as well. That's another thing for FERC to look at. FERC will be a big deal, so those appointments will matter a lot.
Remember, President Obama tried to appoint Ron Bins, who's a pretty progressive cleantech advocate basically, but had a longstanding track record, and was a totally qualified candidate. Ron Bins became for a minute a flash point of controversy. He was being talked about on Fox News. Who would have thought they would have cared who gets appointed to FERC? It killed his nomination as a result. Depending on who gets nominated; you could imagine that becoming another big contentious political issue.
Julia Pyper: I have to wonder, if there was a national strategy for energy, would it help? Would it help FERC give some guidelines, give states some guidelines? If we knew what we wanted our energy transition to look like in terms of carbon reductions, job goals, energy security, some metrics around reliability coming from the president and Congress, would that help steer this discussion in a more coherent way?
Shayle Kann: We've decided, as a country, to mostly...regulate energy at the state level, electricity at least. I would even worry about the idea of saying that there's a single strategy that the federal government, whether it be the president or Congress, would impose upon the states.
Actually, one of the ways that solar has grown so much is that different states have tried out different things. States have learned from what other states are doing. That's a good thing, in my mind. You could have some overarching strategy, but at the end of the day the states still have to enact anything you're actually going to do. To some degree, that's how the Clean Power Plan works, or Obamacare for that matter. You impose something big and broad at the national level and then you let the states enact however they want to enact it.
Stephen Lacey: It's common to say that the U.S. flounders because we don't have an energy policy. If you look at what the Obama administration has done to create guidelines for deployment at DOE, to ramp up R&D spending, to develop things like the Clean Power Plan, to negotiate and sign the Paris climate agreement -- you have a much more comprehensive energy policy than a lot of other developed countries. Even though it is piecemeal, you could argue that it comes together as a more cohesive package than a lot of other countries.
Shayle Kann: You know what I would like to see? It's not exactly a national energy strategy. I would like to see a national distributed energy strategy. I do feel like distributed energy, DERs, distributed generation, all that -- it's different from most of the energy issues that the government has had to deal with before. In some ways, it's crosscutting in a way that a lot of these other issues have not been, maybe since deregulation.
There are a bunch of different federal agencies that have to deal with it in a bunch of different ways. The Federal Trade Commission had a hearing in June or July, looking at consumer protection and antitrust issues in residential solar, and DOJ, and potentially FCC enforcement. All of that is going to come into play with regard to how we sell things like solar to customers. Presumably, that'll become true for whatever else we're selling to customers, energy storage as it picks up as well. The Federal Housing Finance Authority has a big role to play in [property-assessed clean energy] and financing for these assets.
It would be nice to see a cohesive strategy saying, "Distributed energy is a new thing, and it's coming. Here are our guiding principles, and we're now going to disseminate these across all these agencies."
Julia Pyper: I agree with that. That would be interesting. Also, for other elements of the fossil fuel industry, Section 111(d), what happens with the Clean Power Plan, will affect the national strategy -- regulations on natural gas pipelines or natural gas production, or on oil production.
Hillary Clinton has batted around putting in some kind of regulation on petroleum refineries as a way to meet her goal of cutting oil consumption by a third over the next 10 years. Presumably, some kind of regulation would be involved. You could only really make that happen if 111(d) is held up. That national strategy will really depend on the courts in this one case.
Stephen Lacey: Let's just explain what Section 111(d) is. It's this piece of the Clean Air Act that can be interpreted in different ways. The Obama administration argues that you can regulate carbon emissions through the Clean Air Act, which is what the Clean Power Plan is predicated on. Assuming the Supreme Court upholds this use of 111(d) to regulate carbon emissions, the argument is that they can broaden that to other pollutants.
Shayle Kann: Or other sectors, right?
Stephen Lacey: Right, so to chemical production, to agriculture, to the broader manufacturing sector, to oil refining as you said. There are pretty broad implications.
At the beginning of the conversation I talked about a continuation of the Obama administration policies. Assuming that Hillary Clinton becomes the next president, that's the type of continuation that I'm talking about. You're going to see executive level enforcement, and if the Clean Power Plan holds up, an expansion -- for better or worse -- into other sectors.
Many people would argue that this is a very economically inefficient, top-down way of doing things. We would be much better served with a market-based approach. But we're not going to get a market-based approach through Congress anytime soon. Really, the only option is to push forward the strategy that's already been put in place by the Obama administration.
Shayle Kann: That was another thing in some of the WikiLeaks emails that I think is interesting -- the discussion about a carbon tax. [The Clinton camp] seriously put some thought into the idea of proposing a carbon tax and eventually decided not to because it polls so poorly, which is interesting. That's a positive sign generally speaking -- but also the fact that it does poll so poorly is interesting. Do you think just because it's a tax?
Stephen Lacey: Yes. We actually had a really good discussion about a carbon tax that's on the ballot in Washington state in last week's Energy Gang podcast. There's this whole civil war going on around this carbon tax, and many people on the left are opposing it. The big issue is because at the beginning of the ballot initiative it says, 'This ballot initiative pertains to taxes,' and everyone thinks it's going to fail miserably, because when you lead with tax language, it usually fails in public polling. Much of the national polling that we've seen definitely stands up.
Julia Pyper: The social cost of carbon is another way of getting at this.
Stephen Lacey: Basically, the federal government is applying a cost of carbon to infrastructure projects and to federal rules.
Julia Pyper: Yeah, and a court case did uphold the social cost of carbon. In the report that you mentioned at the beginning, they talk about government agencies that do not include a social cost to carbon in their cost-benefit analysis risk legal challenge. That's the sense I get with some of the regulations out there. The next administration could act against [the cost of carbon], but you risk a legal challenge.
Stephen Lacey: Yeah, this is super wonky stuff that we're going to be dealing with. A lot of it comes from the executive branch. We have got to go to wild cards. What's a wild-card element that you think will be important for the next administration to consider? It can pertain to the report that we've been talking about.
Shayle Kann: One of the things that was mentioned in the report, and which pertains to the FERC wholesale versus retail question, is community solar. There's already been a challenge that's put in front of FERC. A couple of co-op utilities in Maryland are basically challenging Maryland's community solar policy, which is an important policy for community solar, saying that it shouldn't be allowed. It's a wholesale policy that should be regulated by FERC basically.
That obviously has big implications if it ends up saying community solar is a different kind of thing, it's a wholesale asset despite the fact that you end up selling retail power. That could either help accelerate the community solar market, or one could imagine it could stop it in its tracks.
Stephen Lacey: What about you, Julia?
Julia Pyper: One takeaway from the previous discussion on transportation and petroleum -- I don't know how that's going to play out -- but transportation surpassed electricity as the No. 1 emitter in the United States.
We focus a lot on the Clean Power Plan. It is going to be precedent-setting. What happens then, with respect to fuel economy regulations or petroleum regulation, will be interesting.
Another wild card is nuclear waste. I don't know what's going to happen with that. If they decide to keep nuclear plants open as part of meeting the Clean Power Plan requirements, what happens to that waste? Yucca Mountain has been a huge, controversial issue. Obama stepped away from that. Now the DOE has put forward a proposal, but that needs legislation to be enacted and approved, and we don't know where that's going to end up.
Shayle Kann: Actually, we haven't talked about nuclear, but nuclear is a whole other set of issues that the next administration is totally going to deal with. There's a couple of appointments to the Nuclear Regulatory Commission too, but also licensing of new reactors.
Stephen Lacey: You're taking my wild card.
Shayle Kann: Oh sorry, well, anyway.
Stephen Lacey: It is a huge issue, for sure. In order to meet the carbon reduction goals under the Clean Power Plan, we need to keep existing nuclear plans in place. Extending licenses, as you said, would be important. Accelerating the licensing process and the approval process for new nuclear, assuming in the next decade we get commercial modular reactors. Then also dealing with nuclear waste, which is a big one.
I see your transportation -- and up you autonomous vehicles. The federal regulators issued guidelines for autonomous vehicles a couple of months ago, maybe it was a month ago. The developers of autonomous vehicles love them. They said, 'They set in place enough flexibility for states to determine how they want to regulate things. There's flexibility in the types of technology that we can use.' Largely, it was celebrated by private industry. Those guidelines will evolve, but it's the first whack at how to deal with autonomous vehicles. This is something that the next administration is really going to have to deal with in a big way.
If you want to dig into local electricity policy issues, listen to our conversation below with Travis Kavulla, the president of NARUC. Kavulla argues the Republican case for the distributed energy transition.
