[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
CLEANER, CHEAPER ENERGY: CLIMATE
INVESTMENTS TO HELP FAMILIES
AND BUSINESSES
=======================================================================
HEARING
BEFORE THE
SELECT COMMITTEE ON THE
CLIMATE CRISIS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
DECEMBER 9, 2021
__________
Serial No. 117-12
www.govinfo.gov
Printed for the use of the Select Committee on the Climate Crisis
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-989 WASHINGTON : 2022
SELECT COMMITTEE ON THE CLIMATE CRISIS
One Hundred Seventeenth Congress
KATHY CASTOR, Florida, Chair
SUZANNE BONAMICI, Oregon GARRET GRAVES, Louisiana,
JULIA BROWNLEY, California Ranking Member
JARED HUFFMAN, California GARY PALMER, Alabama
A. DONALD McEACHIN, Virginia BUDDY CARTER, Georgia
MIKE LEVIN, California CAROL MILLER, West Virginia
SEAN CASTEN, Illinois KELLY ARMSTRONG, North Dakota
JOE NEGUSE, Colorado DAN CRENSHAW, Texas
VERONICA ESCOBAR, Texas ANTHONY GONZALEZ, Ohio
------
Ana Unruh Cohen, Majority Staff Director
Marty Hall, Minority Staff Director
climatecrisis.house.gov
C O N T E N T S
----------
STATEMENTS OF MEMBERS OF CONGRESS
Page
Hon. Kathy Castor, a Representative in Congress from the State of
Florida, and Chair, Select Committee on the Climate Crisis:
Opening Statement............................................ 1
Prepared Statement........................................... 3
Hon. Garrett Graves, a Representative in Congress from the State
of Louisiana, and Ranking Member, Select Committee on the
Climate Crisis:
Opening Statement............................................ 4
WITNESSES
The Honorable Miranda A.A. Ballentine, Chief Executive Officer,
Clean Energy Buyers Association, and Clean Energy Buyers
Institute
Oral Statement............................................... 7
Prepared Statement........................................... 8
Dr. Uday Varadarajan, Principal, RMI; and Precourt Energy
Scholar, Sustainable Finance Initiative at Stanford University
Oral Statement............................................... 16
Prepared Statement........................................... 18
Alexander Herrgott, President and CEO, The Permitting Institute
Oral Statement............................................... 22
Prepared Statement........................................... 25
Amy Meyers Jaffe, Research Professor and Managing Director,
Climate Policy Lab, The Fletcher School at Tufts University
Oral Statement............................................... 28
Prepared Statement........................................... 30
SUBMISSIONS FOR THE RECORD
Letter from the Solar Energy Industries Association outlining the
steps the solar industry has taken to ensure forced labor is
not used in the supply chain, and their recommendations for
growing U.S. solar manufacturing, submitted for the record by
Ms. Castor..................................................... 54
Report from Rewiring America, Energy Bill Security for American
Households through Electrification, submitted for the record by
Ms. Castor..................................................... 55
Issue Brief from Resources for the Future, Cost Analysis and
Emissions Projections under Power Sector Proposals in
Reconciliation, submitted for the record by Ms. Castor......... 55
Issue Brief from Resources for the Future and the REBA Institute,
Evaluation of Power Sector Emissions Reduction Pathways,
submitted for the record by Ms. Castor......................... 55
APPENDIX
Questions for the Record from Hon. Kathy Castor to Hon. Miranda
A.A. Ballentine................................................ 56
Questions for the Record from Hon. Kathy Castor to Uday
Varadarajan.................................................... 59
Questions for the Record from Hon. Kathy Castor to Amy Meyers
Jaffe.......................................................... 64
CLEANER, CHEAPER ENERGY:
CLIMATE INVESTMENTS TO HELP
FAMILIES AND BUSINESSES
----------
THURSDAY, DECEMBER 9, 2021
House of Representatives,
Select Committee on the Climate Crisis,
Washington, DC.
The committee met, pursuant to call, at 1:34 p.m., in Room
210, Cannon House Office Building, Hon. Kathy Castor
[chairwoman of the committee] presiding.
Present: Representatives Castor, Bonamici, Brownley,
Huffman, McEachin, Levin, Casten, Neguse, Escobar, Graves,
Palmer, Carter, Miller, Crenshaw, and Gonzalez.
Ms. Castor. The committee will come to order.
Without objection, the chair is authorized to declare a
recess of the committee at any time.
As a reminder, members participating in the hearing
remotely should be visible on camera throughout the hearing,
and as with in person meetings, members are responsible for
controlling their own microphones. They can only be muted by
staff due to inadvertent background noise.
And I would like to remind members that, per the guidance
of the Attending Physician on July 27, members, staff, and all
others physically present in an indoor U.S. House of
Representatives space, including this hearing room, are
required to wear masks unless seeking or under recognition by
the chair.
In addition, statements, documents, or motions must be
submitted to the electronic repository, to
SCCC.repository@mail.house.gov.
Finally, members or witnesses experiencing technical
problems should inform committee staff immediately.
Good afternoon, everyone, and welcome to our hearing,
Cleaner, Cheaper Energy: Climate Investments to Help Families
and Businesses.
I will now recognize myself for 5 minutes for an opening
statement.
Investing in clean energy will make America healthier and
more resilient and unleash incredible economic benefits for
American families, such as reducing the cost of energy,
lowering electric bills, reducing costs of traveling, and
creating millions of family sustaining jobs. By investing in
clean electricity, energy efficiency, and electric appliances
and vehicles, we will lower energy prices for families and
businesses alike and cushion Americans from the volatile prices
of fossil fuels. The bipartisan infrastructure law made
progress, and the Build Back Better Act will take us farther.
For decades, Americans have powered their homes, cars, and
businesses almost exclusively through burning fossil fuels. But
these fuels come at a cost to our health, to the pocketbooks of
working Americans, including rising property insurance rates
due to climate fueled storms, droughts, and wildfires. Whether
it is price spikes at the gasoline pump or utility bills,
rising energy costs can strain budgets of working families.
There are many factors behind the current costs of energy.
The impacts of the ongoing COVID-19 pandemic, global oil market
dynamics, repercussions of natural disasters, and increased
U.S. natural gas exports all have a hand in driving up prices.
But we are taking action. The Build Back Better Act will
put more money into the pockets of working Americans rather
than excessive oil company and electric utility profits.
Households could save about $500 every year just on energy
costs by embracing renewables, electric vehicles, home
weatherization, and electric appliances.
The Build Back Better Act also will ensure that these
savings reach all Americans, by making grants and loans
available to rural communities and directing investments to
environmental justice communities.
The Build Back Better Act also will help more Americans
make the switch to money saving, and fun to drive, electric
cars and trucks. Thanks to lower maintenance and fuel costs,
families can save up to $10,000 over the life of a vehicle by
driving an electric car, compared to a gas powered one. These
savings are double for rural drivers who often go longer
distances and spend more on maintenance. And with the
bipartisan infrastructure law, EV drivers will have more places
to charge their electric cars and trucks, thanks to a historic
investment to build up to 500,000 charging stations across
America by 2030.
At home in Tampa on Monday, leaders of the Electrical
Workers Union cheered the new investments because they have
developed apprenticeship training for workers to build the
charging stations and electric grid enhancements, and they are
ready for new careers and higher wages.
The Build Back Better Act also will help cut air pollution
and reduce the financial costs of fossil fuels that cost us up
to $870 billion a year in lost income and healthcare costs. It
will improve the lives of the 70 million people of color who
live in counties with failing pollution grades, exposing them
to deadly threats like asthma and cancer. The Build Back Better
Act invests in environmental justice for these Americans,
directing at least 40 percent of investments to the communities
most affected by pollution.
And as winter arrives, it is crucial to help more families
save money through electrification. When it comes to heating
homes, the EIA forecasts that families who use fossil fuels
could see large increases on their heating bills: 54 percent
for propane, 43 percent for home heating oil, and 30 percent
for gas. In contrast, families who use electricity for heat are
only expected to see a 6 percent jump. That is because the
price of electricity, unlike the price of gas, remains
comparatively stable, and it is just one more reason why
Congress must continue to make electrification easier and more
accessible to American families.
Rising fuel prices are only further proof that we must
accelerate the transition to clean energy as quickly as
possible. We cannot remain stuck in the past. It is time to
look to the future as we invest in the clean technologies that
will help lead us into the 21st century and solve the climate
crisis. So I look forward to today's discussion.
At this time, I will yield 5 minutes to the Ranking Member,
Mr. Graves, for his opening statement.
[The statement of Ms. Castor follows:]
Opening Statement of Chair Kathy Castor
Hearing on ``Cleaner, Cheaper Energy:
Climate Investments to Help Families and Businesses''
Select Committee on the Climate Crisis
December 9, 2021
As prepared for delivery
Investing in clean energy will make America healthier and more
resilient--and unleash incredible economic benefits for American
families, such as reducing the costs of energy, lowering electric
bills, reducing the cost of traveling, and creating millions of family-
sustaining jobs. By investing in clean electricity, energy efficiency
and electric appliances and vehicles, we will lower energy prices for
families and businesses alike and cushion Americans from the volatile
prices of fossil fuels. The Bipartisan Infrastructure Law made
progress, and the Build Back Better Act will take us farther.
For decades, Americans have powered their homes, cars, and
businesses almost exclusively through the burning of fossil fuels. But
these fuels have come at a cost to our health and to the pocketbooks of
working Americans, including rising property insurance rates due to
climate fueled storms, droughts, and fires. Whether it's price spikes
at the gasoline pump or on utility bills, rising energy costs can
strain the budgets of working families. There are many factors behind
the current costs of energy. The impacts of the ongoing Covid-19
pandemic, global oil market dynamics, repercussions of natural
disasters, and increased U.S. natural gas exports all have a hand in
driving up prices.
We are taking action. The Build Back Better Act will put more money
in the pockets of working Americans rather than excessive oil company
and electric utility profits. Households could save about $500 dollars
every year just on energy costs by embracing renewables, electric
vehicles, home weatherization and electric appliances. The Build Back
Better Act also will ensure these savings reach all Americans, by
making grants and loans available to rural communities and directing
investments to environmental justice communities.
The Build Back Better Act also will help more Americans make the
switch to money-saving (and fun-to-drive) electric cars and trucks.
Thanks to lower maintenance and fuel costs, families can save up to
$10,000 dollars over the life of the vehicle by driving an electric car
compared to a gas-powered one. These savings are doubled for rural
drivers, who often go longer distances and spend more on maintenance.
And with the Bipartisan Infrastructure Law, EV drivers will have more
places to charge their electric cars and trucks--thanks to a historic
investment to build up to 500,000 charging stations across America by
2030. At home in Tampa on Monday, leaders of the Electrical Workers
union cheered the new investments, because they have developed
apprenticeship training for workers to build charging stations and
electric grids enhancements, and they are ready for new careers that
pay great wages.
The Build Back Better Act also will help cut air pollution and
reduce the financial costs of fossil fuels that cost us up to $870
billion dollars a year in lost income and health care costs. It will
improve the lives of the 70 million people of color who live in
counties with failing pollution grades, exposing them to deadly threats
like asthma and cancer. The Build Back Better Act invests in
environmental justice for these Americans, directing at least 40% of
investments to the communities most affected by pollution.
As winter arrives, it's crucial to help more families save money
through electrification. When it comes to heating homes, the EIA
forecasts that families who use fossil fuels could see large increases
on their heating bills: 54% for propane, 43% for home heating oil, and
30% for gas. In contrast, families who use electricity for heat are
only expected to see a 6% jump. That's because the price of
electricity, unlike the price of gas, remains comparatively stable. And
it's just one more reason why Congress must continue to make
electrification easier and more accessible for American families.
Rising fuel prices are only further proof that we must accelerate
the transition to clean energy as quickly as possible. We cannot remain
stuck in the past. It's time to look to the future--as we invest in the
clean technologies that will help us lead in the 21\st\ century and
solve the climate crisis.
I look forward to today's discussion.
Mr. Graves. Thank you, Chair Castor. And I want to thank
our witnesses for being here today.
It has been interesting the past few months as we have seen
gasoline prices skyrocket. We have seen the President of the
United States send a letter to the Federal Trade Commission
blaming it on energy companies. We saw Senator Warren send
letters blaming it on natural gas exports. And in the same
breath, effectively, we have seen folks like Jake Sullivan, the
National Security Advisor for the White House, asking the OPEC
nations, asking Russia and Saudi--OPEC plus nations, Russia,
Saudi Arabia, Iran, and other countries to actually increase
their oil production.
And, of course, that is similar to a message that we saw
out of Senators Schumer, Markey, Cantwell, and Menendez a few
years ago when they sent a letter to the then-President of the
United States asking him to have other countries increase
production of energy.
Folks are sitting here pointing at different reasons as to
the high energy cost and complaining about the high energy
cost, yet in legislation that just passed the House of
Representatives weeks ago, there is a provision in there that
imposes a $10,000-a-mile-a-year fee on pipelines, which is the
safest way to transport energy, a bill that--the same bill
increases the regulatory burden. The same bill increases the
royalty rate, or tax, that these companies are going to have to
pay. And folks are around scratching their heads and pointing
fingers as to why energy prices are going up?
It is pretty clear why energy prices are going up. The
President of the United States has shut down the Keystone
Pipeline, yet opened up the Nord Stream 2 pipeline for Russia
to send Russian gas into Europe.
The President of the United States has put a pause on
domestic energy production that a court had to step in and say
you can't do this, there is a thing called the law. These are
the reasons why energy prices are going up.
Everybody is out there pointing fingers. We have seen the
Securities and Exchange Commission and other Federal Government
agencies--they have no expertise in energy, none--out there
telling companies that they are going to be pushing these ESG
objectives and requirements that are going to be forcing these
companies to effectively get off of conventional fuels.
We have seen comments out of our Department of Treasury and
others saying that they don't want to make any investments in
oil and gas. We have seen none. And we have even seen, out of
the President's own budget, a provision for the Corps of
Engineers that says we don't want to do anything, make any
investments that will actually reduce the cost of consumption.
Finally, Madam Chair, there was a report out of the Senate
Democrats--excuse me--the Senate Democrats' committee that--
Climate Committee that said that the policies that Democrats
are pushing are going to increase cost of energy. They
acknowledged it. They said it in the report.
Madam Chair, this is what we are seeing today. The United
States actually achieved energy independence in November of
last year. We achieved energy independence, to where, as Ms.
Jaffe is going to be speaking about today, she talks about
how--a theory that Russia and Saudi Arabia's actions were the
ones that are causing energy prices to go up or at least go up
a few months ago.
Well, if we are energy independent, we are insulated from
actions of other countries. Yet the very actions, the very
initiatives of members of this committee and this
administration, just as folks are saying we can't depend upon
Russia and China because they are going to--excuse me--Russia--
because they are going to be exerting influence and causing
prices to spike, all folks are doing now is trying to trade
Russia for China and make us dependent upon them for our energy
resources.
Madam Chair, these policies don't make sense, they don't
add up, and all they are doing is increasing global emissions,
increasing our dependence upon foreign energy sources like that
from Vladimir Putin, who clearly doesn't share America's
values. All it is doing is exporting jobs and increasing the
cost of energy, that has a greater impact on those among us
that can least afford it. It doesn't make sense for any
objective that we share. None. It is not in America's interest.
Yet rather than recognizing errors were made, mistakes were
made, and stepping back, we are watching people double and
triple down on these flawed strategies that are increasing
global emissions, increasing costs, sending jobs overseas, and
subjecting us to greater leverage from countries like Russia.
It is mind boggling to me.
Madam Chair, one of the key things that we have got to
address, if we are going to be successful in moving into clean
energy future, is that chart right there. That is the process,
the regulatory maze, that people have to go through in order to
try to actually execute.
I had a number of conversations with Mayor Mitch Landrieu,
former Mayor of New Orleans, who is going to be the
infrastructure czar. I told him the biggest challenge in front
of him is trying to get through that. It is not just about
building roads and bridges that currently take between 7 and 10
years in the regulatory process, Madam Chair. It is about
trying to do clean energy projects and energy transmission. We
have got to address this.
Madam Chair, I look forward to working together with you
and committee members to advance our shared goals of reducing
energy costs, of charting a clean energy future, and ensuring
Americans have a place to go to work.
I yield back.
Ms. Castor. Without objection, members who wish to enter
opening statements into the record may have 5 business days to
do so.
Well, welcome to our panel of witnesses. These are industry
leaders and energy policy experts who are going to share how
the Build Back Better Act's climate investments will help
reduce electricity bills and transportation costs, how we are
going to address volatile fossil fuel prices, and help
transition to a clean energy economy.
The Honorable Miranda Ballentine is the Chief Executive
Officer of the Clean Energy Buyers Association. Ms. Ballentine
leads a group of nearly 300 energy customers, seeking to
procure clean energy across the United States, including
service providers, businesses, and nonprofits.
Previously, Ms. Ballentine served as the Assistant
Secretary of the Air Force for Installations, Environment, and
Energy during the Obama administration, as well as the Director
of Sustainability for Global Renewable Energy for Walmart.
Dr. Uday Varadarajan is the Principal in the Carbon Free
Electricity Practice at RMI and a Precourt Energy Scholar at
the Sustainable Finance Initiative at Stanford University,
where his work focuses on how to use cutting-edge data and
financial, policy, and regulatory analysis to help drive a just
transition to clean energy.
Previously, Dr. Varadarajan served as a Program Examiner in
the Office of Management and Budget, where he helped oversee
the $2 billion budget for the Department of Energy's Energy
Efficiency and Renewable Energy Program.
Alex Herrgott is the President and CEO of The Permitting
Institute, which advocates for changes to the infrastructure
permitting process. Previously, he was the Executive Director
of the Federal Permitting Improvement Steering Council, as well
as the Associate Director for Infrastructure at the White House
Council on Environmental Quality during the Trump
administration.
And Amy Myers Jaffe is a Research Professor and Managing
Director of the Climate Policy Lab at the Fletcher School at
Tufts University. She was formerly the David M. Rubenstein
Senior Fellow for Energy and Environment and Director of the
Program on Energy Security and Climate Change at the Council on
Foreign Relations.
Previously, Ms. Jaffe served as Executive Director for
Energy and Sustainability at the University of California
Davis, where she led research on low- and zero-carbon fuels and
transportation policy.
Ms. Jaffe is the author of ``Energy's Digital Future:
Harnessing Innovation for American Resilience and National
Security.''
Without objection, the witnesses' written statements will
be made part of the record.
With that, Ms. Ballentine, you are now recognized for 5
minutes for your testimony. Welcome.
STATEMENTS OF THE HONORABLE MIRANDA A.A. BALLENTINE, CHIEF
EXECUTIVE OFFICER, CLEAN ENERGY BUYERS ASSOCIATION, CLEAN
ENERGY BUYERS INSTITUTE; DR. UDAY VARADARAJAN, PRINCIPAL, RMI,
PRECOURT SCHOLAR, SUSTAINABLE FINANCE INITIATIVE AT STANFORD
UNIVERSITY; MR. ALEXANDER HERRGOTT, PRESIDENT AND CEO, THE
PERMITTING INSTITUTE; AND MS. AMY MYERS JAFFE, RESEARCH
PROFESSOR AND MANAGING DIRECTOR, CLIMATE POLICY LAB, THE
FLETCHER SCHOOL AT TUFTS UNIVERSITY
STATEMENT OF THE HONORABLE MIRANDA A.A. BALLENTINE
Ms. Ballentine. Thank you.
Good afternoon. Chair Castor and Ranking Member Graves, and
to all of the members of the Select Committee on the Climate
Crisis, thank you for the opportunity to testify on the Build
Back Better Act's clean energy provisions.
I want to start by thanking you all for your service to
your constituents and to our nation as a whole and, for this
committee in particular, to all of mankind, frankly.
My name is Miranda Ballentine. I am the Chief Executive
Officer of the Clean Energy Buyers Association. I have spent
two decades leading large clean energy buyers' strategies
globally, including Walmart and the United States Air Force
when I was the Assistant Secretary for Installations,
Environment, and Energy. But, today, I am testifying on behalf
of CEBA's 280 business members, over half of whom are large
clean energy customers, and our membership really significantly
contributes to America's prosperity. Our members have about 14
million employees and contribute about $7 trillion in annual
revenues.
And a few weeks ago, we set out a really bold aspiration,
which is a 90 percent carbon-free U.S. electricity grid by
2030. And the Build Back Better Act is a key step on the path
to this bold aspiration.
So my bottom line point today is that the clean energy
investments in the Act are good for business, they are good for
energy electricity prices for customers in particular, and they
are good for the economy.
So I am going to make two key points in my opening remarks,
and then I will look forward to taking your questions.
So, first, American businesses support the clean energy
provisions in the Build Back Better Act. And the second key
point that I will make today is that energy customers and
energy markets matter and matter to decarbonizing the grid in a
way that is good for our economy and good for all Americans.
So let's start with the first one. American businesses
support the clean energy provisions in the Build Back Better
Act. Last January, if you will recall last January, there were
just a few things going on in our country. Despite that, three
dozen iconic American brands asked the Federal Government to
take action on clean energy policy. These were companies like
Walmart, like the Walt Disney Company. These are companies like
Johnson & Johnson, for whom there was a lot going on last
January.
Fast-forward to today and we have 160 investors and
companies of all sizes who have supported the BBBA and the
Investment Jobs and Infrastructure Act.
Two dozen CEBA members have demonstrated their public
support for the clean energy provisions in the Act, including
companies like General Motors, Amazon, Google, PepsiCo.
Why are they doing this, you might ask. Well, these
American businesses know that investments in clean energy can
resuscitate our economy.
Let me give you just a few examples. Expanding organized
wholesale markets to every region of our country can save
energy customers $11 billion on their energy bills--$11
billion--by expanding wholesale markets. Thus, we really
support the $40 million dedicated--appropriated to DOE in the
Act to provide states with assistance for their wholesale
market electricity work.
Second, a national transmission grid could reduce energy
prices by a further 2 percent. Every billion dollars that we
invest in transmission creates $2 to $3 billion in direct
customer benefit, and can create 7,000 jobs directly in
construction on transmission, as well as 1,500 other related
jobs. Likewise, clean energy investments create thousands of
jobs in diverse geographies across the country.
So my second key point is that energy customers and energy
markets matter. And with the right legislative and regulatory
support, markets can accelerate a carbon-free energy system
that benefits all Americans.
Sixty percent of Fortune 500 companies have public climate
and clean energy goals. 1,100 companies are committed to
science-based greenhouse gas reduction targets. 340 global
businesses have committed to 100 percent renewable energy. And
we have only scratched the surface of the demand.
Since 2008, corporate energy customers have driven 44
gigawatts of new wind and solar, and last year's 10.6 gigawatts
was the equivalent of 40 percent of all new capacity--all new
carbon-free capacity last year.
How are we doing?
All right. So I would conclude, bottom line is
decarbonizing our power system is a key component of
decarbonizing our economy. The U.S. must lead. We applaud the
efforts of this Congress to take steps to do so, and we urge
the Senate to also pass this bill without delay.
So, again, thank you for the opportunity to be here, and I
look forward to your questions.
[The statement of Ms. Ballentine follows:]
Statement by Miranda Ballentine
Chief Executive Officer of the Clean Energy Buyers Association
Before the
House Select Committee on the Climate Crisis
December 9, 2021
INTRODUCTION
The Clean Energy Buyers Association (CEBA) thanks the Committee for
the opportunity to share our perspective: the clean energy investments
in the Build Back Better Act (BBBA) are good for business, good for
markets, good for consumer energy prices, and good for the economy.
CEBA\i\ activates a community of 280 members--representing over $7
trillion in annual revenues and over 14 million employees--to deploy
market and policy solutions for a carbon-free energy system. Most of
our members are institutional energy customers of every type and size--
corporate and industrial companies, universities, and even cities.
Our vision is customer-driven clean energy for all.
CEBA is pro-market, pro-community, and pro-carbon-free energy.
Energy customers have deployed over 44 gigawatts (GWs) of renewable
energy since 2008, which is over a quarter of all wind and solar
capacity in the United States, driving down air pollution and lowering
energy costs for American businesses and families. Last year alone,
voluntary energy customers contracted for 10.6 GW \ii\ of clean
energy--the equivalent of 40% of all new carbon-free capacity installed
in 2020.
Energy customers face intractable barriers to procuring clean
energy: lack of organized wholesale markets, need for expansion of
transmission, lackluster investments in clean energy technology
incentives, and underfunded research and development of emerging clean
technologies. BBBA makes important investments in each of these areas
that will result in powerful outcomes for our economy and community:
Expanding organized wholesale markets to every region of
the country could save energy customers $11 billion per year, thus we
support the BBBA's $40 million appropriated to DOE to provide states
with assistance to form, participate in, expand, or improve organized
wholesale electricity markets.
A national transmission grid could reduce energy bills by
2%. Likewise, every $1 billion invested in large-scale transmission
infrastructure creates $2-3 billion in customer benefits, about 7,000
construction jobs, and about 1,490 new related jobs. Therefore, the
BBBA's 30% transmission Investment Tax Credit, $1.5Billion in grants
for upgraded lines, $100 million for planning and $800 million in
siting authorities grants is a first step in the right direction.
Clean energy could create thousands of new,
geographically diverse jobs across the supply chain. The BBBA's roughly
$200 billion in clean energy tax incentives will spur private sector
investment across a range of clean energy technologies, including
investments in renewables, advanced nuclear, carbon capture and
sequestration, and clean hydrogen.
BBBA also makes important investments to bring the
benefits of the clean energy economy to rural America. These
communities also should benefit from lower utility bills and have the
opportunity to develop clean energy infrastructure.
We support the flexible, market-based, complementary suite of
investments in BBBA that can empower energy customers to unleash an
economic boom in clean energy and help us reach CEBA's aspiration of a
90% carbon-free electricity system in the United States by 2030.
This testimony lays out three key points.
First, American businesses support the clean energy
provisions in the BBBA because they are good for business, good for our
communities, and good for our economy.
Second, energy customers and energy markets matter and
are key to driving affordable, clean energy for all Americans.
Third, to solve the climate crisis, we must focus on
decarbonizing our power system.
1. Businesses support federal action on climate and clean energy under
the Build Back Better Act
Investments in clean energy can resuscitate the economy and society
by creating vital tax revenue to support communities, growing the
workforce by training and employing tradesmen and women, and can begin
to address the disparate impacts of pollution and climate change on
disadvantaged communities.
Businesses have leveraged their brand voices and influence to
advocate for federal action on climate change since the start of 2021
while continuing to accelerate Environmental, Social, and Governance
(ESG) efforts within existing operational and strategic priorities.
Leading up to the 26\th\ Conference of Parties (COP), over 778
businesses representing $2.7 trillion in annual revenue and 733
investors managing more than half of the world's assets called on
governments to raise climate ambition and implement meaningful climate
policies.\iii\
In support of both the BBBA and the Investment Jobs and
Infrastructure Act (IIJA), over 160 investors and companies of all
sizes have urged U.S. lawmakers to support climate and energy
investments to combat the climate crisis and put us on a path to
achieving key decarbonization milestones.\iv\ Members of the CEBA
understand the importance of this critical moment and have demonstrated
public support through the organization and individual advocacy
efforts.\v\ We have all of the tools and solutions to initiate
meaningful solutions right now to help address extreme events ravaging
communities, create new well-paying employment opportunities through
ever-growing energy sector, and to improve U.S. economic
competitiveness.
The clean energy provisions in the Build Back Better Act are good for
business.
Achieving a net-zero U.S. economy by 2050 hinges on having
sufficient time for the sectors where it is hardest and most
costly.\vi\ Ensuring the power sector decarbonizes as quickly as
possible enables the clean electrification \vii\ of other
sectors.\viii\ In the power sector, 11 independent recent studies,\ix\
including by the Clean Energy Buyers Institute,\x\ show that it is
possible to cost-effectively achieve at least 80% clean electricity by
2030 with existing technologies, and with significant net benefits. The
BBBA makes investments in the power sector that could get the U.S. up
to 76% \xi\ clean electricity when combined with broader federal
actions, some of which are advanced by BBBA, and by state actions.
Tax credits are the cornerstone of clean energy deployment in the
BBBA and modeling by Resources for the Futures (RFF) shows these
investments alone could incentivize up to 69% carbon-free electricity
by 2030.\xii\ The roughly $200 billion in clean energy tax incentives
will spur private sector investment across a range of clean energy
technologies, including investments in renewables, advanced nuclear,
carbon capture and sequestration, and clean hydrogen. Capital
expenditures will decrease power sector emissions, reduce technology
deployment costs, put new steel in the ground, create thousands of new,
geographically diverse jobs across the clean energy supply chain, and
serve as a catalyst for future investments in emerging technologies.
These investments are essential to accelerating the pace of
deployment, but alone, tax incentives won't ensure the scale and pace
needed. To create the enabling conditions for faster and cheaper clean
technology deployment that mobilizes innovation, private capital, and
the demand of energy customers, we need to also leverage technology
research and development (R&D), expand and improve organized wholesale
markets, and accelerate transmission buildout to develop a national
transmission grid.
The Clean Energy Buyers Institute partnered with RFF to analyze the
most impactful policy pathways to power sector decarbonization. In
addition to finding that a well-designed, bipartisan Clean Energy
Standard (CES) is the most impactful way to reduce emissions in the
power sector to greatest benefit, it also found that expanding
wholesale markets and supporting significant transmission expansion are
substantially helpful in reducing the cost, accelerating the pace, and
enhancing the beneficial outcomes of the transition which include
nearly $100 billion in net annual benefits in 2035. The study's
preliminary findings show that expanding organized wholesale markets to
all regions of the country would save energy customers an additional
estimated $11 billion a year, and that the creation of a national
transmission macrogrid by 2035 would reduce customer rates by roughly
2%.\xiii\ The BBBA creates important investments that support both
markets and transmission enablers of a lower-cost transition to clean
energy.
Organized wholesale energy markets currently serve two-thirds of
energy customers.\xiv\ They are operated by various independent, non-
profit entities, often referred to as regional transmission
organizations (RTOs), that allow open, non-discriminatory access to the
nation's transmission system.
In parts of the country with organized wholesale energy markets,
clean energy is deployed at a higher rate and carbon emissions are
dropping faster.\xv\ For example, according to a November 2021
assessment, regions with competitive wholesale power markets reduced
their power sector CO2 emissions by about 35% from 2005
levels, while regions without wholesale power markets reduced their
power-sector CO2 emissions by about 27% over the same
period.\xvi\ Moreover, regions with wholesale power markets deployed
almost 80% of all utility-scale wind and solar generation capacity,
despite only accounting for about 67% of all existing power plant
capacity, of all types.
RTO markets save energy customers money \xviii\ by efficiently
using existing resource fleets and reducing the need for additional
resources. RTOs have reduced production costs by increasing trade,
better coordinating power plants, and driving efficiency improvements
at plants.\xix\ One study estimates, nationwide, organized wholesale
markets saved approximately $3 billion per year in production costs
from 1999-2012.\xx\ Organized wholesale markets, such as those operated
by the Midcontinent Independent System Operator and PJM now save up to
$4 billion each annually.\xxi\ Recent regional studies evaluating the
cost benefits of expanding organized wholesale markets into the West
and Southeast found substantial net benefits as well.\xxii\
Power grids are more resilient in parts of the country with
organized regional electricity markets because regional grid operators
have visibility across multiple utility territories. Risk of systemic
disruptions are more effectively mitigated by pooling diverse resources
and controllable demand across broader regions so that neighboring
regions are better set up to assist each other.
American businesses and consumers demand a new paradigm--one that
encourages both clean energy and economic competitiveness by leveraging
markets. CEBA applauds the House for including language that would
establish the ``Organized Wholesale Electricity Markets Technical
Assistance Grants'' program, appropriating $40 million to the U.S.
Department of Energy to provide states, on a voluntary basis, with
dedicated technical assistance and grants to evaluate forming,
participating in, expanding, or improving organized wholesale
electricity markets.\xxiii\
Well-planned transmission is crucial to least-cost decarbonization.
As the grid decarbonizes, substantive and comprehensive action is
required to ensure the nation's transmission system can reliably and
cost-effectively deliver carbon-free energy to all customers.
Due to ineffective, inadequate, and slow planning processes, as
well as outdated siting procedures and cost-allocation methods, U.S.
transmission expansion has not kept pace even with current demand
despite major studies showing we need 2-3 times current transmission
capacity by 2035 for decarbonization.\xxiv\ Every $1 billion invested
in large-scale transmission infrastructure creates $2-3 billion in
customer benefits,\xxv\ about 7,000 construction jobs, and 1,490 new
related jobs.\xxvi\ Inadequate transmission infrastructure results in
procurement challenges for customers in regions of the country where
transmission is constrained, with congestion increasing prices and
limiting project interconnections.
Expanding transmission will enhance grid operations to meet energy
customer demand by integrating clean energy resources, increasing grid
resilience and reliability, and facilitating electrification
initiatives. Transmission also enables markets to deploy generation
over large areas, which optimizes renewable energy resources that are
best managed and delivered across diverse geographic regions. For
example, 15 states \xxvii\ between the Rocky Mountains and the
Mississippi River account for 88% of the nation's potential wind
capacity and 56% of potential solar capacity, but those states are only
projected to account for 30% \xxvii\ of the national electricity demand
by 2050. Constructing new high-voltage, interregional transmission
lines as part of a macrogrid will enable the movement of electricity
from clean energy sources to major load centers.
Provisions in BBBA that specifically address the bottlenecks and
inefficiencies in transmission planning, siting and construction,
include:
1. Inter-regional planning. The $100 million to plan,
site, and build an interconnected, national transmission ``back-bone'',
referred to as a ``macrogrid,'' will benefit customers by increasing
grid reliability and efficiency, accelerating decarbonization goals,
and creating cost savings.
2. Transmission Investment Tax Credit (ITC) and grants.
Implementing a 30% transmission ITC can incentivize the construction of
new lines where development otherwise would not occur due to challenges
with cost allocation for interregional projects. An ITC can benefit
customers by accelerating transmission projects that expand access to
cheaper, zero-carbon energy and increase reliability. The $1.5 billion
in transmission grants in the bill would provide for new and upgraded
lines as an important down payment toward dramatically expanding our
transmission system and unlocking private sector capital.
3. Siting. Interstate siting is one of the biggest
barriers to getting transmission projects built. The House allocated
$800 million to provide grants to transmission siting authorities to
study and analyze the impacts of transmission projects, examining
alternative transmission siting corridors, and for economic development
activities for communities that may be affected by the construction and
operation of a transmission project.
Additional programs make the BBBA a comprehensive approach to
decarbonizing the electricity system. We need to make investments now
to foster innovation and commercialize the technologies to get full
decarbonization. The BBBA includes $30 billion for clean technology
funding, including $1 billion for the Department of Energy (DOE)
Research, Design, Development, and Demonstration (RDD&D) activities and
$29 billion to support the rapid deployment of low- and zero-emission
technologies.
Furthermore, BBBA makes important investments to bring the benefits
of the clean energy economy to rural America. These communities also
should benefit from lower utility bills and have the opportunity to
develop clean energy infrastructure. Twelve percent \xxix\ of U.S.
electricity load is serviced by rural cooperative utilities and the
BBBA uses a broad array of tools to support rural electric customers
and spur rural clean energy economic development.
Finally, to bring increased clean energy onto the grid and reduce
carbon emissions, we need to modernize the permitting process,
including improving agency coordination to accelerate the environmental
review process, while making certain that we do not compromise
environmental protection and community participation. Combined, the
BBBA advances the most comprehensive and substantial set of investments
intended to unleash clean energy to date.
2. Energy Customers Matter
Energy customers have prioritized directly procuring clean energy
as a key component of broader climate and energy goals since 2008.
Leveraging their voice and demand for clean energy, organizations of
all types have become agents of change by innovating to address market
barriers hindering access to clean energy, creating new procurement
structures, advancing emerging technologies, and advocating for
policies that support the acceleration of clean energy.
Today, 60% of Fortune 500 companies have a public climate or clean
energy goal.\xxx\ Over 340 global businesses have committed to 100%
renewable energy,\xxxi\ and over 1,100 companies \xxxii\ are committed
to a science-based target aligned with 1.5 degrees Celsius. Financial
markets are also increasingly interested in Environmental, Social and
Governance (ESG) as financial regulators, investors, and asset owners
turn their focus to more deliberate evaluation of the risks posed by
climate change and prioritization of sustainable investing.
Clean energy has become a commonsense decision for many
organizations. Because of clean energy's cost effectiveness, strong
stakeholder demand, and greater interest in ESG impacts, Wood Mackenzie
estimates that there is at least 85 GW of unmet demand in the U.S. from
the largest existing energy customers to 2030.\xxxiii\ As market demand
for clean energy continues to swell, energy customers are battling
intractable barriers that impact their ability to leverage markets to
meet business goals and accelerate decarbonization of the U.S. energy
system.
The biggest barrier to customer-driven clean energy is whether
there is a market to transact in at all. Eighty percent of the 44 GW of
new utility-scale wind and solar contracts driven by customers were in
the organized wholesale markets that serve two-thirds of the nation's
electricity customers. Where those markets don't exist, customers must
negotiate time-consuming, and often less cost-competitive bilateral
deals or utility tariffs in order to access clean energy.
In addition to customers being able to source clean energy, the
grid needs to decarbonize for all customers, which is a function of the
constellation of policies driving down clean energy costs and
incentivizing faster deployment, including through foundational
approaches like leveraging organized wholesale markets and transmission
expansion, and technology R&D. The BBBA provides transformative
investments across these priorities.
3. Decarbonizing the power sector is critical
To achieve a zero-carbon global economy by 2050,\xxxiv\ the
International Energy Agency calls for a 60% decline in emissions from
the power sector globally by 2030.\xxxv\
The United States must lead. We are the largest historical emitter
of greenhouse gases, the second largest GHG emitter globally, and the
electricity sector in the United States is the second largest source of
greenhouse gas emissions. Commercial and industrial customers account
for over 60% of electricity consumption.
Clean energy is cost-effective. A recent study \xxxvi\ found that
the U.S. grid can achieve a 90% carbon-free generation mix by 2035
without increasing customer cost or undermining system reliability;
what's missing is unified, predictable, durable, and ambitious
deployment policy. The suite of approaches under Build Back Better Act
(BBBA) would change that. As global investments in clean energy surpass
a record-breaking $500 billion,\xxxvii\ the BBBA clean energy and
climate provisions are an opportunity to usher in a historic wave of
investment and innovation to accelerate emissions reductions swiftly
through clean energy deployment.
Throughout history, our country has relied on energy infrastructure
investments to lift us out of crises. President Roosevelt's New Deal
saved the U.S. from economic collapse and brought electricity to rural
America through investments in public works projects. More recently,
the American Recovery and Reinvestment Act rapidly put 2.3 million
Americans to work, spurred innovations that dramatically reduced the
costs of clean energy technologies, and leveraged private sector
investments, raising the GDP by $500 billion within one year.\xxxviii\
We applaud the efforts of this Congress to address climate change,
accelerate clean energy and empower customers to lead the transition
through the Build Back Better Act. We urge the Senate to preserve the
House allocations to the clean energy provisions and pass the Build
Back Better Act without delay.
ENDNOTES:
\i\ Clean Energy Buyers Association: www.cebuyers.org.
\ii\ Clean Energy Buyers Association. 2021. Clean Energy Buyers
Association Deal Tracker. https://cebuyers.org/deal-tracker/
\iii\ Lubber, M. and Schauble, B. 2021, November 19. COP26 is over.
Now it's up to investors, companies, and governments to raise their
climate ambition. Ceres. https://www.ceres.org/news-center/blog/cop26-
over-now-its-investors-companies-and-governments-raise-their-climate
\iv\ Ceres. 2021, October 27. `There is no time to waste': Dozens
of companies, investors urge Congress to act now on climate. Ceres.
https://www.ceres.org/news-center/press-releases/there-no-time-waste-
dozens-
companies-investors-urge-congress-act-now
\v\ As of December 3, 2021, 24 CEBA member companies have released
individual statements or signed letters of support of the clean energy
provisions in the BBBA: Adobe, Amazon, Apple, Autodesk, Bank of
America, Bp America Inc., Cummins, Ebay, Facebook/Meta, General Motors,
Google, Hewlett Packard (HP), Johnson Controls, Mars Incorporated,
Microsoft, Nestle, PepsiCo, Salesforce, Stonyfield Organic (Stonyfield
Farm), Trane Technologies, VF Corporation, Volt Energy Utility,
Walmart, Workday.
12 companies have publicly supported the CEBA statements on the
Build Back Better Act and Infrastructure Investment and Jobs Act's
clean energy and climate provisions, including: Amazon Web Services,
Ebay, Electric Power Supply Association, Environmental Defense Fund,
First Solar, Google, Iron Mountain, LevelTen Energy, Primergy Solar,
Wells Fargo, WeWork, World Wildlife Fund.
\vi\ The Net-Zero America Project which analyzes five different
pathways to reach economy-wide net-zero emissions by 2050 finds,
``Building a net-zero America will require immediate, large-scale
mobilization of capital, policy and societal commitment, including at
least $2.5 trillion in additional capital investment into energy
supply, industry, buildings, and vehicles over the next decade.
Consumers will pay back this upfront investment over decades, making
the transition affordable.'' Net Zero America. October 2021. Net-Zero
America: Potential Pathways, Infrastructure, and Impacts. Princeton
University. https://netzeroamerica.princeton.edu/the-report
\vii\ A meta-analysis of 11 clean energy studies found agreement
that decarbonization of the power sector amplifies electrification-
based emission reductions across other sectors. Achieving 70-80 percent
clean electricity by 2030 is necessary to reach the GHG reduction
target of 50-52 percent below 2005 levels by 2030 and be on track to
achieve zero-emissions by 2050: Esposito, Dan. September 2021. Studies
Agree 80 Percent Clean Electricity by 2030 Would Save Lives and Create
Jobs at Minimal Cost. Energy Innovation. https://energyinnovation.org/
publication/studies-agree-80-percent-clean-electricity-by-2030-would-
save-lives-and-create-jobs-at-minimal-cost/
\viii\ A recent special report from the United Nations
Intergovernmental Panel on Climate Change finds the world needs to cut
its planet-warming emissions by about half by 2030 relative to a 2005
baseline: IPCC. 2018, Summary for Policymakers. Global Warming of
1.5+C. An IPCC Special Report on the impacts of global warming of 1.5+C
above pre-industrial levels and related global greenhouse gas emission
pathways, in the context of strengthening the global response to the
threat of climate change, sustainable development, and efforts to
eradicate poverty. https://www.ipcc.ch/sr15/chapter/spm/
\ix\ A meta-analysis of 11 cross-sector studies finds 80% clean
energy by 2030 would add 500,000-1,000,000 net new jobs per year,
prevent 85,000-317,000 premature deaths and save $1-5 trillion in
health costs through 2050: Energy Innovation. 7 September, 2021.
Studies Agree 80 Percent Clean Electricity by 2030 Would Save Lives and
Create Jobs at Minimal Cost.
https://energyinnovation.org/publication/studies-agree-80-percent-
clean-electricity-by-2030-would-save-lives-and-create-jobs-at-minimal-
cost/
\x\ Research between CEBI and RFF, Summary for Policymakers
released in July 2021, finds that a clean energy standard achieving 80%
clean energy by 2030 increases rates by an average of 4%, compared to a
3% rate increase in 2035 to be on track for 100% by 2050 but
significantly higher to achieve 100% clean energy by 2035: Clean Energy
Buyers Institute (formerly Renewable Energy Buyers Institute) and
Resources for the Future. July 2021. Evaluation of Power Sector
Emissions Reduction Pathways.
https://cebuyers.org/wp-content/uploads/2021/07/Evaluation-of-Power-
Sector-
Emissions-Reduction-Pathways-Summary-for-Policymakers.pdf
\xi\ Rhodium group found a combination of investment and
regulations can achieve CO2 emission reductions of 69-76%
below 2005 levels in 2031: Larsen, J., King, B., Kolus, H., and
Herndon, W. 23 March, 2021. Pathways to Build Back Better: Investing in
100% Clean Energy. Rhodium Group. https://rhg.com/research/build-back-
better-clean-electricity/
\xii\ Roy, N., Burtraw, D., and Rennert, K. 7 October, 2021. Cost
Analysis and Emissions Projections under Power Sector Proposals in
Reconciliation. Resources for the Future. https://www.rff.org/
publications/issue-briefs/cost-analysis-and-emissions-
projections-under-power-sector-proposals-in-reconciliation/
\xiii\ Clean Energy Buyers Institute (formerly Renewable Energy
Buyers Institute) and Resources for the Future. July 2021. Evaluation
of Power Sector Emissions Reduction Pathways. https://cebuyers.org/wp-
content/uploads/2021/07/Evaluation-of-Power-Sector-Emissions-Reduction-
Pathways-Summary-for-Policymakers.pdf
\xiv\ Federal Energy Regulatory Commission. November 2015. Regional
Transmission Organizations. https://www.ferc.gov/sites/default/files/
2020-05/elec-ovr-rto-map.pdf
\xv\ As of 2018, renewable energy generation reached 100 gigawatts
in wholesale energy markets, which represents roughly 80% of US total
installed variable renewable energy capacity. See 2018 Renewable Energy
Grid Integration Data Book: U.S. Department of Energy. 2018. 2018
Renewable Energy Grid Integration Data Book. https://www.nrel.gov/docs/
fy20osti/74823.pdf
Additionally, about 73% of large-scale battery storage power
capacity in the United States, is installed in states covered by
independent system operators (ISOs) or regional transmission
organizations (RTOs): U.S. Energy Information Administration. July
2020. Battery Storage in the United States: An Update on Market Trends.
https://www.eia.gov/analysis/studies/electricity/batterystorage/pdf/
battery_storage.pdf
Additionally, according to Advanced Energy Economy, ``removing
market barriers would allow these advanced energy technologies to
inject $65 billion into wholesale markets'': Advanced Energy Economy.
May 2019. Wholesale Market Barriers to Advanced Energy--and How to
Remove Them. https://info.aee.net/wholesale-market-barriers-to-
advanced-energy
\xvi\ Rhodes, J., Kiesling, L., and Davidson, F. November 2021.
Assessment of the Emissions Performance of Wholesale Electricity
Markets. Energy Choice Coalition. https://
static1.squarespace.com/static/5c60a6ff809d8e61723abdd4/t/
619536b70740600220a236d0/
1637168824983/ECC-Assessment+of+Emissions_11182021.pdf
\xvii\ Id.
\xviii\ Current RTOs provide participants between $2-4 billion in
annual savings each (See MISO Value Proposition: MISO, 2021. MISO Value
Proposition. https://www.misoenergy.org/about/miso-strategy-and-value-
proposition/miso-value-
proposition/; PJM Value Proposition: PJM. 2019. PJM Value Proposition.
https://www.pjm.com/-/media/about-pjm/pjm-value-proposition.ashx SPP.
27 April, 2021. SPP reports $2.14B in annual savings for members,
unveils new mission and vision to board of directors. SPP.
https://www.spp.org/newsroom/press-releases/spp-reports-214b-in-annual-
savings-for-members-unveils-new-mission-and-vision-to-board-of-
directors/).
Prospective studies on benefits of RTO participation find
production cost savings in the range of 3% to 9%. (The Brattle Group.
April 2019. Potential Benefits of a Regional Wholesale Power Market.
https://www.brattle.com/insights-events/publications/potential-
benefits-of-a-regional-wholesale-power-market-to-north-carolinas-
electricity-customers/).
The State-led Market Study led by Utah's Department of Energy and
neighboring western states found an RTO expanding the west could save
participants $2 billion annually in gross benefits by 2030: Energy
Strategies. 2021. Insights and Experience. https://www.energystrat.com/
new-insights-experience
Studies on the formation of an RTO in the southeast could achieve
cumulative savings of $384 billion by 2040: Energy Innovation. August
2020. Economic And Clean Energy Benefits Of Establishing A Southeast
U.S. Competitive Wholesale Electricity Market. https://
www.powermag.com/wp-content/uploads/2020/08/economic-and-clean-energy-
benefits-of-establishing-a-southeast-u-s-competitive-wholesale-
electricity-market_final.pdf
\xix\ James Bushnell, Erin T. Mansur, and Kevin Novan. 23 February,
2017. Review of the Economics Literature on US Electricity
Restructuring. University of California Davis and Dartmouth College
Tuck School of Business.
https://
mansur.host.dartmouth.edu/papers/
bushnell_mansur_novan_literature_elec_restructuring.pdf
\xx\ Chen, J and Hartman, D. 10 November, 2021. Why wholesale
market benefits are not always apparent in customer bills. R Street
Institute. https://www.rstreet.org/2021/11/10/why-wholesale-market-
benefits-are-not-always-apparent-in-customer-bills/
\xxi\ MISO. 2021. MISO Value Proposition. https://
www.misoenergy.org/about/miso-strategy-and-value-proposition/miso-
value-proposition/
PJM Value Proposition: PJM. 2019. PJM Value Proposition.
https://www.pjm.com/about-pjm/˜/media/about-pjm/pjm-value-
proposition.ashx;
\xxii\ Western States could save $2 billion annually: Energy
Strategies. 30 July, 2021. State-Led Market Study: Market and
Regulatory Review Report.
https://static1.squarespace.com/static/59b97b188fd4d2645224448b/t/
6148a03ea5c43d63b2873506/1632149569046/Final+Roadmap+-
+Market+and+Regulatory+Review+Report+210730.pdf
Colorado: joining an RTO could reduce customer rates 5%: Howland,
E. 3 December, 2021 Colorado utilities could cut costs 5% by joining an
RTO, PUC finds, as Western market momentum builds. Utility Dive.
https://www.utilitydive.com/news/colorado-utilities-PUC-rto-report-
power-
markets/610918/?utm-source=Sailthru&utm-medium=email&utm-
campaign=Issue:%202021-12-
03%20Utility%20Dive%20Newsletter%20%5Bissue:38381%5D&utm-
term=Utility%20Dive
SE Maximizing Cost Savings and Emission Reductions: Power Market
Options for the Southeast United States found that an RTO in the SE
could save $5 billion annually: Clack, C., Choukulkar, A., Cote, B.,
and McKee, S. 28 September, 2021. Maximizing Cost Savings and Emission
Reductions: Power Market Options for the Southeast United States.
Vibrant Clean Energy.
https://www.vibrantcleanenergy.com/wp-content/uploads/2021/09/VCE-SEEM-
Modeling_final.pdf
\xxiii\ See Section 30453 of H.R. 5376, the Build Back Better Act.
\xxiv\ MIT researchers show that coordinating power system planning
and dispatch regionally, along with a doubling of transmission
capacity, reduces the cost of zero-carbon electricity by as much as 46%
compared to a state-by-state approach. Brown, P., and Botterud, A. 20
January, 2021. The Value of Inter-Regional Coordination and
Transmission in Decarbonizing the US Electricity System. Joule https://
www.sciencedirect.com/science/article/abs/pii/
S2542435120305572?dgcid=author
The National Academies offer deep decarbonization scenarios that
would allow the U.S. to reach net zero or net negative CO2
emissions by 2050. The central case estimates that expanding
interregional transmission by a 2.5-fold increase over 2020
transmission levels would increase the share of wind and solar to 60%
of total generation. National Academies of Sciences, Engineering, and
Medicine. 2021. Accelerating Decarbonization of the U.S. Energy System.
https://www.nap.edu/resource/25932/interactive/
Princeton University researchers identified a need for 3-5 times
more transmission capacity to reach net-zero emissions by 2050:
Princeton University. Net Zero America. October 2021. Net-Zero America:
Potential Pathways, Infrastructure, and Impacts. Princeton University.
https://netzeroamerica.princeton.edu/the-report
\xxv\ Brinkman, G., Novacheck, J., Bloom, A., and McCalley, J.
October 2020. Interconnections Seam Study. National Renewable Energy
Laboratory.
https://www.nrel.gov/docs/fy21osti/78161.pdf
\xxvi\ Researchers from Iowa State University found that $80
billion in transmission spending would create 562,000 construction jobs
and a net gain of 3,083 jobs nationally across the energy sector.
Swenson, D. July 2018. Economic Impact & Job Creation Relative to
Large-Scale, High Voltage Transmission Infrastructure. Iowa State
University.
http://www2.econ.iastate.edu/prosci/swenson/Publications/
The%20Interconnection%20Seam%20Study%20Amended%20Title.pdf
\xxvii\ Wimsatt, K. and David Gardiner and Associates. 29 July,
2019. Transmission: A Key Aspect of New Climate Policies. Americans for
a Clean Energy Grid.
https://cleanenergygrid.org/transmission-key-aspect-new-climate-
policies/
\xxviii\ David Gardiner and Associates. January 2018. Transmission
Upgrades &
Expansion: Keys to Meeting Large Customer Demand for Renewable Energy.
A Renewable America. https://windsolaralliance.org/wp-content/uploads/
2018/01/WEF-
Corporate-Demand-and-Transmission-January-2018.pdf
\xxix\ NRECA. 22 October, 2021. Electric Co-op Facts & Figures.
https://www.electric.coop/electric-cooperative-fact-sheet
\xxx\ World Wildlife Fund. 02 June, 2021. Power Forward 4.0: A
progress report of the Fortune 500's transition to a net-zero economy.
https://www.worldwildlife.org/publications/power-forward-4-0-a-
progress-report-of-the-fortune-500-s-transition-to-a-net-zero-economy
\xxxi\ RE 100. 2021. RE 100 Member List. https://www.there100.org/
re100-members
\xxxii\ Science Based Targets. 2021. Companies Taking Action.
https://sciencebasedtargets.org/companies-taking-action
\xxxiii\ Wood Makenzie. 20 August, 2019. Corporates usher in new
wave of US wind and solar growth.
https://www.woodmac.com/our-expertise/focus/Power--Renewables/
corporates-usher-in-new-wave-of-u.s.-wind-and-solar-growth/
\xxxiv\ A recent special report from the United Nations
Intergovernmental Panel on Climate Change finds the world needs to cut
its planet-warming emissions by about half by 2030 relative to a 2005
baseline: IPCC. 2018, Summary for Policymakers. Global Warming of
1.5+C. An IPCC Special Report on the impacts of global warming of 1.5+C
above pre-industrial levels and related global greenhouse gas emission
pathways, in the context of strengthening the global response to the
threat of climate change, sustainable development, and efforts to
eradicate poverty. https://www.ipcc.ch/sr15/chapter/spm/
Rhodium Group also states that, under optimistic assumptions, the
electric power sector is projected to maintain emissions in the range
of 46%-50% below 2005 levels in 2030 without additional action: Larsen,
J., King, B., Kolus, H., Herndon, W. 23 March, 2021. Pathways to Build
Back Better: Investing in 100% Clean Energy. Rhodium Group. https://
rhg.com/research/build-back-better-clean-electricity/
\xxxv\ International Energy Agency. 2020. World Energy Outlook
2020. IEA.
https://www.iea.org/reports/world-energy-outlook-2020/achieving-net-
zero-emissions-by-2050
\xxxvi\ Goldman School of Public Policy. June 2020. 2035 Report:
Electricity.
https://www.2035report.com/?utm_medium=email&_hsmi=2&_hsenc=p2ANqtz-
_nsf6UuQfub_okag8lAO3F-GO-oXf1rhZpXEhjh4RdqfOxBMs14KwyiFMybtArc0D5TNvO-
YCGub8TavKJt9aEBqoo5w&utm_content=2&utm_source=hs_email
\xxxvii\ BloombergNEF. 19 January, 2021. Energy Transition
Investment Hit $500 Billion in 2020--For First Time. https://
about.bnef.com/blog/energy-transition-
investment-hit-500-billion-in-2020-for-first-time/
\xxxviii\ White House Office of the Press Secretary. 25 February,
2016. FACT SHEET: Seven Years Ago, the American Recovery and
Reinvestment Act Helped Bring Our Economy Back from the Brink of a
Second Great Depression.
https://obamawhitehouse.archives.gov/the-press-office/2016/02/25/fact-
sheet-seven-years-ago-american-recovery-and-reinvestment-act-helped
Ms. Castor. Thank you very much.
Next, we will go to Dr. Varadarajan. Dr. Varadarajan, you
are recognized for 5 minutes for your testimony.
STATEMENT OF DR. UDAY VARADARAJAN
Dr. Varadarajan. Thank you, Chairwoman Castor, Ranking
Member Graves, and distinguished members of the select
committee, for inviting me to testify and for your ongoing
leadership in focusing on the climate crisis.
I am a Principal at RMI, which was founded in 1982, and is
an independent, nonpartisan nonprofit dedicated to transforming
global energy use to help create a clean, prosperous, and
secure low-carbon future. And I am grateful for the chance to
speak with you today about RMI's work to assess the potential
impacts of climate investments in the Build Back Better Act on
families and businesses across the country.
I wanted to start by noting that, indeed, this winter, more
than half of American households could see energy bills rise by
30 percent or more because of skyrocketing natural gas and oil
costs. Now, I think it is important to note this isn't an
isolated incident, and this has happened many, many times
before. Just this February, in Texas, we saw a cold spell that
led to daily gas supply suddenly falling by half, and led to
huge blackouts, and about a $47 billion spike in electricity
costs over 1 week, as much as Texas usually pays over 3 to 6
years on generation.
These kinds of volatile and rising energy costs pose a real
threat to the health and financial well-being of families
across the country.
And to put a finer point on it, in 2019, the country's
lowest income households, about 18 million, spent an average of
about $1 out of every $6 on energy costs, a rate that is nearly
10 times that of households with above-average income. And, in
fact, nearly half of all Americans pay more annually in energy
bills than they do in Federal income taxes. So energy really
matters.
In the near term, what can we do about this? Well, in the
near term, things like science rapidly strengthening the energy
assistance programs that we have in place, like LIHEAP, or
through internationally coordinated releases of strategic oil
reserves, as the Biden administration is pursuing, are
important steps that can mitigate this harm. But that is not
the long-term solution.
In the long run, the only way to ease the burden of
volatile fossil fuel and energy costs on American families is
to make the shift to better buildings and vehicles that use
cleaner and cheaper energy sources with more stable energy
prices. Such a shift could involve the use of wind and solar,
complemented by battery storage, that offer energy price
stability and can create durable energy savings for American
households, all while reducing greenhouse gas emissions.
The Build Back Better Act could help American families and
businesses do just this. They could really help the United
States reduce greenhouse gas emissions from the supply of
electricity and save Americans billions of dollars on their
electricity bills and be less dependent on fossil fuels, whose
changing prices disproportionately impact low-income
households.
So how does it do this? First, one of the best ways to
reduce both high energy burdens, and especially for low-income
households, as well as the disproportionate negative health
impacts they face by burning fossil fuels inside their homes,
is through comprehensive upgrades to their homes and
apartments, health and safety repairs, investments in
efficiency and electrification.
The Build Back Better Act includes incentives for exactly
these investments, particularly for low-income households, such
as the high efficiency electric home rebates, two thirds of
which must be directed to low-income and tribal households. Now
a seond way in which the Build Back Better Act helps to
mitigate these burdens is through new and improved financial
mechanisms such as the extension improvement on existing clean
energy tax credits. These changes can allow customers of
electric utilities across the country save money if their
utilities and their regulators, in some cases, make the choice
to switch to clean energy.
Now, we wanted to understand how this could actually work
for households that were the most vulnerable to volatile fuel
prices. So we analyzed the electricity costs paid by customers
of those utilities that are most dependent on fossil fuels
today. These are regulated utilities, rural cooperatives, that
serve 92 percent of the counties facing challenges with
persistent poverty and publicly owned utilities.
Together, these utilities own about 80 percent of the
remaining coal power in the U.S., and we asked how the Build
Back Better Act could impact them. And what we found is that
the incentives in the Build Back Better Act, if they became
law, along with existing policies, could allow customers of
these utilities to see annual savings of up to $11 billion a
year by 2030, if these utilities choose to use the incentives
that are being offered to them and to reduce their use of
fossil fuels and build in clean generation and, at the same
time, reduce their greenhouse gas emissions by 67 percent.
And, moreover, we found that these savings are concentrated
in households and regions with the highest energy burden.
So, in short, increasingly expensive fossil fuel burdens
fall on customers with high costs. But the Build Back Better
Act makes shifting to clean energy easier, reducing costs to
customers while providing help to the regions that most need
it.
Thank you.
[The statement of Dr. Varadarajan follows:]
Testimony of Dr. Uday Varadarajan
Principal, RMI and Precourt Energy Scholar, Sustainable Finance
Initiative at Stanford University
Before the Select Committee on the Climate Crisis
``Cleaner, Cheaper Energy: Climate Investments to Help Families and
Businesses''
2021-12-09
Introduction
This winter, more than half of American households will see their
energy bills rise by 30% or more \i\ due to skyrocketing natural gas
and oil costs. Rising energy costs pose a real threat to the health and
financial well-being of families, especially the 4.8 million low-income
households in the United States that missed an energy bill payment in
2020.
Rapidly strengthening energy assistance programs such as the Low
Income Home Energy Assistance Program \ii\ that aid households with a
high energy burden (share of household income that goes to energy
expenditures) is an important step to mitigate this threat and protect
low-income families from energy shutoffs--at least in the near term.
However, the long-term solution to easing the burden of volatile
energy costs on American families is to shift to cleaner, cheaper
energy sources. Cleaner energy sources such as wind and solar
complemented by battery storage offer energy price stability and could
create durable energy savings for American households. The Build Back
Better Act as passed by the House expands and improves financial
incentives such as clean energy tax credits \iii\ to accelerate the
transition to clean energy resources, reducing energy bills and
negative health impacts for families across the country.
Build Back Better
The Build Back Better Act will help the United States reduce its
greenhouse gas emissions from the supply of electricity, save Americans
billions of dollars on their electricity bills, and be less dependent
on volatile fossil fuels whose changing prices disproportionately
affect low-income households. The most significant drivers of the
overall cost and emissions reductions are three changes to the tax
code. First, the Act extends and expands clean energy tax credits,
allowing any carbon-free generation resource installed over the next
ten years to benefit from a $25/megawatt-hour production tax credit.
Next, the Act provides incentives to improve the reliability and
resilience of the electric grid by introducing a 30% investment tax
credit for battery storage and transmission. Finally, the Act allows
both tax credits to be available via direct pay,\iv\ which enables
electric utilities of all kinds to fully utilize the tax credits
without delay to maximize cost reductions for their customers. As a
result, utilities can use the Build Back Better tax credits to reduce
the carbon they emit by deploying a diverse set of clean energy
technologies, while providing low-cost and reliable electricity
service.
In addition, the Act features several provisions aimed at ensuring
that energy cost relief and clean energy investment benefits low-income
and fossil-dependent communities. For example, the Act provides funding
for the USDA to help rural electric cooperatives reduce the debt burden
and facilitate their reinvestment in clean energy--thereby helping
bring down energy bills for the 92% of the U.S. counties with
persistent poverty that are served by cooperatives. On the investment
side, clean energy projects built in low-income or fossil-dependent
communities are eligible for tax credit enhancements funded by the Act,
ensuring that these communities are able to share in the wealth created
by the transition to clean energy.
Build Back Better Reduces Emissions and Lowers Energy Bills
To assess the potential magnitude of the emissions reductions and
savings made possible by the Act, RMI analyzed the impact of existing
clean energy incentives as augmented Build Back Better provisions on
the economics of the regulated, cooperative, and publicly owned
utilities that own and operate nearly 80% of the remaining coal plants.
Using publicly reported utility data sourced from RMI's Utility
Transition Hub \v\ and federal agencies, RMI calculated the effective
``crossover'' points at which adding more generation from renewable
energy can save utility customers money relative to current utility
operations. We also accounted for increasing costs of capacity from
battery storage to enhance system reliability as renewable energy usage
increases. Finally, RMI incorporated Build Back Better Act policies
like expanded clean energy tax credits, low-cost refinancing, and debt
relief for electric cooperatives. We assumed that with these policies,
clean energy replaces fossil generation once it becomes cost-effective
to do so, with savings calculated from the difference in energy costs
between renewables and fossil generation. RMI calculated emission
reductions by measuring the Build Back Better Act against a baseline
that begins with the reported emissions from power plants in 2019.
The numbers are clear--clean energy and the Build Back Better Act
will save billions of dollars over the next decade and significantly
reduce greenhouse gas emissions by enabling utilities to accelerate
their transition to cleaner, cheaper resources:
Utility customers will see annual savings of $11 billion
per year annually by 2030 from the transition to clean energy,\vi\ and
The combined impact of the Act with existing policies and
the declining costs of clean energy can make it economic for these
utilities to reduce their GHG emissions by 67%--or 658 Million Metric
Tons of CO2 annually--relative to their 2019 emissions by 2030,
lowering emissions by as much as 4.2 Billion Metric Tons of CO2
cumulatively from 2022-2030.\vii\
And with a grid powered by clean electricity, the electrification
and decarbonization of other sectors will follow. In short, the savings
and emissions reductions presented in this analysis refute the myth--
one that has garnered a great deal of airtime during the federal budget
debate--that transforming our electricity sector will be too expensive
for customers.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Build Back Better Empowers Households to Act to Reduce Their Energy
Burden
One of the best ways to reduce both the higher energy burdens borne
by low-income households and the disproportionate negative health
impacts caused by burning fossil fuels inside homes \viii\ is through
funding comprehensive building upgrades--health and safety repairs,
efficiency, and electrification at the same time. The Build Back Better
Act includes incentives for such investments, particularly for low-
income households, such as the High Efficiency Electric Home Rebates,
two-thirds of which must be directed to low-income and tribal
communities, and the Home Energy Performance-Based Whole-House Rebates
and Training Grants. The full benefits of all of these programs must be
made accessible to those most burdened by high energy and housing costs
and suffering the impacts of substandard homes. As examples, the same
changes to allow refundability and direct pay proposed for the
renewable energy tax credits under section 25D should be extended to
the residential efficiency tax credits under section 25C, and the new
construction tax credits under section 45L should not reduce the basis
for the Low-Income Housing Tax Credits when used together for highly
efficient affordable housing projects. These provisions would improve
both air quality and human health while improving living standards and
saving households money.
Build Back Better Protects Vulnerable Families
Replacing expensive fossil generation will not only reduce
emissions and helps meet ambitious US climate commitments, but it will
also save Americans money on their electricity bills. Such savings are
important for all Americans facing rising fuel costs but are especially
crucial for households that experience high energy burden.
In 2019, the country's 18.2 million lowest-income households spent
an average of one out of every six dollars on energy costs,\ix\ a rate
nearly ten times that of households with above-average income. In fact,
nearly half of all Americans pay more annually in energy bills than
they do in federal income taxes.\x\ This issue is all too relevant
today, as we've just seen the average energy burden from electricity
expenditures has increased \xi\ for the first time since 2014. Reducing
this energy burden will provide these families substantial relief.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In fact, the Act's savings are concentrated in households in
regions with the highest burden. According to RMI's analysis, the five
utilities with the highest potential annual savings from Build Back
Better serve households with an average energy burden in the top
quartile across all utilities.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
In short, increasingly expensive fossil fuels burden customers with
high costs that can rise with little warning. The Build Back Better Act
makes shifting to clean energy easier, reducing costs to consumers
while providing help to the regions that are most in need.
References Page
\i\ https://www.eia.gov/outlooks/steo/report/WinterFuels.php
\ii\ https://www.acf.hhs.gov/ocs/low-income-home-energy-assistance-
program-liheap
\iii\ https://www.utilitydive.com/news/550b-clean-energy-climate-
spending-build-back-better-credit-renewable-congress/609151/
\iv\ https://rmi.org/simple-tax-changes-can-unleash-clean-energy-
deployment/
\v\ https://utilitytransitionhub.rmi.org/
\vi\ Levelized annual savings by 2030 for FERC-reporting utilities
and extrapolated across the entire electricity sector with Build Back
Better Act compared to 2019. Sources: RMI Utility Transition Hub, FERC,
EIA, NREL
\vii\ Annual emissions reduced for FERC-reporting utilities with
Build Back Better Act compared to 2019. Sources: RMI Utility Transition
Hub, FERC, EIA, NREL
\viii\ https://rmi.org/uncovering-the-deadly-toll-of-air-pollution-
from-buildings/
\ix\ https://www.canarymedia.com/articles/energy-equity/build-back-
better-act-would-reduce-burden-of-household-energy-costs
\x\ https://www.canarymedia.com/articles/energy-equity/build-back-
better-act-would-reduce-burden-of-household-energy-costs
\xi\ https://utilitytransitionhub.rmi.org/portal/
Ms. Castor. Thank you very much.
Mr. Herrgott, you are recognized for 5 minutes to present
your testimony. Welcome.
STATEMENT OF ALEXANDER HERRGOTT
Mr. Herrgott. Chair Castor and Ranking Member Graves, my
name is Alex Herrgott, and I serve as the President of The
Permitting Institute, or TPI. We are a nonpartisan, nonprofit
organization focused on simplifying the permitting process so
that we can both protect our nation's resources and build the
critical infrastructure America needs.
While we are based here in Washington, DC, TPI's most
important work happens in the field and across the country
where most critical project approvals occur. Our team of
scientists, engineers, and attorneys recruited from Federal
agencies, including recent additions of senior permitting
officials from the Biden administration, have a long track
record of success in balancing infrastructure needs with
creative solutions to deliver improved environmental and
community outcomes during the permitting process.
We are the real-world, project-delivery practitioners
behind the scenes in both the private and public sector who
have written 2,000-page environmental impact statements and the
additional 2,000 pages of appendices and technical reports. We
have been in the trenches, written the laws, and worked
alongside agency staff to untangle the web of permitting
confusion caused by overlapping and conflicting requirements
across dozens of Federal and state agencies, a hundred
permitting laws, and the resulting maze of regulations,
executives orders, and judicial precedent that govern
infrastructure development.
Our mission is to strengthen the partnership between
government and impacted communities and industry. We deploy a
collaborative, practical, problem solving approach that has
successfully guided many of the largest wind, solar,
transmission, and coastal restoration projects in the U.S.,
saving years and billions in costs.
TPI members, and members of your committee, know all too
well that funding is only the first step in delivering the
improvements promised in the Infrastructure Investment and Jobs
Act. But to be clear, to build back better, we first must be
able to build, and currently that is not the case.
TPI strongly supports recent permitting reforms, along with
new training and siting and assistance grants to states,
cities, and Tribes, but these will yield only modest benefits
for those who are invested in a cleaner, cheaper energy future,
a status quo that diminishes or, at best, delays the impact of
any new funding currently being discussed in Congress.
Developers across all sectors, while still experiencing the
same chronic obstacles and process delays, they see consistency
in policy, predictability in process, and some basic
accountability for appropriate reviews; not guaranteed outcomes
or yeses, just a decision in a reasonable amount of time.
Unfortunately, this is a human-based system spread across
sometimes 50 different decision makers and chains of command,
each with their own requirements that are rarely aligned.
To achieve real progress, Congress must tackle the
underlying sources of bureaucratic gridlock. Permitting reform
has been the central focus of Republican and Democrat
administrations, yet compromise remains elusive.
Americans are already experiencing the cost of inaction.
Rising energy costs and volatility in our energy markets
continues as we transition from those conventional to renewable
resources, as the other witnesses have mentioned. With much of
the much--the needed infrastructure still in the earliest
planning stages, they still now face a maze of permitting
obstacles that developers report are responsible for adding an
additional 20 to 30 percent on total project costs.
These costs are ultimately passed on to the public in the
form of higher taxes and escalating utility rates. In this
system, no one wins: not the environment, not the stressed U.S.
electricity grid, and definitely not the ratepayers.
Project developers, including many of our members, stand
ready to pursue $600 billion to $800 billion in private
investment for new wind, solar, transmission, hydrogen,
storage, and carbon capture. The reality, however, is the
benefits of projects initiated today won't be realized for 7 to
10 years because of the current permitting system.
It could be hydropower plants that are routinely challenged
in court, citing conflicting statutory and regulatory
requirements, a growing list of proposed offshore wind projects
and other onshore on Federal lands stalled by the constantly
evolving rules governing species and wetlands protections.
One egregious example is a $3 billion investment in a clean
energy transmission line that began the permitting process more
than a decade ago. The project was finally approved 4 years
ago. However, it is now entangled in court proceedings because
one hand did not know what the other hand was doing within the
same Federal agency.
This is not a Republican or Democrat issue. This is a
process issue. The lack of a predictable permitting process is
the enemy of progress, and that uncertainty is keeping hundreds
of billions of dollars of new investments on the sidelines.
Beyond those existing permitting obstacles, new
infrastructure investment must now also contend with the
regulatory whiplash with contradictory regulations being
proposed and issued every couple years. Projects currently
undergoing review, years into the process, are left in a no
man's land trying to figure out what to do, while agencies
provide no guidance regarding decision making in the meantime.
TPI is working to bridge the disconnect between erratic
policy shifts and the real-world consequences on the ground. We
are building a large coalition of diverse entities, committed
to achieving a balance between progress and protection. The key
is greater coordination efficiency, not limits on stakeholder
participation or shortcuts to laws and regulations. More
comprehensive and lasting permitting reform efforts in the past
have been blocked by the notion that faster always means fewer
protections to the environment. That is simply false.
Congress should embrace reforms that expand state, local,
and Tribal partnerships, such as TPI State Permitting Council
initiative that builds trust, communication, and coordination
between state and Federal regulators. We also recommend this
committee take a hard look at achievable compromise on
legislative reform initiatives such as the BUILDER Act, which
clarifies the appropriate role for Federal reviews at state
levels.
And to conclude, if we agree that a project development
cycle of 7 to 10 years, regardless of the energy source, is
simply too long, we must move past fringe talking points and
political posturing and take the next steps together. We have
no other choice. By doing so, we will unlock the opportunity to
modernize and expand our energy infrastructure, while expanding
the supply of U.S.-sourced critical minerals essential to make
these projects a reality. These efforts will safeguard
communities, protect the environment, while simultaneously
securing new domestic sources of affordable energy and the jobs
bringing American industry back to life.
Thank you very much.
[The statement of Mr. Herrgott follows:]
Written Testimony of Alexander Herrgott
President and CEO, The Permitting Institute
U.S. House of Representatives Select Committee on The Climate Crisis
Cleaner, Cheaper Energy: Climate Investments to Help Families and
Businesses
Thursday, December 9, 2021
1:30 p.m.
210 Cannon House Office Building
Chairman Castor and Ranking Member Graves, my name is Alex Herrgott
and I am president of ThePermitting Institute (``TPI''). TPI is a
Washington DC-based non-profit, non-partisan organization, whose
purpose is to modernize America's aging infrastructure while protecting
our environmental, cultural, and historic resources.
I appreciate the opportunity to discuss targeted actions Congress
can take to increase the efficiency and certainty of the permitting
process, while enabling construction of affordable, reliable, and
resilient energy infrastructure. Permitting confusion, redundancy, and
uncertainty increase the cost of energy and our dependence on foreign
nations--including our adversaries--thereby diminishing America's
global competitiveness.
The unfortunate reality is that the permitting reforms in the new
bipartisan infrastructure law will yield only modest benefits for the
transportation, coastal restoration, broadband, energy, and water
infrastructure and resources project developers.
Those developers will experience 99% of the same chronic obstacles
and process delays. To achieve real progress, Congress must address the
bureaucratic gridlock blocking new investment.
Permitting uncertainty is diminishing and delaying investment
returns across all infrastructure sectors, most notably the expansion
of conventional and renewable energy and transmission development.
Volatility in energy markets continues to increase as the country
transitions its energy supply. The mismatch between planned electric
generation--often delayed by a 7 to10 year development timeline--and
electric generation retirement are causing supply and demand issues
that are, in part, responsible for rapid increases in domestic and
global energy prices.
An equally big deal is the $600-$800 billion in private investment
for new wind, solar, transmission, hydrogen, storage, and carbon
capture waiting on the sidelines for clarity and certainty. These ``big
deal'' numbers are further informed by an April 2021 report by Grid
Strategies LLC, released during a Department of Energy event, that
shows 22 ``shovel-ready'' transmission lines stalled in various phases
of the permitting process, with no resolution in sight.
TPI urges this Committee to focus future comprehensive permitting
reform efforts broadly and dispassionately on all sources of
bureaucratic obstructions blocking accelerated deployment of new clean
energy projects. The alternative is a status quo that benefits no one.
Accordingly, project developers and TPI members are hesitant to
invest. They know that projects initiated today will not be able to
commence operations and realize their investment cost recovery for 7
to10 years at the earliest. As this summary timeline articulates, our
nation's permitting system does not solve problems, it creates them.
To illustrate the problem, for major infrastructure projects, it
takes:
2-to-3 years of project design, engineering, permitting,
planning, and financing
2-to-4 years of formal permitting process submission and
review--a timeline that pushes orders for equipment, steel, concrete,
and labor contracts years into the future
2-to-3 years of construction--this assumes permitting
approvals are granted and supply chain orders are aligned
Despite these challenges, I am here today to highlight significant
opportunities for progress and to help remove obstacles impeding
infrastructure project timelines. TPI provides guidance early in the
process and throughout a project's development--helping our members
identify issues years ahead of the current timeline. We minimize risk
of delays and avoidable costs by working with all parties to identify a
streamlined path to completion while protecting our natural resources.
Still, TPI members, and members of this committee, know all too
well that energy projects are routinely stymied at various phases of
project development by disconnected and fragmented federal and state
review processes. Permitting is often marred by contradictory and
redundant rules, timelines, and policies that cause delays, cost
overruns, and in some cases, project abandonment.
Chronic permitting problems are exacerbated by the lack of
bureaucratic accountability. Our broken system allows agencies to sit
on applications for years, even decades in some cases, with no
certainty of eventual project approval. TPI does not maintain that
federal agencies owe project developers a yes, but we believe federal
agencies owe project developers an answer--yes or no--in a reasonable
timeframe.
While the focus in most permitting timeline discussions often
centers on the National Environmental Policy Act (``NEPA''), NEPA is
just one process among more than 60 possible federal permits that may
be required for a project, spread across 13 federal agencies, not
including myriad state and local permitting obligations.
Many otherwise ``shovel-ready'' infrastructure projects spend years
in bureaucratic gridlock. Developers routinely find themselves
struggling through the informal pre-permitting, planning, and
application process--again, often for years--with extensive ongoing
submission and review cycles before NEPA reviews formally commence.
Consider these examples:
Proposed energy projects on federal lands continue to
face constantly evolving rules governing species and wetlands
protections.
Some federal agencies have identified new formal or
informal policies over the past several years to frontload biological,
cultural, and historical survey requirements prior to formally starting
the review process--pushing the official starting point even further
into the future. In some cases, project pre-planning increases
efficiency and substantial discussion early in the process, but in
others it can conceal the full duration of the permitting review
process and leave developers with no final federal to challenge.
One egregious example is a $3 billion investment in a
clean energy transmission line that began the permitting process more
than a decade ago. The project endured seven years of review and was
finally deemed ``complete'' by the federal government four years ago.
However, it is now entangled in court proceedings because one hand did
not know what the other was doing--within the same federal agency.
Multiple offshore wind projects, including Skipjack,
Mayflower, and Bay State, even after becoming a clear priority for the
Biden Administration, have yet to receive a preliminary permitting
timetable from federal agencies, even for those projects statutorily
required to have a permitting timetable.
Over the last few years, several exploration, copper,
lithium, molybdenum, nickel, and other mineral projects essential for
battery storage and EV deployment have been stalled by internecine
squabbling among federal agencies and litigation. This includes a
proposed road in Alaska that would have moved critical and ``renewable
energy'' minerals from remote parts of the state to industrial centers.
Several hydropower permits and operating authorizations
have also been challenged in court, citing conflicting statutory and
regulatory requirements among as many as 10 federal agencies.
Each of these examples--and there are hundreds more--points to the
urgent need to repair the outdated and chaotic permitting system that
keeps the country from meeting our growing infrastructure needs.
Most major U.S. infrastructure investments in energy, including
wind, solar, hydrogen, carbon capture, hydro, and geothermal, as well
as broadband, electricity transmission, oil and gas pipelines, supply
chain port expansion, and export development are entirely supported by
U.S companies and investors in the private sector. Energy and
infrastructure investors require predictability and prompt decision
making when putting capital at risk. Unfortunately, investors are too
often treated as adversaries pitted against federal regulators rather
than as partners in rebuilding our nation.
Despite bipartisan agreement that the country's permitting process
is broken, outside stakeholders, each prioritizing their narrow
interests, are inhibiting additional reforms. But there is a path
forward.
Lawmakers should build on and expand the reforms enacted over the
past decade. Perhaps the most notable accomplishment was the creation
of the Federal Permitting Improvement Steering Council (FPISC), a
voluntary program for project developers charged with identifying best
practices and implementing basic project management practices across 13
federal agencies. The extension of this Council is appreciated by TPI
members. However, the FPISC dashboard currently hosts only 20 active
multiyear projects of the largest and most complicated efforts in the
country--a number that must grow substantially. FPISC's leadership,
particularly Executive Director Christine Harada, is preparing the
Council to grow. The Council has accepted 8 new projects in 2021, six
wind farms, one solar project, one transmission line.
Additionally, thanks for the new bipartisan infrastructure bill,
the ``One Federal Decision'' (OFD) framework enhances coordination
among agencies with the goal of completing NEPA review in an average of
two years for major surface transportation projects. Unfortunately, if
a project doesn't meet the limited and precise FPISC or OFD criteria,
coordinating support is limited. This reality leaves hundreds of
developers proposing $600-$800 billion in new energy infrastructure
suffering through the status quo. Currently, there are no new enacted
reforms supporting these important projects.
TPI commends Congress for passing, and President Biden signing,
bipartisan infrastructure legislation. However, the Administration is
rescinding longstanding permitting efficiencies without proposing new
rules help guide efficient permitting. The Administration must reverse
course on this flawed approach.
These changes are resulting in extended delays and creating a
chilling effect on new infrastructure investment. TPI members
appreciate the sector specific and narrowly targeted permitting reforms
included in the new infrastructure bill, but they still face growing
confusion from the constantly evolving federal rules and reviews.
TPI is concerned that the dividends from ``build back better'' are
7 to 10 years away, at the earliest. That extended timeline does not
account for permits challenged in court and shows the need for Congress
to step up to the plate and fix the permitting process.
While we have not yet seen the specifics of the Phase II NEPA
rulemaking the Administration plans to unveil later next year after
Phase I is finalized early next year, our concern is that it will place
renewable and traditional energy infrastructure and generation projects
at great risk.
When combined with other new proposed rulemakings and regulatory
actions previously listed, it is difficult to find the win for new
transmission lines and pipelines, solar installation, wind buildout,
broadband deployment, and the expansion of critical minerals production
to provide domestic sourcing for the manufacturing supply chain for
these projects.
Recent reforms have showed limited results in reducing average
permitting timeframes. It is critical to note that those reduced
average timeframes are just the tip of a massive permitting iceberg.
They do not capture all associated phases of the project development
life cycle, the years of early engagement prior to formally commencing
review under NEPA, or the years that can follow the Record of Decision.
In short, these reforms improved permitting processes but also
illuminated how many more opportunities remain to address the root
cause of permitting delays and obstruction.
The negative consequences of only addressing parts of the statutory
and regulatory process in separate, mutually exclusive, reform
exercises are easy to see. On average, project developers report that
20 to 30 percent of total project funding is wasted by delays. The
resulting cost overruns create an enormous disconnect between the
funding Congress provides and private sector invests, and the ultimate
delivery of the infrastructure America needs.
The cost of these pauses and restarts are rarely considered by
lawmakers but estimates of the financial impact for major energy
infrastructure projects begin at $50 million per month in lost revenue.
Add $32 million per month in lost retainers on heavy machinery,
architects, engineers, and construction crews who either sit stagnant
or are reassigned to active jobs. Finally, tack on another $50 million
in annual costs as project sponsors adapt to shifting permitting goal
posts requiring additional studies and mid-project redesigns, broken
contract penalties, interest on purchased materials along with
financial consequence of delays. That cost is ultimately passed down to
citizens, either through taxes, tolls, or increased rates and usage
fees.
Greater efficiency DOES NOT mean fewer environmental protections.
TPI is building a large coalition of diverse entities committed to a
balance that respects the environment while increasing efficiency.
We are working with developers in every affected industry sector,
officials at all levels of government, Tribes, non-government
organizations, and community leaders to identify permitting ``wins''.
Congress can fix permitting problems by starting small with the
creation of temporary initiatives to test new policies in the field
under conditions ideal for compromise. One very achievable near-term
step is to create a seven-year expedited permitting pilot program for a
discrete list of the most critical projects, with focus on coordinating
across all regulatory entities. Granting such an essential, yet
temporary, new authority will create room to experiment with innovative
and expedited permit authorizations. Outcomes can be scrutinized and
studied by Congress for feasibility, then converted into more lasting
reforms across all sectors.
Congress should also take a hard look at legislative reform
initiatives such as the Builder Act, which clarifies the appropriate
role for federal reviews at the state and local levels. To that end,
TPI is working to expand the permitting-council model to state and
tribal governments, emulating the success achieved in Arizona earlier
this year. New state coordinating offices bridge the information and
communication gap between state and federal regulators. States, local
governments, and Tribes often have numerous overlapping permitting
responsibilities and they are rarely coordinated efficiently. State,
local, and tribal permitting requirements are often best addressed in
the field where the project is located, equipped with critical
firsthand knowledge and expertise about local resources. State
permitting councils will allow local governments to bring the federal
government to the table early in the process.
To be clear, opportunities for progress are directly in front of
us. The creation of FPISC and improvements offered in the ``One Federal
Decision'' framework were just the first steps.
Meaningful next steps to modernize and expand our energy
infrastructure require that Congressenact comprehensive reforms that
extend beyond NEPA to eliminate avoidable delays at all phases of a
project.
A project development cycle of 7-to-10 years is simply too long.
Working together, we can advance permitting reforms to build 21\st\
Century infrastructure that safeguards communities, protects the
environment and cultural resources, creates jobs, and brings prosperity
to every corner of America.
Ms. Castor. Thank you.
Next, we will go to Ms. Jaffe. You are recognized for 5
minutes. Welcome.
Ms. Jaffe, check your audio, please.
Ms. Jaffe. Oh, goodness. Sorry.
Ms. Castor. There we go.
Ms. Jaffe. Okay.
Ms. Castor. Go ahead and start.
STATEMENT OF AMY MYERS JAFFE
Ms. Jaffe. Thank you very much.
Good afternoon, Chairwoman Castor, Ranking Member Graves,
and the distinguished committee members of the Select Committee
on the Climate Crisis. My name is Amy Myers Jaffe. Together
with Dean Kelly Sims Gallagher, I lead U.S. and global climate
policy research at the Fletcher School at Tufts University.
I have written several books on energy, including one on
the link between the oil price cycle and global financial
crises and, more recently, one on digital energy innovation.
I thank you for this opportunity to speak before the
important committee today. And I thank Ranking Member Graves
for referencing my testimony. I am glad to hear that he and
perhaps other members of the committee are concerned about the
undue influence of OPEC and Russia on global energy markets;
that we don't want to have our own foreign policy, whether that
is our climate negotiations at Glasgow or other kinds of
strategic policies, held hostage.
We also similarly want to make sure that we are competing
in global markets effectively with China. I think those are
concerns that are bipartisan concerns, and I am going to talk
about them today.
So the first thing we have learned on energy independence,
which I have a nice little diagram in my testimony, is that if
we provide extra oil supply, but oil demand is rising
exponentially, we can still wind up with increased imports to
the United States and instability in oil prices globally. And
so really, truly, the best tool we have in our arsenal is
demand management, and that in the past has been the CAFE
standard, having our vehicles be more efficient. That helps
families because they can buy less fuel to do the same trip.
And when we think about electric cars, we need to think
about that same level of efficiency. Electric motors convert
the vast majority of the energy that is stored in the battery,
between 60 to 85 percent, into useable energy that moves the
wheels and takes the car forward. By contrast, even a good
internal--combustion engine is much less efficient. It converts
only 40 percent of the gasoline fuel into useable energy, and
then an additional amount of that energy is wasted in the form
of your heating a drivetrain. And so we wind up actually only
using about 20 percent of the energy from the fuel we burn in
our car.
So, in effect, electric cars are a much more efficient
technology. And, over time, the advent of electric cars in the
United States and globally are going to remedy the influence
that producing countries can have, undue, on global energy
markets. That is a critical tool we have in our toolbox.
In the short term, we know what we have to use. We need
inventories, we need diverse supply, we need backup systems.
But longer term, we also know that public transit is an
important part of making sure that every American has access to
mobility and can't be held hostage to the cost raise that could
be made on the international market.
And one of the things we know is that--which we learned
sadly in COVID--is that, actually, of our most underserved
communities, that 20 percent of low-income families don't even
have access to an automobile and need services from public
transit.
So when we think about build back better, we are talking
about targeting exactly the needs we need to take to reduce the
volatility we see in energy markets today.
Thank you very much.
[The statement of Ms. Jaffe follows:]
BEFORE THE SELECT COMMITTEE ON THE CLIMATE CRISIS
UNITED STATES HOUSE OF REPRESENTATIVES
``CLEANER, CHEAPER ENERGY: CLIMATE INVESTMENTS
TO HELP FAMILIES AND BUSINESSES''
December 9, 2021
Amy Myers Jaffe
Research Professor and Managing Director
Climate Policy Lab, Fletcher School, Tufts University
Good afternoon, Chairwoman Castor, Ranking Member Graves, and
members of the Committee. My name is Amy Myers Jaffe and I lead U.S.
and global climate policy research at the Fletcher School at Tufts
University. I have written several books on energy, including one on
the link between the oil price cycle and global financial crises and
more recently, one on digital energy innovation. Thank you for this
opportunity to speak before this important committee.
I want to begin this afternoon by discussing what has caused recent
energy price fluctuations. Unfortunately, it is not unusual for global
energy prices to fluctuate sharply based on sudden changes in temporary
market conditions. Notably, from 2005 to 2008, oil prices rose sharply,
peaking at $147 a barrel in July 2008 and then dropped sharply in 2009
following the global financial crisis. Although tensions in the Middle
East contributed to oil's rise in the 2000s, detailed analysis of the
period concluded that markets had experienced a ``demand shock'' driven
by a sudden surge in demand for commodities due to unexpectedly strong
economic expansion of the Chinese economy following massive
urbanization and a construction boom in the runup to the 2008 Beijing
summer Olympics. A similar run up in oil prices took place in 2014 when
prices reached $100 a barrel, as regional conflicts in Libya and
elsewhere removed several million barrels a day suddenly. Oil prices
collapsed in 2015 following a price war instigated by OPEC. U.S.
natural gas prices have also fluctuated due to sudden surges in winter
demand and production disruptions such as hurricanes in the U.S. Gulf
of Mexico. For example, natural gas prices reached $15 per million BTU
in 2005, in the aftermath of Hurricanes Rita and Katrina.
The COVID-19 pandemic has caused extreme energy market
disequilibrium. The global collapse in demand as a result of pandemic
related lockdowns sent prices sharply lower, which then were given more
momentum by a price war initiated by Saudi Arabia. The problem was so
severe in March 2020 that oil producers struggled to find storage tanks
to place their unwanted oil in. Oil prices fell to $16 in April 2020.
US gasoline prices followed suit, reaching under $2 a gallon at that
time. Oil companies and oil producing countries were forced to curtail
drilling to alleviate the glut of unwanted oil. In the United States,
domestic oil and natural gas producers also had to cut back rig
operations as a result of the pandemic. In January 2020, there were
nearly 700 rigs operating. By September, the oil rig count had
collapsed 75% to under 200 rigs. Natural gas drilling also faltered,
with rig counts falling by over 40%.
But eventually as demand made a sudden recovery in 2021, notably in
the United States as economic growth skyrocketed at a pace of 6%
increase in GDP, oil prices began to rise sharply. OPEC, led by Saudi
Arabia, and Russia took advantage of the sudden imbalance of energy
global supply and demand to create artificial price hikes to their
geopolitical and financial advantage. A primary driver behind major oil
producing countries actions in recent months to create extreme energy
price volatility was to try to convince political leaders in major
economies to abandon plans to address climate change ahead of the
Glasgow climate talks. Their motivation is clear. It is because those
major oil exporting countries stand to lose geopolitical power and
financial gain in the short run from successful global climate
agreements. Their actions are not surprising but do harm to their own
populations who are already subject to devastating extreme summer heat
and localized flooding, and in the case of Russia, severe fires and
permafrost melting in Arctic region.
It is a large stretch of the imagination to say that these
fluctuations that have been part of a structural and long-established
boom and bust cycle in the oil and gas sector going back to the 1960s
are currently the fault of the transition to cleaner energy. If
anything, the addition of alternative energy helps us diversify our
sources of energy, thereby reducing the market power of foreign oil
producing countries within the OPEC plus cartel. Sadly, the energy
transition has been slow to take hold, despite the crisis in rising
global greenhouse gas emissions that are driving climate change. Global
climate policies have not substantially removed oil and gas demand yet;
both demand for oil and gas and emissions are rising this year. Greater
ambition towards climate action at the next two upcoming climate
gatherings could lead more quickly to a decline in oil and gas use
globally, depending on the suite of policies selected to implement
deeper decarbonization. Still, at least for this year, and probably
next year as well, energy transition risk to oil is more theoretical
than tangible. Global oil and gas demand did not collapse last year due
to the energy transition, and it didn't recover suddenly this year
because of the energy transition. While it is true that intermittency
in wind power temporarily affected Northern European markets last
summer and a drought which curtailed hydroelectric power exacerbated
energy shortages in China earlier this year, those events might have
been more easily overcome if the economic recovery from COVID-19
lockdowns had happened more gradually or if Russia had proceeded with
providing its customary levels of energy instead of strategically
manipulating markets ahead of its troop buildup on the border of
Ukraine.
What are the best options for short term solutions
The solutions to temporary fluctuations in energy market conditions
are well known. The U.S. Strategic Petroleum Reserve (SPR) (and similar
strategic stocks in the world's largest economies) were created to
prevent a major oil exporter or group of exporters to threaten energy
shortages to influence the foreign policy of oil consuming nations.
Addressing climate change is an important element to US foreign policy.
The Biden Administration correctly acted to tap the SPR, in conjunction
with other major countries including China, India, the U.K. and Japan
tapping their reserves at the same time, to prevent this geopolitically
motivated manipulation of global energy markets. Congress has
authorized the sale of 58 million barrels from the SPR by 2025. In
light of current conditions, it did not make sense to delay the sales
of this oil to 2024 or 2025. Selling a higher volume now provides a
double benefit. It brings American consumers and the global economy
immediate price relief, helping curtail inflation and preventing
further financial strain on low-income economies already reeling from
the pandemic. It also means the U.S. treasury benefits from selling oil
when prices were high instead of waiting several years when prices
could be significantly lower. The strategic stock sales announcement
has helped push speculators out of the futures markets, reducing for
now any undue upward momentum such speculation was driving.
There are other levers that have been successfully used in the past
to ease winter fuel shortages in the United States that should be
considered. Temporarily waiving the Jones Act, which prohibits
deliveries between U.S. locations to be carried on non-U.S. vessels,
could ease bottlenecks in energy supply movements within the U.S. With
limited supply of U.S. flagships, it can be difficult and expensive to
find a vessel to ship fuels from one part of the country to another.
Waiving the Jones Act temporarily has been used in the past to
facilitate getting the energy American families need in times of
shortages. The United States currently exports 5.5 million barrels a
day of refined products, such as gasoline, heating oil, diesel fuel,
and propane, to global markets. If that product is needed inside the
United States, policy makers should act to facilitate that. Waiving the
Jones Act would be one way to do this. Beefing up the U.S. Energy
Administration's emergency preparedness work with industry leaders and
states to identify and clear up supply bottlenecks and hasten inventory
stores in preparation for winter would be another. In addition, rising
costs of credits used to meet the Environmental Protection Agency's
renewable fuel standards is adding to the price of ethanol used to
blend for gasoline at the pump. The Administration could temporarily
suspend the ethanol compliance credit program to ease the supply
pressures. This is not to say that the aims that underpin the Jones Act
or the EPA's ethanol programs are not important, just that temporary
adjustments can have an outsize influence on removing bottlenecks from
fuel availability and promoting easy distribution to Americans who need
it most.
Preparing for the future
Given the financial losses stacked up from investment in oil and
gas since 2015, investors and banks are more cautious about lending to
drillers moving forward. Uncertainty about future market dynamics also
contributes to hesitancy. However, a recent preliminary review by the
Federal Reserve Bank of Dallas found that American oil and gas
companies have been able to access bond markets at the same costs and
availability this year than in the past. The U.S. rig count currently
stands at 569, up almost 50% from last November, but still below
February 2020 levels.
Years of study on energy security have identified various
mechanisms to smooth anomalies in energy markets and ease shortfalls in
supply. But it is important to note that strategies that focus solely
on increasing supplies without addressing underlying drivers of excess
demand will be ineffective. For example, even when U.S. oil production
was surging strongly, it was the implementation of corporate average
vehicle efficiency standards (CAFE) that limited internal U.S. demand
and created the pathway for surpluses that could be exported to our
allies and international markets, influencing global supply and
pricing. Figure 1 illustrates the impact of CAFE standards on U.S.
petroleum net exports trends by plotting how trends would have looked
had the efficiency standards not been implemented (green line vs red
line).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Better performance in energy efficiency, both in vehicles and in
buildings and industry, lowers demand, potentially reducing the chances
of energy shortfalls but also automatically reducing the burden of any
rise in energy costs to consumers and businesses because it takes less
energy to do the same task. Electric motors in vehicles are more
efficient than traditional internal combustion engines. Electric motors
convert the vast majority of their electric energy (60% to 85%) into
usable power (e.g. movement). An internal combustion engine is much
less efficient, converting only 40% of its gasoline fuel to usable
energy. When losses in the form of heat in the drivetrain are
considered, gasoline combustion vehicles only use around 20% of the
energy from burning fuel into moving the car.
Just as vehicle efficiency standards have eliminated a measure of
the potential increases in U.S. oil demand, promotion of EV sales in
the United States would also reduce U.S. oil demand, increasing the
chances that any lower investment in drilling for oil would be matched
by similar decreases in the need for that oil. Virtually no oil is used
in generating electric power in the United States.
The EV tax credit for new electric vehicles, Section 136401, and
the tax credit for used electric vehicles for households of a certain
means, Section 136402, and for commercial vehicles, Section 136403, in
the Build Back Better legislation are important tools to accelerate
wider EV adoption and thereby reduce demand for gasoline in a way that
will contribute to lowering road fuel costs for all Americans. Many
countries around the world have used credits of some sort to promote EV
sales successfully, improving urban air quality and lowering carbon
emissions while stimulating new jobs. The more individuals that make
the switch to EVs, the lower the undue market influence OPEC Plus oil
exporters will have in geopolitics and the stability of global
financial markets. The U.S. government can play a strong role in
launching higher U.S. production and adoption of EVs by electrifying
federal vehicles and the U.S. postal fleet, saving money on vehicle
maintenance and fuel requirements through operational efficiency. These
steps are important actions that have already been taken in other
growing economies and should be considered a minimum competitive
standard for an economy as diverse and preeminent as ours.
Some critics have raised concerns about the burden EVs will place
on the U.S. electric grid. The U.S. power generation sector uses a wide
variety of fuels including natural gas, renewables, hydroelectric,
nuclear power, and coal. As the grid shifts to cleaner power sources,
technology solutions will lower energy costs by reducing the costs of
backup power for renewables, which in many locations can be produced
more cheaply than traditional energy. We are also seeing new software
solutions that can modulate demand management to shed electricity load
at critical times to reduce surges in prices.
Many types of solutions already exist and have been deployed in
different geographies. The recently passed Infrastructure bill
incentivizes demonstration of some of these solutions, including
battery storage, distributed energy solutions, advanced small modular
nuclear reactors, and hydrogen conversion. But the scale of what is
needed would be best addressed in broader climate specific legislation
that can further target deployment in a manner that can best achieve
cost reductions over time through scale economies and learning by doing
cost reductions. Between 2015 and 2020, the cost for 60-cell
monocrystalline solar photovoltaic modules fell by 60%. Onshore wind
costs declined a further 26% over the last five years, following sharp
declines in previous decades. Offshore wind costs have fallen by 50% in
key locations since 2014, with experts predicting a further 50% drop by
2050.
To keep the lights on and energy prices low, backup systems and
system redundancies are needed no matter what energy fuel is used. It
is a myth that gasoline is not affected in a power blackout. It takes
electricity to run the vast gasoline distribution system in the United
States, including wholesale terminals and retail stations that cannot
deploy any supply without electricity. The final findings from the
Texas electricity crisis were that firms did not have sufficient levels
of natural gas inventories on hand to keep the grid afloat once the
freeze curtailed ongoing natural gas production. More rechargeable
battery storage or stored hydrogen that could have been run through a
fuel cell might have eased the problem, not made it worse. We know how
to backup energy generation capacity. What's needed now is a national
effort to lower than costs of doing so. Europe and China are investing
hundreds of millions of dollars to get there. The United States could
lead.
The United States needs to capitalize on its current private sector
technological edge to become the leading purveyor of the hardware and
software that is going to revolutionize electricity markets in the
coming decades. Projections are that global energy use in the form of
electricity will rise to 50% by 2050, up from 20% today. The United
States needs to invest more heavily in energy innovation and grid
modernization in stay out front of that energy trendline. Our aged and
failing grid puts us behind other major economies. U.S. companies have
leading technologies in solar, micro-grids, and virtual power plants
that allow firms to buy surplus energy capacity from rooftop solar
panels, electric cars and battery storage systems and then sell it back
to the grid when extra power is needed to avoid soaring prices or
brownouts. There are automated software solutions that can program in
power demand management practices to balance grid supply and demand
more effectively, reducing waste and lowering costs to consumers. For
example, Google is pioneering such technologies that would help
residences modulate their electricity use tapping automation to better
match availability of renewable energy output. Data assisted, digital
technologies, properly regulated, also portend a greater ability to
reduce energy use from daily transactions via smart appliances and
equipment, optimized e-commerce deliveries, and improved supply chain
management. We need to make the public expenditures in grid
modernization, broadband, and technology promotion to make these
technologies available at affordable cost to benefit all Americans and
to create export products that will support American jobs.
Another key to lowering energy costs for average Americans is to
improve availability and reliability of mass transit systems. Roughly
16% of all oil used in the United States goes to commuting by car.
Traffic congestion is responsible for billions of gallons of wasted
fuel (3.5 billion gallons in 2019). With a quarter of Americans still
telecommuting, transit authorities need to reorganize routes and
services to prioritize providing affordable transportation to essential
workers who cannot do their jobs remotely. Collapse of public transit
would have an extremely detrimental impact on families and on
sustainability in cities, raising energy costs for workers.
The Build Back Better Act includes $9.75 billion in grants to
enhance access to affordable housing and improve mobility for lower-
income individuals and residents of disadvantaged communities. One very
important element in the bill is support to transit authorities to
expand areas of service and high frequency of service including rapid
bus systems. Forward looking localities are experimenting with on-
demand oriented services facilitated by big data and user smart phones
to increase ridership and to modernize reliability. Fare free and
reduced fare services are another tool small cities have used to
improve mobility accessibility. Grants to promote zero-emissions bus
service in disadvantaged communities lower oil use and bring positive
health impacts. Investment in public transit is an essential tool
lowering energy costs through reduced fuel use, lower congestion, and
greater urban accessibility.
Conclusion
The energy transition is a global phenomenon now gaining momentum
given the urgency of the climate crisis. To quote from my book,
Energy's Digital Future, ``The genie is already out of the bottle on
these [smart, clean energy] technologies. There is no benefit to
allowing traditional energy incumbents to push the United States to go
backward to save jobs. This is a formula to transfer those jobs to
other countries that will be glad to fund or overtake U.S. intellectual
property and move promising technologies forward, first in their own
countries and later in the form of export products. These products
would then go back to the United States as imported goods for American
use made by workers in other countries . . . This time around,
maintaining U.S. innovation culture will be just as important to
maintaining America's power and influence globally as it has been in
past eras of rapid technological change. The United States can decide
not to lead on the technologies that will be needed to arrest climate
change, but that means other countries will.''
Ms. Castor. Thank you very much.
And I want to thank all of our witnesses for your very
insightful and informative testimony.
I am going to start by recognizing Representative Casten
first for 5 minutes. You are recognized.
Mr. Casten. So thank you very much. And before the clock
starts, my conflict has been shuffled, so I am happy to go
first, but I don't want to impinge on you if you would like to
go.
Ms. Castor. Please go ahead and set the table.
Mr. Casten. All right. Thank you.
Ms. Ballentine, it is such a pleasure to see you and have
all your expertise here. Learned so much from you through the
years. And I mention that in part because I want to apologize
because I am going to start at a second grade reading level
because I don't want to lose any of my colleagues.
If I am looking right now, I am just googling on my phone,
Henry Hub spot price of natural gas, $3.76 per million BTU. The
price of coal has surged. It is about $133 a ton. If I am doing
the math right, that is almost $650 per million BTU. And I
can't find a spot price for sunlight and wind.
Am I correct in assuming that the price of sun and wind is
zero per MMBtu?
Ms. Ballentine. You are correct.
Mr. Casten. Thank you. I was glad I didn't look at that
wrong.
The price of power is averaging about $49 a megawatt hour
right now. So it sounds to me like if we built solar and wind
panels, that we are using zero cost fuel and turning it into
something worth $49, we would generate a return on investment.
Do I have that about right?
Ms. Ballentine. I am going to trust you on that.
Mr. Casten. Well----
Ms. Jaffe. 7 to 12 percent return.
Mr. Casten [continuing]. Yeah. Thank you very much.
Ms. Jaffe. You would earn a 7 to 12 percent return.
Mr. Casten. I appreciate that. Okay. So, now, if I--I think
the price of solar and wind right now is running a thousand
dollars a kilowatt, maybe, installed, something in those
neighborhoods. And the last time I looked, transmission and
distribution, the full system--is a weird way to look at it,
but I did a little piece of math--roughly $1,500 per delivered
kilowatt, when you sort of run through the whole system.
Ballpark-ish?
I see some heads nodding. Okay.
So almost basically more than half of the capital cost we
have to amortize in the system is the transmission system. And
I quite agree, I think, with all our witnesses, that permitting
is a real problem, and it is a big chunk of that cost.
We did have, in the American Jobs Plan that the President
proposed, a Standard Office of Transmission. Unfortunately, we
didn't get that in a bipartisan package, and we can't do policy
under reconciliation. But I would hope on a bipartisan
consensus, we can streamline that permitting process in some
future bill.
My first question, though, for you, Ms. Ballentine, is--we
run about 7 percent losses in the system on the transmission
and distribution grid. And so if more than half of the cost of
the system, that is going to lower our cost of energy, because
I think we just said 12 percent return--great--that exceeds
GDP, let's do it. But if more than half of that cost to the
system is in the transmission system, and we are losing 7
percent of it on the way from the generator to the load, are we
doing enough to make sure that we are first building generation
closest to the load where we can avoid those losses, or are
there other things we should be thinking about in that regard?
Ms. Ballentine. So I would answer your question directly
that we are not doing enough in two regards. You are right, we
should be looking at building generation close to load. No
question about it. However, as we know, that zero marginal
cost--wind, solar, geothermal, hydropower, you know, there is a
whole suite, not just wind and solar, of zero marginal cost
renewable energy sources, they are not evenly distributed
across the country.
Mr. Casten. Sure.
Ms. Ballentine. So we have to invest in advanced
transmission as well. It is a critical piece of the pie. And
today, in our connection cues are slowing down electrons
getting from where projects can be built to where customers'
loads are.
Mr. Casten. Yeah.
Ms. Ballentine. We need two to three times the transmission
that we are going to have today, and every bit of investment
that is in this Act is going to help that.
Mr. Casten. Well, I quite agree. And thank you for raising
the point. And I just want to make sure, and as my colleagues
know, I am a big fan of the Federal Energy Regulatory
Commission. I hope that they can streamline some of these
permitting processes and make sure that we build the
transmission where it should go in a streamlined fashion but
also fix those downstream market issues.
Ms. Jaffe, I want to start again--and I apologize, this is
so simple--all else equal, if demand goes down, does price go
up or down?
Ms. Jaffe. If demand goes down, price goes down.
Mr. Casten. Awesome. So if we reduce the demand for natural
gas by building solar and wind, if we reduce demand for oil, we
are going to lower the price of gas and oil, right? Do I have
that about right?
Ms. Jaffe. That is correct.
Mr. Casten. Awesome. Mr. Graves will be so delighted. We
are going to lower the price for consumers across the board.
This is fantastic news.
Now, if you could just help us out, Ms. Jaffe, because as I
look at the last 7, 8 months, it looks like the demand for
natural gas in the U.S., the demand for oil has not
dramatically increased, and yet the price has gone up, and
wellhead counts have fallen and exports have surged.
Can you explain to us how it is that collapsing wellheads
and surging exports might account for some of the increase in
fossil fuel prices over the last 7 months?
Ms. Jaffe. So I think the way you have described it is not
really accurate. What actually happened is we had a huge
unprecedented collapse in demand for both oil and natural gas
in 2020 because of COVID. Many American companies stopped
drilling, not having anything to do with Federal policy but
simply because there was no demand because of COVID, and they
were losing huge amounts of money. And then because of the
success of the vaccine rollout, we had a sudden reopening of
our economy. We had 6 percent growth, which is unprecedented. I
think a lot of--I can't think of the last time, maybe the
Fifties, when we had 6 percent growth in the United States.
And that sudden--resurgence of sudden demand in the United
States, more people driving their cars, meant that we, together
with the recovery in the rest of the world, created a situation
where the cutbacks that we saw in 2020 could not be immediately
reversed. That gave OPEC power, and they used that power.
Mr. Casten. Thank you. I am over time.
I yield back. We could do this conversation for a long
time, but greatly appreciate all your expertise.
Ms. Castor. Next, Mr. Crenshaw, you are recognized for 5
minutes.
Mr. Crenshaw. Thank you, Madam Chairwoman. Thank you all
for being here.
I want to talk about what lowers costs for Americans and
how to build that infrastructure that does so, because we keep
hearing that the Build Back Better plan and the infrastructure
plan that was passed will lower costs for Americans. This is
repeated so often that it supposedly becomes self-evident, but
we have to ask how. Because this argument is based on the
notion that spending more Federal money actually makes these
projects easier to execute.
Somebody has to ask, is that actually true?
Now, you could argue that better infrastructure certainly
lowers costs, but the infrastructure has to be built. It
actually has to happen. And as Americans are experiencing the
highest cost of electricity in the last 20 years, I want to
know how the Build Back Better agenda will actually reduce
costs, not just by spending money, but by making projects
easier to complete.
So, Mr. Herrgott, we will start with you, please, and thank
you for being here. During your time at the permitting office,
what did you find was the single largest threat to getting a
project completed?
Mr. Herrgott. Well, I thank you for that question, Mr.
Crenshaw. I think that there is a bit of a disconnect between
the world that everyone wants to live in and the one that we
actually live in. And the one that I live in, and in the Trump
administration in particular, and although it was little known,
we pushed some of the largest wind and solar projects in the
history of our country, right? Some of the largest in the
world, even though it got me in a bit of trouble.
But the reality is that it takes 7 to 10 years. For a
project that starts today, what do we do in that 10 year
period, especially now that we have supply chain issues that we
can't actually address. So at the same time that we are talking
about demand and supply issues and a recognition of where that
might increase prices, at some point, if you are going to put--
you can't throw good money after bad.
At some point, we have to have a road map. Whether it is
wind, solar, transmission, my entity is agnostic. But the
bottom line is, if people are putting capital at risk on
whatever energy source that comports with the stated national
policy and the changing priorities of the whims of elections,
we have to remove this.
Because those 20 to 30 percent of costs are things that we
have to solve and that are not going to solve themselves, and,
apparently, nobody wants to talk about it in a real way. And
those kinds of costs are the ones that are borne on utility
bills. And those are the things that I haven't seen addressed
by either side, either in the draft versions of the
infrastructure bill or in the current Build Back Better plan.
Creating a new office within an agency doesn't solve a
problem. All right? Calling something shovel-ready without
making it shovel-ready doesn't do anything for the American
people.
Mr. Crenshaw. Right. And that does get to a question I was
going to ask about the claim that the infrastructure bill took
care of these process issues. But you are saying it does not?
Mr. Herrgott. Well, while I was in the administration, I
drafted something called ``One Federal Decision,'' in a
recognition that we needed to bring this disparate universe of
decision makers and have one adult in the room that would
actually drive the process, no shortcuts to the environmental
reviews, but that there would actually be, not necessarily yes,
but a decision given in a reasonable amount of time.
One Federal Decision was codified in the most recently
passed bill, but that is only for DOT projects.
The Federal Permitting Council, which I ran, which is an
extremely successful tool, and Christine Harada, who currently
runs it, is exceptional at her job. The problem is it only has
eight projects, six wind and one transmission. And it is only
for projects that are $200 million and above.
Those are very targeted, narrow tools. What do you do with
the other 2,000 projects that are stated to meet the 2030
climate goals that are sitting in a period of limbo, with no
one giving them a hand? And those are on both--those are both
our faults, frankly.
Mr. Crenshaw. Last thing I want you to talk about is how
our court system is weaponized and what we do could do to
streamline the process which would avoid that.
Mr. Herrgott. So thank you for that question. There is
currently about 1,200 cases that are direct contributors to a
renewable energy future that are currently in active stages of
litigation. Whether that was the most recent recision of the
Migratory Bird Treaty Act that makes it now a criminal penalty
to have an incidental take of even one bird, has paralyzed
offshore wind development and wind development in Nevada.
And solar is the same issue, is being impacted by new
changes to the sage grouse. Not even just the NEPA rules that
everyone talks about, it is the 60 other permits that are
required here that have now created an uncertain regulatory
landscape because project developers have to get everything
right.
Those that don't want the project only have to get one
thing wrong and there is a process foul and they can hold up a
project for about 2 years, which oftentimes lead, about 30
percent of the time, to project abandonment.
And in that case, if we don't solve this issue, we are
going to continue to have--we are going to continue litigation
and have courts making science based decisions, adjudicating
things that should be solved either by Congress or by the
scientists in the agencies that make these risk-based
decisions.
Mr. Crenshaw. We could talk about that for a lot longer--
and we have, you and I--but I am out of time.
So I yield back. Thank you.
Ms. Castor. Thank you.
Next, we will to go Representative Bonamici. You are
recognized for 5 minutes.
Ms. Bonamici. Thank you, Chair Castor and Ranking Member
Graves. And, really, thank you to our witnesses for your
testimony today.
We know the financial and social cost of fossil fuels.
Millions of deaths annually are attributed to burning fossil
fuels, and without intervention, according to the Fourth
National Climate Assessment report, warming could contribute to
an 18 percent increase in ratepayer electric bills by 2040.
But, fortunately, the Build Back Better Act's climate
change provisions will reduce costs and reduce health problems.
So I want to ask Dr. Varadarajan, your RMI modeling that
you cited in your testimony reveals that the Build Back Better
Act will help ratepayers see an annual savings of about $11
billion per year by 2030 as utilities transition to clean
energy.
So how will these savings be distributed geographically
across the country, and how will these savings help lower-
income households and support a just transition? And also, does
that $11 billion in projected savings depend on enacting the
Build Back Better Act?
Dr. Varadarajan. Thank you so much for the question. To
that last point, we certainly believe that the bulk of those
savings do indeed depend on the enactment of the Build Back
Better Act.
The way in which these savings are distributed is impacted
by the fact that, you know, we have spoken a little bit about
how existing tax incentives or existing policies have been
uneven in leading to clean energy deployment across the
country, that there have been these barriers to moving forward.
Well, some of the biggest barriers have been related to the
way that these incentives have been structured. And in
particular, these incentives have been structured to make it
difficult for the customers of municipal utilities, for rural
customers of rural cooperatives, as well as customers of
regulated utilities, to benefit from clean energy in the way
that we hoped they could.
And one of the things the Build Back Better Act does is
break down some of these barriers to allow these communities
that have so far not been able to have access to clean energy.
And when we look at where these communities are located, they
are, in fact, very well co-located, they are communities that
have some of the highest energy burdens in the country.
So when we look at the utilities, for example, that might--
whose customers may see the greatest savings, some of these
utilities are utilities in Wisconsin, in Florida, in Indiana,
in Georgia, and in Virginia, utilities in Alabama. These are
customers who haven't had the opportunity. And what the Build
Back Better Act does, is it makes some strategic and important
shifts in the way that those incentives are structured to bring
those benefits to those who would benefit the most from them
over time.
Ms. Bonamici. Thank you so much. I appreciate that, and I
appreciate your testimony.
Ms. Ballentine, in your testimony, you cite an analysis of
11 studies that confirms the feasibility of reaching 80 percent
clean energy by 2030 at a minimal cost. To bridge the gap
between 80 and 100 percent energy deployment, we need to invest
in major innovative breakthroughs that will reduce emissions in
hard-to-decarbonize sectors.
So Build Back Better will help achieve this challenge by
providing $2 billion for Department of Energy research and
development and other investments in innovation.
So for you and Ms. Jaffe, what are the most important
innovations that we need to materialize for us to exceed the 80
percent decarbonization? And how will the provisions in Build
Back Better support clean energy innovation?
Ms. Ballentine. So I will mention two things. One of the
most important innovations is probably one of the most boring
because it is not an innovation. We need to expand wholesale
organized markets to every region of the country. We often
forget about the importance of competition to accelerate clean
energy, and we know that wholesale markets lower costs--
building on Dr. Varadarajan's comments, we know that wholesale
markets lower costs, and expanding wholesale markets to every
region of the country will make a big difference.
Now, in terms of technology, when we think about how we are
going to decarbonize the grid, how we are going to plan for
threats in the future that look different than threats in the
past, whether it is change in weather patterns or whether it is
determined adversaries that can attack our grid from anywhere
in the world through cyber, we need to be thinking about our
grid in a very, very different way.
We have customers who are also producers now--prosumers, we
call them. We need a much more agile grid that can respond to
customers producing their own power and using their own power.
So we need software and hardware.
Ms. Bonamici. I want to turn to Ms. Jaffe for the remaining
20 seconds. Thank you.
Ms. Jaffe. Innovations?
Ms. Jaffe. I mean, there is so much potential. To mention
the question of transmission, there is even an innovation where
there is a new technology out on the market that would allow us
to transmit electricity in major wires without the 7 percent
loss. So a lot of innovation can take place.
Ms. Bonamici. Great, thank you, and I am out of time.
I yield back. Thank you, Madam Chair.
Ms. Castor. Next, we will go to Representative Miller. You
are recognized for 5 minutes.
Mrs. Miller. Thank you, Chair Castor, Ranking Member
Graves. And I appreciate you all for being here today with us.
While many Americans across the country suffer from rising
inflation, increasing gas costs, and higher prices on every
product and service they rely on, the Democrats today want to
twist the knife in the wound of the American middle class.
In the build back broke agenda, one of the costliest
provisions in the entire bill is a tax cut for millionaires and
billionaires living in high tax states like California and New
York. This tax break is offset by raising taxes on the middle
class workers across our country, increasing the cost of their
necessities and especially their energy.
No matter how many times we have what seems to be the same
hearing, discussing the same flawed logic proposed by my
colleagues across the aisle, we are not fixing the real issues.
It feels like the movie Groundhog's Day.
Instead of focusing on viable solutions to lower emissions,
many of my colleagues only seem to focus on pie-in-the-sky
fantasies of a world run solely on specific renewable energies.
We need an all-of-the-above strategy which focuses on key
baseload energy and affordability, while still being
responsible stewards of our environment.
As winter begins to take hold across the country, the
United States is not prepared to supply our nation with the
energy it needs to keep the lights on, heaters warm, and water
running.
Liberal energy policies have stymied investments, forced
banks to withhold credit to traditional energy companies, and
created a never-ending regulatory nightmare, where it takes
years for new lower-emitting projects to even get started.
As I say often in the hearings in this committee, I am not
opposed to renewable energy. I am committed to lowering
emissions through smart, market-driven forces.
While I appreciate my colleagues across the aisle
acknowledging that lowering taxes promotes business growth and
technology development, their insistence on only lowering taxes
for their pet industries is a disturbingly--a new trend.
The build back broke agenda will increase taxes on all
companies in the United States, whereas the Republican Tax Cuts
and Jobs Act stopped corporate inversions, the takeover of U.S.
companies by foreign companies and competitors. The BBB will
make U.S. companies less competitive, again sacrificing
American intellectual property and U.S.-owned companies to
overseas money.
We must do more to move into this reduced-carbon future the
right way. Carbon capture technologies will mitigate the
impacts of traditional energy sources without giving up
American energy independence, and brings along our energy-
producing communities, like mine in southern West Virginia.
This committee and this President and his administration
must commit to commonsense energy policies, not kneeling at the
feet of radical progressive idealism.
Mr. Herrgott, would you say that energy projects, whether
they be pipelines, export terminals, or power plants, that are
built today are more efficient and less carbon emitting than
those built decades ago?
Mr. Herrgott. Yes.
Mrs. Miller. Can you explain to me, then, if these newer
projects would emit less emissions, why is there not a push to
streamline the permitting process to get these projects online
faster?
Mr. Herrgott. Well, thank you for that question. Up here
you see a pipeline chart that is from the administration that
talks about the 80 steps that need to take place. These are the
same steps that also afflict transmission. There is no
difference between the permitting regime that affects clean
energy transmission and pipelines. And so the reality, however,
is this still takes 7 years to do.
Mrs. Miller. That is too long.
Madam Chairwoman, I yield back my time.
Ms. Castor. Thank you very much.
Next, we will go to Representative Brownley. You are
recognized for 5 minutes.
Ms. Brownley. Thank you, Madam Chair. Thank you for putting
this hearing together.
Ms. Ballentine, I wanted to ask you, we talked a lot
about--in your opening comments, you talked about how your
organization certainly supports the Build Back Better plan, et
cetera. Get that. We have talked about permitting barriers,
fixing the permitting system. You have talked about the
transmission infrastructure needs to increase by two to three
times.
So what I am interested in knowing is, from your
membership, what are some of the other--you know, what are some
of the other issues that Congress should be looking at?
Ms. Ballentine. Thank you for that question. And I actually
loved a couple of quotes from your colleague's previous
remarks. Smart, market-driven forces, all of the above. CEBA
couldn't agree more with those kinds of comments, so, thank
you, ma'am, for bringing those to the table.
The largest barriers to energy customers using their market
demand to drive carbon-free, low pollution to no pollution,
low-cost, reliable power, is lack of markets. Eighty percent of
wind and solar has been deployed in wholesale organized markets
today. And that is not because 80 percent of load is in
organized markets. Only about two-thirds of load is in
organized markets.
Without competition, without choice, markets can't work,
and customers can't help. So that is the number one barrier.
Certainly, getting steel in the ground faster, getting
projects done faster, is a critical component as well.
But I would come back again and again to organized markets
and transmission. We need those two things to make this market
work.
Ms. Brownley. Great. And just on a separate point, I have
been a member who has worked on sustainable aviation fuel, and
it has been a very interesting journey because the--you know,
certainly the environmentalists are supportive and the airlines
industry now, particularly United Airlines, who is really
leading the way on SAF and are really very much committed to
it.
And so we have a blender's tax that hopefully will stay in
the Build Back Better that will help to develop this market
because that is what we need. I mean, in the aviation industry,
that is--for the short term, medium term, this is really our
only solution in terms of reducing carbon.
So can you tell me what other things are needed to develop
that market?
Ms. Ballentine. So I haven't worked on aviation fuel in a
number of years. I will say that there is a parallel
organization that has actually been established at Rocky
Mountain Institute, called the Sustainable Aviation Buyers
Alliance, that does very similar work to the Clean Energy
Buyers Association, and it brings together consumers of
aviation services to drive demand for low- and zero-carbon
aviation. So, again, putting these markets to work is a
critical component.
Additionally, what we found when I was back in the Air
Force, was, even though we had certified our aircraft to fly on
a full range of aviation fuels, our partners and peers around
the world hadn't. And so when we have our colleagues on our
bases, we have to have fuel that works in everybody's
airplanes. So this has to be a global solution.
Ms. Brownley. Thank you very much.
And, Ms. Jaffe, I wanted to ask you, I, you know, was
delighted in your testimony and your comments really about mass
transit, the need for mass transit, and the ability of mass
transit to ultimately reduce costs to consumers.
Several of us sit on the Transportation Committee. We were
pretty disappointed with the amount of money that ended up in
Build Back Better towards mass transit. We wanted to--you know,
we needed--we wanted to repair our roads but not build new
roads. We wanted to put all of that money into transit systems.
So based on what we have in Build Back Better, do you think
it is going to make a dent? I am just curious to know, I mean,
there is, you know, money in there for electrification of
transit systems and certainly money in there for lower-income
areas and some money for mass transit. But what do you think we
really need to do?
Ms. Jaffe. Well, you know, there is something in the bill
that really caught my eye, which is helping transit agencies
really upgrade evening service and services for the people who
really need it. And one of the ways we do that is to modernize.
So that means, you know, being able to use, you know, your
smartphone apps and being able to connect to people in a way
that your scheduling transit in a really effective and
productive way. And that does require to be able to have the
transit authorities have the funding to be able to do that, and
I see some of that in the bill. I think that that is important.
Maybe having that be a bigger part could be a very positive
thing.
And, also, just recognizing that when we build highways,
you know--and I have lived many years in Texas, and you know,
thanks to Tom DeLay, the traffic in Houston today is much, much
worse than it has been. Every time they expand the lanes, you
know, what we learn is it just takes up more and more vehicles,
and so you get more and more congestion, which means more and
more ways to fuel, which means more power to OPEC.
So transit is really an important part of breaking that
cycle. And, also, you get to the point in big cities where the
traffic is so bad, you really don't have any choice but to take
transit because otherwise you can't reliably go anywhere. And
so it is really an important piece.
Ms. Brownley. Thank you.
I apologize, Madam Chair. I yield back.
Ms. Castor. Thank you.
Next, we will go to Representative Gonzalez. You are
recognized for 5 minutes.
Mr. Gonzalez. Thank you, Chairwoman Castor and Ranking
Member Graves, for holding this hearing today and for our
distinguished witnesses for joining us.
I was told I could go if my questions were intelligent. I
make no promises.
There is one thing all large scale energy transitions have
in common, and it is a great deal of inertia. Under most
circumstances, energy transitions take decades to achieve. And
the greater the reliance on one or two energy sources, the
longer the transition tends to occur. That is a historical
fact.
While this simple truth may seem obvious, it does seem to
go ignored. Overlooked are things such as the scale of the
shift, any social and economic implications, the lower energy
density, the replacement fuels, the inherent intermittency in
renewable energy, and the uneven distribution of renewable
energy sources.
Every transition to date has introduced fuels with superior
energy densities, but the one we are discussing today moves us
in the other direction.
Barring some extraordinary unprecedented innovation, I am
skeptical that we are going to achieve these targets. I say all
that while believing a world with less carbon-emitting sources
is highly desirable, and the goal is a noble goal. But I do
believe we have to recognize that getting there is going to
require a suite of technologies.
And if there is one disappointment I have with the hearing,
frankly, it is I saw the title and I thought we were going to
have a really deep dialogue about how do we actually fund the
transition, what the right mix of private and public investment
are, where those sources need to come into place. And then I
read the testimonies and it seems like it is basically just a
selling exercise for Build Back Better, which we all know is a
partisan bill.
That said, now to my question.
Dr. Varadarajan, I would like to start with you because, in
your testimony, you state cleaner energy sources such as wind
and solar, complemented by battery, offer energy price
stability and could create durable energy savings for American
households.
I think ``could'' is the operative word in that statement.
I would like to dive into that with you, because what I am most
nervous about when I look at Build Back Better and I see the
mission of many of my Democratic colleagues that focus on wind
and solar--wind, solar, and battery, is that we end up being
like Germany, where a perfect case study for examining the ROI
on subsidizing certain technologies.
It committed more than $560 billion in wind and solar, yet
just 42 percent of its electricity from nonhydro renewables.
Large-scale energy storage remaining inefficient and expensive,
efficiency rates have plummeted, and electricity prices have
doubled.
In the first half of 2020--the first half--Germany's
electricity prices were 43 percent higher than the European
average. In response, Germany is actively mining and producing
a record amount of brown coal and increasing their consumption
of Russian natural gas. The result, a 21 million ton increase
in German emissions from electricity in the first 6 months of
this year.
So here is the question: Why should we believe the Build
Back Better proposal won't make the same mistakes as Germany,
raising household energy costs and increasing our reliance on
foreign fossil based energy sources?
Dr. Varadarajan. Well, I think the most important point
here is that the United States isn't Germany. Germany has the
solar resources----
Mr. Gonzalez. But, sir, we are pursuing the same strategy.
Dr. Varadarajan [continuing]. Germany has the same solar
resources as Alaska. We have the Saudi Arabia of wind in the
middle of this country, in the Great Plains states. We have
resources just in Arizona that are sufficiently good solar
resources. They could power about a hundred kilometer by a
hundred kilometer square. Arizona alone can power the grid
across the United States.
We are blessed with some of the best solar and wind
resources in the world, something that Germany and most
European countries can't even come close to. It is because of
our prosperity and our incredible--of the lands that we have
that we are able to do something like this and do it in a way
that lowers costs over time.
And, thankfully, technology has changed. Germany made these
investments when solar was 10 times as expensive as it was. We
are now able to make these investments when, if I look out at
the cost of clean energy right now in the United States, if I
am trying to build some kind of new energy, you know, even
independent of policy, forgetting about all of that, the lowest
cost choice on a per-kilowatt-hour basis right now is to build
solar and wind in most of the country. But not everywhere. I do
think--and this is a really----
Mr. Gonzalez. Reclaiming my time for a second----
Dr. Varadarajan [continuing]. Sure.
Mr. Gonzalez [continuing]. Because I have a question on
the--so I agree we are not Germany obviously, right? We have
areas of the country that have a ton of wind generation
capacity and others that solar would be beneficial for. But you
still have to transport it around the country, right? Where I
live in northeast Ohio, that is not the case. We have a lot of
cloudy days, and we don't have as much wind.
So talk to me about how confident you are that we could do
all this and not have the cost increases, knowing that you are
going to have to transport it across. And I am seeing I am
running out of time so maybe I will follow up in writing with
that.
Dr. Varadarajan. Be happy to----
Mr. Gonzalez [continuing]. But I think it is something that
we should all have on our minds.
Thank you, and I yield back.
Ms. Castor. Thank you.
Next up is Representative Levin. You are recognized for 5
minutes.
Mr. Levin. Well, thank you, Chair Castor. I appreciate your
holding today's hearing on such an important and timely topic.
As my colleagues have noted, the Build Back Better Act
represents the single largest investment in climate action in
our nation's history, and I am really proud of the work of this
Select Committee in making sure that we are able to pass such a
transformational bill through the House.
But today's hearing underscores what I think we already
know, that the Build Back Better Act will create millions of
good-paying jobs right here in the United States and reduce
transportation and energy costs for American consumers, while
making sure that we can stave off the worst effects of climate
change. That is why it is so critical that the Senate seize
this critical opportunity to act on climate and put our nation
on the pathway to a zero carbon future.
With that, I will turn to my questions, and I will start
with Ms. Jaffe. You noted in your testimony how the oil and gas
industry operates in a boom-bust cycle. As we know, the
pandemic has put that cycle on overdrive as gas prices dropped
dramatically last March before rising precipitously earlier
this year as we began the vaccination campaign.
However, these dramatic swings in prices are not
unprecedented. Over the last 15 years, we have seen dramatic
shifts in energy costs due to global financial downturns,
regional conflicts, and severe weather events. And while my
friends across the aisle may allege that policies intended to
address climate change are the main cause for the current price
increases, the facts simply say otherwise.
Rather, it comes down to economics. As COVID-19 emerged
last year, many operators cut supply dramatically and have not
been able to meet the rapidly increasing demand since the
beginning of the vaccination campaign. Compounding this was
OPEC-plus' failure to reach an agreement on substantial
production increases, and the fact that domestic supply remains
relatively low because investors and banks remain worried about
a full resumption of operations, given the losses that they
have mounted since 2015.
At the same time, oil and gas companies are reporting
record profits, even as they choose not to increase production
to meet the demand. This has even prompted President Biden to
ask the Federal Trade Commission to investigate whether these
oil and gas companies are illegally increasing prices even as
the price of unfinished gasoline continues to drop.
And while the U.S. Energy Information Administration
predicts that we will see gas prices continue to decrease over
the coming year, if we do not rapidly decarbonize our economy,
I worry--I worry--that the fossil fuel sector's boom-bust cycle
will become even more pronounced in the years ahead as both
greenhouse gas emissions and the frequency of extreme weather
events continues to rise. The result will be the continuation
of this never ending roller coaster of supply swings and price
changes as the American people bear the brunt of unpredictable
fossil fuel costs and its associated negative environmental
impacts.
So, Ms. Jaffe, with that context, in your testimony, you
noted that transportation electrification can help us reduce
demand for fossil fuels and keep transportation costs in check
during the energy transition, which can be helpful for low
income families that often experience the greater energy
burden.
Can you please expand on that statement, and specifically,
how can investments in electrifying our transportation sector,
along with parallel investments in electrifying our grid, help
protect American families, especially low-income households,
from the volatility of the oil boom-bust cycle?
Ms. Jaffe. Well, as has also already been stated, you know,
we are going to have these resources. I mean, the great thing
about renewable energy is it is inside your border, and it is
close in. I mentioned but didn't seem to fully come across that
electric vehicles are just technologically so much more
efficient in how much they utilize energy and how they utilize
energy. The fact that gasoline is somehow more energy-dense
doesn't matter because the vehicle itself is so much more
efficient.
But then to add to the point, which I feel I always need to
make, which is that I have lived in Houston, I have lived in
northern California with the fires, I have lived in New
England. And I can tell you, having been through multiple
hurricanes, that you need electricity to distribute and use
pump gasoline from a retail level.
And so, you know, there is no advantage, in a way, to the
gasoline from a logistical point of view when it comes to
storms and resiliency and so forth because you need the same
electricity. Indeed, if you had an electric car and you had a
system for backup electricity, you were in a community solar
project or you were somehow able to access electricity, you
would at least be able to use your car because you would have
that electricity for your car. And you wouldn't have to worry
about whether some giant company was able to electrify all the
retail stations near your house.
So, you know, we are really moving to what I think will be
a superior technology, and that is going to benefit everybody.
Mr. Levin. Well, thank you, Ms. Jaffe. I am over time, but
I wanted to let you roll. I appreciate very much your reply and
all our witnesses and my colleagues.
And I will yield back.
Ms. Castor. Next up is Ranking Member Graves. You are
recognized for 5 minutes.
Mr. Graves. Thank you very much, Madam Chair.
Mr. Casten, I am hoping to get to second grade level next
year. I am trying hard.
So, Ms. Ballentine, I want to make sure I understand
something, so let me ask you a question. If you are a retailer
and I am your supplier, and I increase my cost to you, what are
you going to do with that increased cost you are paying for the
product?
Ms. Ballentine. Are you talking energy in particular?
Mr. Graves. Sure, whatever. Energy is fine, yes, that is
fine.
Ms. Ballentine. You pass it on to the customer.
Mr. Graves. You pass is on to the customer. You pass it on
to the customer.
So if the Build Back Better Act imposes a tax of $10,000 a
mile a year for pipelines, that is an increased cost. And so
companies are baking that in now. If you are going to increase
royalty rates, that is an increased cost. Companies are going
to bake it in, and they are going to pass it on now. So this
whole thing, trying to disassociate these actions with
increased energy costs are completely flawed.
Mr. Herrgott, supply and demand question because I am not
a--I am still apparently at a lower level----
Ms. Jaffe [continuing]. Representative, can I weigh in
here? [Inaudible.]
Mr. Graves. If you--if you--hang on, Ms. Jaffe. Ms. Jaffe,
excuse me. I am trying to ask a question.
So, Mr. Herrgott [continuing]. If you decrease supply by
pausing through an executive order exploration and production
activity, you are decreasing supply but you don't have a
corresponding decrease in demand, what happens?
Mr. Herrgott. It is going to go up, especially because you
don't have a----
Mr. Graves. Prices are going to go up. That is right. And
that is exactly--the executive order--I am pausing--that is
exactly what is going on.
Another question for you, Mr. Herrgott. If something is
free, as Mr. Casten noted, do you need to put huge subsidies on
it in the form of ITC and PTC, Investment Tax Credit and
Production Tax Credit?
Mr. Herrgott [continuing]. I am a permitting nerd, not a
politician, all right? But I will tell you, you are correct.
Mr. Graves. All right. Thanks. I am just trying to
understand all this stuff.
So, Mr. Herrgott, the Department of Energy under this
administration, or the Biden administration, ran several models
looking at the energy future. Every single--and I hope, if
anybody listens to anything I say, listen to this.
The Biden Department of Energy just released a report
looking at several energy future models. Every single model
shows an increase in both domestic and global demand for
natural gas. Every single model.
As we have talked about in this committee over and over
again, the United States natural gas delivered to Europe and
delivered to Asia is anywhere from 41 to 47 percent lower
emissions profile. Why in the world would we disincentivize
domestic energy production, domestic jobs, domestic economic
activity, and yet incentivize Vladimir Putin to do it? I don't
understand it for the life of me. I just don't.
Mr. Herrgott, so you are a permitting expert, and you have
spent a lot of time working on this. Let me ask you a quick
question.
If I am doing an environmental project, whether it is a
solar array, a wind farm, I am trying to do a wetlands
restoration project in the coast of Louisiana, is there a
different environmental process--permitting process that if I
am trying to go build a road through wetlands?
Is your mic on? Is your mic on?
Mr. Herrgott. No. It is the same.
Mr. Graves. Okay. So I hope this is something that we can
work on, Madam Chair. We have got to tailor the regulatory, the
environmental process, to the type of project or perceived
threat that is out there.
Mr. Herrgott, if we are talking about financing these
projects, what type of threat does the permitting uncertainty
pose to the financing?
Mr. Herrgott. The debt and equity cost and the default
risk, directly associated with the development risk, associated
with our failure to solve this, can, in many cases, drive
project financing costs up 10 to 25 percent. That is real, and
that is on wind and solar projects as we speak, not on natural
gas projects because they are highly capital intensive.
There is a direct relationship between failing to address
this and the 20 to 30 percent cost that is associated and
passed on to ratepayers.
Mr. Graves. So back in April, as an example of these
delays, back in April, the administration, this administration,
identified 22 transmission projects that were ready to go. What
do you think--I mean, just knowing the permitting process, how
shovel ready are these projects?
Mr. Herrgott. Well, one of them completed because we worked
on it. The other 21 projects are still 6 years away. So--and
that is orphaning any new solar and wind development. We have
to have the holistic comprehensive strategy. If we are going to
build the wind and solar, we also have to be committed to doing
the things we need to build the transmission, and that is just
currently not happening.
Mr. Graves. Thank you.
Ms. Jaffe, I actually did have a question for you, but I am
running out of time, so I am going to submit it for the record.
But I do want to ask you about supply and demand of critical
minerals and how much sense it makes for us to become more
dependent upon critical minerals for China. So I will submit
that for the record.
I yield back.
Ms. Castor. Next up we will go to Representative Escobar.
You are recognized for 5 minutes.
Ms. Escobar. Thank you so much, Madam Chair. And many
thanks to our panelists for sharing their expertise with us
today. Very grateful to you all.
You know, one of the things that is really concerning to me
is the desire that I have heard from some to sort of pump the
brakes on a transition that many of us now see as urgent, long
overdue, long past its time, and, in fact, in some cases, far
too late. So we have to obviously act with the utmost urgency,
and we have got to ensure--from my perspective, we have also
got to ensure that some of the most vulnerable communities are
able to capitalize on what is an almost guaranteed outcome.
I mean, we are going to pass Build Back Better. It is going
to happen. And so I think the best use of our time and
conversations is to figure out how to best capitalize on that.
And my priority is ensuring that economically disadvantaged
communities like mine, that have long been neglected by state
governments and others, can best capitalize.
How can some of the poorest families, how can some of the
poorest communities, really ensure that they are ready for the
benefits of Build Back Better? And that includes local
governments, local nonprofits, consumers, the private sector.
And so I would love to hear from each one of you how you
think vulnerable communities like the one I represent in El
Paso, Texas, on the U.S.-Mexico border, can best capitalize and
prepare so that we can do the best possible by everyone with
Build Back Better.
Ms. Ballentine.
Ms. Ballentine. Thank you. This is a really important and
beautiful question. And I would like to also recognize that for
the members of the Clean Energy Buyers Association, energy is
often the second largest controllable operating expense we have
for the vast majority of our companies. And our companies
employ Americans from every community.
So when we expand organized markets, it lowers costs. When
we expand transmission, it lowers costs. And those costs are
passed through. Whether you are a retailer or whether you are a
pharmaceutical company, they are passed through. Those lower
costs are passed through.
And importantly, what we are seeing in communities is these
large corporations who have sophisticated energy teams, who are
thinking about low-cost, low-pollution, no-pollution clean
energy of all types, not just wind and solar but all types of
renewables; and how can they work with marginalized communities
to say, what if we oversized our project so that we could be
the guarantee and get the financing for the project but provide
low marginal cost, zero-carbon power to local communities,
marginalized communities? How can we do more than have our
projects just build jobs? How can we build wealth in
communities through our projects?
So I think that is one of the most exciting areas of
development, because marginalized communities and companies
share a desire for lowering energy costs.
Ms. Escobar. Thank you so much.
Ms. Jaffe.
Ms. Jaffe. Well, I think there are so many things in the
bill that would be of assistance. And we have--we have things
we need to do because, in the end, globally, those things are
going to take place.
China is going to build these products, Europe is going to
build these products, and do we want to be importing all of
those products from somewhere else or do we want to be having
the United States economy be competitive?
And that goes across an entire range of technologies. I
mean, we were leading in digital. We have got companies like
Google talking about making home thermostats that would allow
you to better utilize and smooth out purchases of renewable
energy automatically.
There is just so much innovation that is possible to come
to market, and it needs the support of the infrastructure that
it takes to get that going.
Ms. Escobar. Dr. Varadarajan.
Dr. Varadarajan. Well, thank you for the question. I think
it is a critical one, because the Build Back Better Act has a
number of provisions that make it more financially attractive
both for individuals in low-income communities and for
investors to make the investments that they would deploy in
clean energy resources in vulnerable communities.
Look, this is going to require the communities to know
about, and get access to, and have the processes in place to be
able to utilize them. And this is going to take a whole-of-
government effort. It is going to take civil society, it is
going to take local governments, city governments, and state
governments to engage to make this happen.
Ms. Escobar. Mr. Herrgott, I will submit in writing because
I would love your opinion as well.
Mr. Herrgott. I concur with that statement. Wholeheartedly.
Ms. Escobar. Okay. Thank you so much.
Ms. Castor. Great. Next, we will go to Representative
Palmer. You are recognized for 5 minutes.
Mr. Palmer. Madam Chairman--Mr. Herrgott, the topic of this
hearing is ``Cleaner, Cheaper Energy: Climate Investments to
Help Families and Help Businesses.'' Does reducing reliability
help families and help businesses?
Mr. Herrgott. No, it doesn't.
Mr. Palmer. Have we experienced in any other part of the
country a lack of reliability, particularly with turbines?
Mr. Herrgott. Yes. Baseload renewable is still about 6 to 7
years away with the kind of storage and technology, especially
with the supply chain issues and the fact that projects that
will take 4 or 5 years from now for the lithium, for EVs,
beryllium, molybdenum, and several others haven't even gotten
off the ground. So we no longer have the appropriate domestic
supply chain for critical minerals.
Mr. Palmer. And from 2011 to 2019, we spent over $2
trillion on renewables, and they represent about 3 percent of
the energy production worldwide, and about 4.5 percent here in
the United States.
There was a 2021 report that came out on reliability risk
priorities. Do you have any idea what they ranked as the top
risk to the reliability of our power grid?
Mr. Herrgott. It is probably one of the few studies I
haven't read. I would love to learn.
Mr. Palmer. Changing resource mix. Cybersecurity
vulnerabilities were number two, but changing resource mix.
So what we are doing right now, as we continue this head-
long push toward adoption of renewables, which I think anyone
who has much engineering background understands that we are not
going to get there in the timeframe they are talking about.
We are putting the reliability of our energy infrastructure
at risk. What we just saw in the North Sea when the winds stop
blowing, you had that massive spike in natural gas,
particularly hit the U.K. hard. It occurred about the same time
that Russia decided to reduce their output, supposedly to build
their reserves for the winter--which I think was more about
sending a message about Nord Stream 2--really did harm to
consumers there.
Let me ask you this. Does higher prices help families and
businesses, higher--let me ask it in another way.
Does it have the potential to harm families when they can't
adequately heat their homes?
Mr. Herrgott. Yes.
Mr. Palmer. And we have seen this in the U.K. with the
excess winter deaths. We have seen it here in the United
States.
Are you aware, Mr. Herrgott, that excess winter deaths kill
more residents in Vermont than car crashes?
Mr. Herrgott. I was not aware.
Mr. Palmer. It is their own report.
Mr. Herrgott. Yeah.
Mr. Palmer. In the winter of 2017-2018 in the U.K., they
estimate that there were 17,000 excess winter deaths. Is that
acceptable collateral damage for a head long push into
renewables?
Mr. Herrgott. No.
Mr. Palmer. I didn't think you would agree with that
either.
I also want to point out another thing about this. For some
reason, we just can't get our arms around the fact that we have
got next-gen nuclear that could really pave the way for clean
energy for the future. We now have the technology to recycle
spent fuel rods. And ``spent'' is kind of a misrepresentation
because they retain about 90 percent of their energy.
Here is the other thing, though. The lifecycle of next-gen,
next-generation nuclear, is estimated to be 100 years. Can you
imagine where we will be technologically a hundred years from
now if we convert to that?
Natural gas, which I think is still a major part of our
reducing emissions and providing energy to low-income people
and the billion people around the world who don't have access
to adequate energy, their life--a lifecycle for a natural gas
facility is 60 to 65 years. Do you know what the lifecycle is
for solar panels?
Mr. Herrgott. They have to be changed every 4 or 5 years
and substations accordingly.
Mr. Palmer. And wind turbines is 20 to 30 years. But after
about 10 years, they begin to dramatically lose generating
power. And you can't recycle the solar panels. You can't--
apparently, right now you can't recycle the wind turbine
blades. We are having to bury them.
I just want to point out, when you raise prices,
particularly on low-income people, and for all the rhetoric
that the Democrats want to have about Build Back Better, it is
raising prices.
I keep bringing up to my Democrat colleagues the Pembroke
Township in Illinois, about 2,100 people, 85 percent Black. The
average income--the median income is about $16,000 a year. They
don't have access to natural gas. They are heating their homes
with propane and with wood. And the Reverend Jesse Jackson and
Al Sharpton has been trying to get a natural gas pipeline to
that city, and they have--they haven't been successful so far.
Let me just add this. It might be actually good news for
them because natural gas prices are almost double.
Ms. Castor. I am sorry. You have run out of time. Because
we have a vote going on, I am sorry, Mr. Palmer, we are having
to finish up.
And I will recognize myself for 5 minutes for questions to
wrap up here today.
You know, everything that we did in crafting the Build Back
Better Act was targeted to lowering costs for American families
and businesses across the board. That is why, when you examine
Build Back Better, you will see policies relating to energy
efficiency, more energy-efficient appliances for consumers,
more energy-efficient buildings, electrifying buildings.
Electric vehicles now, you see the electric vehicles and
cars and trucks on the road right now, bypassing the gas
stations. They are going to be--but we want to make sure they
are available for consumers all across the country.
That is why we were totally focused on making sure that
consumers really felt it in their pocketbooks, and businesses
could save money and pass those cost savings along.
But it is not just the cost of electricity. It is also the
cost of climate. Build Back Better also takes us down a road of
reducing greenhouse gas pollution that we know impacts our
health--so let's build in those costs considerations--the cost
considerations of higher property insurance, because of climate
fueled disasters, higher flood insurance costs. All of these
costs put together are central to the strategy of President
Biden and all of us in building back better and lowering costs.
So, Dr. Varadarajan, can you speak to us here, help close
us out today on how Build Back Better investments in both clean
energy and electrification--we haven't talked a lot about
buildings here today--how will that work to help families and
businesses lower costs and give them a little relief in their
pocketbook?
Dr. Varadarajan. Thank you so much again. I appreciate the
opportunity to speak to this.
At the end of the day, as we look at the Build Back Better
Act, to the provisions that it contains, what it offers, what
the majority of the climate action in this bill offers is the
opportunity, the power, and the freedom for individuals and
utilities and businesses across the country to make the choice,
if it is economically sensible to them, to choose lower,
cheaper, and cleaner energy.
This is true when it comes to utilities making choices
about the resources they want to put on their system. At the
end of the day, every single utility in this country is
responsible for providing affordable power to its consumers
that is reliable.
If a utility chooses to use the powers within this Act that
give it--make it more attractive for them to build great
resources like storage, like transmission, to ensure greater
reliability for their customers, they can do that. If their
regulators agree or if their communities agree, with the input
from these key stakeholders, they can make choices they didn't
have before, to deliver cheaper and more reliable power to
their customers.
But it is not just that--and this is a really important
point--every individual in the country, every household in the
country, businesses in the country, can also, because of
additional provisions in this Act that make it easier for
individuals to make efficiency improvements, to choose
electrified appliances, to make upgrades to their buildings.
They can make those choices themselves and take it upon
themselves to make themselves more energy-independent. And they
can do this in their homes by building clean energy resources
like solar, by reducing--by switching to induction ovens that,
you know, avoid significant harm from NOx and SOx pollution
that cause asthma to their children.
These are the types of choices that are available as a
result of this Act that can ultimately make it possible for
each individual company and cities and States across the
country to make the choice to move to cleaner energy in a way
that reduces their risks and reduces their cost.
This is the power of the Act. And I think, you know, again,
when we look at the possibility for cost reductions across the
economy, the Build Back Better Act is going to more than pay
for itself ultimately in the reduced costs of climate harm and
in the reduced cost--health costs associated with reduced
pollution within the homes and, more broadly, across our
economy, and in reduced costs to consumers.
And so I think it is an enormous opportunity. I am looking
forward to action by all of Congress and by the President to
put this into action moving forward.
Ms. Castor. Well, thank you very much. Yes, we are looking
forward to action. We passed it here in the House. It is
pending in the Senate. Build Back Better means cleaner, less
expensive energy for consumers and businesses across America.
So I would like to thank our witnesses for their testimony
today.
And, without objection, I will enter into the record,
first, a December 2021 letter from the Solar Energy Industries
Association, outlining the steps the solar industry has taken
to ensure forced labor is not used in the supply chain, and
their recommendations for growing U.S. solar manufacturing;
two, a report released today by Rewiring America, titled,
Energy Bill Security for American Households Through
Electrification, which shows how American households with
efficient heat pumps and electric vehicles will see lower
heating and driving costs this winter compared to homes with
fossil heating and traditional vehicles; three, an October 2021
analysis by Resources for the Future, that shows clean energy
tax credits included in the Build Back Better Act can achieve
69 percent clean power generation by 2030, while lowering costs
for ratepayers by 3 percent; and four, a December 2021 analysis
by Resources for the Future and the Clean Energy Buyers
Institute, that shows building a transmission macro grid would
add an estimated $5 to $10 billion in annual net benefits and
would reduce national average retail electric rates by
approximately 1 to 2 percent.
[The information follows:]
Submissions for the Record
Representative Kathy Castor
Select Committee on the Climate Crisis
December 9, 2021
December 8, 2021
Chair Kathy Castor Ranking Member Garrett Graves
U.S. House of Representatives U.S. House of Representatives
Select Select
Committee on the Climate Crisis Committee on the Climate Crisis
H2-359 Ford Building H2-359 Ford Building
Washington, DC 20515 Washington, DC 20515
Dear Congresswoman Castor and Congressman Graves:
I appreciate the opportunity to share with you the steps the Solar
Energy Industries Association (SEIA) and our members have taken to
prevent the use of forced labor in the solar supply chain and reduce
our reliance on solar imports by growing U.S. solar manufacturing.
SEIA, on behalf of the more than 231,000 American workers employed
by the domestic solar industry, is committed to ensuring that no
products made from forced labor should enter the United States and we
support efforts to address forced labor in China's Xinjiang Uyghur
Autonomous Region (Xinjiang).
SEIA has been calling on the industry to relocate supply chains \1\
from Xinjiang since October 2020. On December 8, 2020, International
Human Rights Day, SEIA announced the Solar Industry Forced Labor
Prevention Pledge \2\ and restated our recommendation to industry
participants to move their supply chains. Since then, 300 companies
representing the majority of solar panels sold in the U.S. market have
signed the pledge.
---------------------------------------------------------------------------
\1\ https://www.bnnbloomberg.ca/u-s-solar-group-calls-for-pulling-
out-of-xinjiang-over-abuses-1.1511887
\2\ https://www.seia.org/sites/default/files/
Solar%20Industry%20Forced%20Labor%20Prevention%20Pledge%20Signatories.pd
f
---------------------------------------------------------------------------
In addition, SEIA has updated its Solar Industry Commitment to
Environmental & Social Responsibility \3\ to ensure the industry is
adequately and proactively addressing evolving environmental and social
responsibility issues. SEIA also partnered with leading experts in
solar supply chain transparency to establish a comprehensive
Traceability Protocol.\4\ The protocol will serve as an important
compliance tool and give solar companies the ability to accurately
determine the source of key components in a solar panel.
---------------------------------------------------------------------------
\3\ https://www.seia.org/research-resources/solar-industry-
commitment-environmental-
social-responsibility
\4\ https://www.seia.org/sites/default/files/2021-04/SEIA-Supply-
Chain-Traceability-Protocol-v1.0-April2021.pdf
---------------------------------------------------------------------------
Leading solar panel suppliers are already taking steps to ensure
the traceability of key inputs. Among those steps is to ensure that
suppliers are relocated in regions where companies can conduct
independent third-party audits.
As this issue highlights, there are significant policy benefits
associated with increasing domestic supply of solar products. Though
some critical solar components are already made in the United States,
bolstering our domestic manufacturing capacity throughout the entirety
of the solar value chain would help promote transparency, reduce the
need to rely on imported products and create good-paying jobs here at
home.
Indeed, SEIA is leading the way to an American solar manufacturing
future. In May 2019, SEIA modified its bylaws to create a new
Manufacturing Division and Board of Directors seat dedicated to
representing domestic solar manufacturing interests. Later that year,
SEIA hosted a Solar+Manufacturing Summit \5\ attended by nearly 100
solar leaders from across the nation. This summit served as the basis
for SEIA's September 2020 Manufacturing White Paper,\6\ which set a
goal of 100GW of domestic solar and storage manufacturing capacity by
2030.
---------------------------------------------------------------------------
\5\ https://www.seia.org/events/solar-manufacturing-summit
\6\ https://www.seia.org/sites/default/files/2020-09/SEIA-American-
Manufacturing-Vision-2020_FINAL.pdf
---------------------------------------------------------------------------
As first articulated in SEIA's Manufacturing White Paper, our
country needs a new approach to growing U.S. solar manufacturing. As we
have said for many years, and as has been validated time and again,
tariffs are ineffective at growing solar manufacturing capacity. What
our industry requires is a suite of long-term federal investments,
including:
1. Demand drivers such as a long-term extension of the
solar investment tax credit with direct pay and related bonus credits
for meeting certain domestic content thresholds;
2. Ongoing domestic production support, i.e., the Solar
Energy Manufacturing for America Act (SEMAA), as our manufacturers and
their suppliers scale operations in a hyper-competitive global
environment; and
3. Incentives for private sector investments in
manufacturing capacity, i.e., a refundable 48C manufacturing tax
credit.
Importantly, all three categories of federal investments are
required if we hope to truly compete as a nation in solar
manufacturing. We need to recognize that the United States is competing
for private sector investments against not only China but other
countries as well. Importantly, as we grow our domestic solar
manufacturing base here at home, we must also recognize that it will
take time to scale operations and reduce our reliance on imports.
SEIA is committed to preventing forced labor in the solar supply
chain, and we would appreciate the opportunity to lend our expertise
and work constructively with both Congress and the Administration to
uphold U.S. law and prevent the importation of products made with
forced labor.
We are eager to meet with you and members of your respective staffs
to discuss our efforts to stamp out forced labor. That work will ensure
a vibrant and safe global supply chain, which will be critical as we
scale up a domestic manufacturing base. We also would like to discuss
specific policies to support strong U.S. manufacturing and the massive
demand for solar in the U.S. that will be needed to expand domestic
supply chains, create jobs and fuel economic growth.
Sincerely,
Abigail Ross Hopper
President & CEO
+++
ATTACHMENT: Caslisch, S., Grace, R., Daly, G., and Matusiak, A.
Rewiring America (2021 December), Energy Bill Security for
American Households through Electrification.
This report is retained in the committee files and available at:
https://www.rewiringamerica.org/policy/energy-bill-security
ATTACHMENT: Roy, N., Burtraw, D., and Rennert, K. Resources for the
Future (2021 October), Cost Analysis and Emissions Projections
under Power Sector Proposals in Reconciliation.
The brief is retained in the committee files and available at:
https://www.rff.org/publications/issue-briefs/cost-analysis-
and-emissions-projections-under-power-sector-proposals-in-
reconciliation/
ATTACHMENT: Shawhan, D., Witkin, S., et al. Resources for the Future
and the REBA Institute (2021 December), Evaluation of Power
Sector Emissions Reduction Pathways.
The brief is retained in the committee files and available at:
https://media.rff.org/documents/Evaluation-of-Power-Sector-
Emissions-
Reduction-Pathways-Summary-for-Policymakers.pdf
Ms. Castor. Without objection, all members will have 10
business days within which to submit additional written
questions. For the witnesses, I ask our witnesses to respond
promptly. And thank you again for joining us at this hearing.
The meeting is adjourned.
[Whereupon, at 3:11 p.m., the committee was adjourned.]
[The information follows:]
United States House of Representatives
Select Committee on the Climate Crisis
Hearing on December 9, 2021
``Cleaner, Cheaper Energy:
Climate Investments to Help Families and Businesses''
Questions for the Record
The Hon. Miranda A.A. Ballentine
Chief Executive Officer
Clean Energy Buyers Association
Clean Energy Buyers Institute
the honorable kathy castor
1. Ms. Ballentine, how would lowering the cost of clean energy help
companies achieve their climate and clean energy goals?
The Clean Energy Buyers Association's (CEBA) research arm, the
Clean Energy Buyers Institute (CEBI), in partnership with the Resources
for the Future (RFF) and the National Renewable Energy Laboratory
(NREL) conducted a study of the most effective ways to decarbonize the
electricity system.\i\ The study found that expanding wholesale markets
and supporting significant transmission expansion are one of the most
effective and cost-efficient approaches. Organized wholesale markets
expanded to the West and SE could save consumers additional $11 billion
per year and a national transmission macrogrid could reduce retail
bills a further roughly 2%.\ii\ If pursued in combination with a
national Clean Energy Standard, the study also found that these
measures could result in close to $100 billion in net annual benefits
by 2035. A copy of the report is included with this response.
---------------------------------------------------------------------------
\1\ Clean Energy Buyers Institute (formerly Renewable Energy Buyers
Institute) and Resources for the Future. July 2021. Evaluation of Power
Sector Emissions Reduction Pathways. https://media.rff.org/documents/
Evaluation-of-Power-Sector-Emissions-Reduction-Pathways-Summary-for-
Policymakers.pdf
\2\ Clean Energy Buyers Institute (formerly Renewable Energy Buyers
Institute) and Resources for the Future. July 2021. Evaluation of Power
Sector Emissions Reduction Pathways. https://media.rff.org/documents/
Evaluation-of-Power-Sector-Emissions-Reduction-Pathways-Summary-for-
Policymakers.pdf
---------------------------------------------------------------------------
Companies are committed to addressing the climate crisis by setting
clean energy goals and significantly contributing to clean energy
deployment, as evidenced by the 43 GW of clean energy transacted to
date. Continuing to drive down the cost of clean energy, along with
increasing access to clean energy, will accelerate their ability to
decarbonize their operations and their supply chains. Companies lack
sufficient market options to directly control their clean energy
procurement options, and where markets do exist, capacity constraints,
due to lack of adequate infrastructure, causes congestion, which
increases prices, and often limits their ability to procure the clean
energy they want. Hence, why expanding wholesale markets and
transmission is critical to enabling customers to help drive the clean
energy transition.
2. Ms. Ballentine, you mentioned companies passing on energy costs
and savings to customers. Can you tell us other ways companies have
dealt with volatile fossil fuel prices?
For many institutions, energy is one of the top controllable
operating expenses, often second only to labor costs. Fossil fuel price
volatility and future price uncertainty can wreak havoc on even the
best business plan.
Most businesses do everything they can *not* to pass on volatile
commodity costs to customers, and they first seek ways to mitigate the
volatility.
One way to mitigate rising electricity prices is for companies to
enter into long term power purchase agreements (PPA) for zero-marginal
cost renewable energy, and they are doing exactly that. Corporate PPA's
announced in 2020--over 10.2GW--were equivalent to over 40% of all new
zero-carbon capacity added that year.
Likewise, before passing through costs to customers, most companies
would see other paths to lower costs. For example, when electricity
prices increase, the ROI on energy efficiency projects improve.
3. Ms. Ballentine, can you speak further to the question of what
kinds of technologies could help achieve a zero-carbon energy system?
A combination of zero-carbon generation technologies, plus enhanced
transmission, plus storage for intermittent zero-carbon generation,
plus potentially carbon capture on emitting generation sources, plus
smarter demand response, plus energy efficiency are likely to be
required to fully decarbonize the grid.
CEBA supports the Build Back Better Act's investment of $30 billion
to the Department of Energy for clean technology development and
deployment.
There is fascinating research being conducted at the Department of
Energy's national labs on electric power generation from green
hydrogen, next generation and smaller scale nuclear, tidal power, and
biomass gasification. If these innovative technologies meet the
criteria of a zero-carbon energy system, CEBA welcomes the addition of
a more diverse clean energy mix. CEBA is technology neutral and defers
to our members to determine their application and use as several
factors will warrant one region's or one company's use of certain
technologies versus another region or company.
As more attention and investments are directed toward modernizing
the electric grid, however, we can anticipate further technological
advances that will improve the transmission efficiency and operations.
Dr. Uday Varadarajan mentioned some of the advancements in technology
that have the potential to reduce transmission power loss, improve
efficiencies, and lower operating costs during his testimony on
December 9, 2021, in front of the House Select Committee on the Climate
Crisis.
4. Ms. Ballentine, in your testimony, you spoke about some of the
transmission investments in the Build Back Better Act and the
Infrastructure Investment and Jobs Act. How would moving towards a more
nationally-connected grid, a MacroGrid, help your companies achieve
their clean energy and climate goals?
A macrogrid could help CEBA's member companies achieve their clean
energy and climate goals as it would provide a backbone electrical
system with significant capacity options to procure clean energy. More
significantly, the presence of a macrogrid, while important to my
membership, is a hardening of the electrical grid that would provide
substantial reliability benefits especially in extreme weather events,
which are regular occurrences. The macrogrid provides resiliency to the
system by utilizing neighboring electric supply options and mitigating
system outages.
In addition, modeling by Resources for the Future shows that the
clean energy tax credits in the House-passed Build Back Better Act
alone could incentivize up to 69% carbon-free electricity by 2030.\iii\
The House-passed Build Back Better Act's $180 billion in clean energy
tax incentives will generate billions in additional private sector
investment in a broad spectrum of clean energy technologies from more
investments in renewables, advanced nuclear, carbon capture and
sequestration to clean hydrogen. These additional investments will
lower emissions from electric generators, reduce technology deployment
costs, break ground on new construction projects creating thousands of
new jobs across the clean energy supply chain, and as further progress
becomes apparent, catalyze more investment in emerging technologies.
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\3\ Roy, N., Burtraw, D., and Rennert, K. 7 October 2021. Cost
Analysis and Emissions Projections under Power Sector Proposals in
Reconciliation. Resources for the Future. https://www.rff.org/
publications/issue-briefs/cost-analysis-and-emissions-projections-
under-power-sector-proposals-in-reconciliation/
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When these tax incentives are complemented with transmission
capacity investments now available through the Infrastructure
Investment Jobs Act, and the potential expansion of organized wholesale
electricity markets, which is already under consideration in several
regions, we will have the tools, the technology, and the resources to
decarbonize the electric grid. We will also enable the private sector
to fulfill its commitments to meet fully their clean energy and
decarbonization objectives.
5. President Biden just announced a new Executive Order on
sustainable procurement, which is a great step forward for creating
jobs and reducing carbon pollution. Using the Federal government's
procurement power for clean vehicles, clean fuels, and innovative
building technologies will help bring new solutions to market so all
American can experience the benefits of lower-cost, zero-emission
climate solutions. How would 24/7 clean electricity help expand clean
energy deployment in communities across the country?
CEBA applauds federal efforts to achieve 100% carbon-free
electricity by 2030 as directed in Executive Order (EO) 14057. The
order provides the ambition and scale needed to use the full
procurement and purchasing power of the federal government and 24/7
carbon-free pollution electricity standard sends a strong market signal
that time and location-matched clean energy is imperative to
accelerating decarbonization.
Through power purchase agreements and other tools, energy customers
have facilitated the deployment of more than 44 gigawatts (GWs) of
renewable energy since 2008, which is over a quarter of all wind and
solar capacity in the United States. Voluntary energy customers
contracted for 10.6 GW of clean energy in 2020--the equivalent of 40%
of all new carbon-free capacity installed.? Last year through the end
of the third quarter, voluntary energy customers contracted
approximately 7.88 GW of new off site, utility scale renewables--
equivalent to 34% of the new generating capacity added (or planned to
be added) to the grid.
To fully decarbonize the electric grid, however, we must consider
the decarbonization impact of energy procurement options more
intentionally. Energy customers' ambitions have evolved beyond the
traditional annual matching of clean energy with an invested interest
in matching consumption with carbon-free energy on a local, temporal,
and demand-driven basis.
Advancing the suite of next-generation procurement strategies will
require a coalition of stakeholders collaborating on the market,
technology, and data solutions. CEBA looks forward to working alongside
the committee and other lawmakers to overcome the barriers that
presently exist and?implementing solutions to accelerate progress
towards decarbonizing the grid.
6. Ms. Ballentine, your members have ambitious clean energy and
climate goals, and in many cases have partnered with cities on meeting
those targets. How are your members addressing the situation in states
where the state leadership is preventing cities from moving forward?
Could you tell us more about your state-level initiatives?
As I noted in my testimony, the lack of organized wholesale markets
and transmission bottlenecks are the largest obstacles to carbon-free
electricity. Expanding organized wholesale markets to every region of
the country and expanding transmission capacity would not only
decarbonize the grid but could also save energy customers $11 billion
annually.
While CEBA is focused on advancing policies in the halls of
Congress and before the Federal Energy Regulatory Commission to
modernize the electric system, CEBA also works collaboratively with the
business community and others at the local and regional level to grow
support from the ground up for competitive organized wholesale markets.
This work is being done both at the Clean Energy Buyers Institute where
we are conducting research and developing educational material to
inform regional, state, and local officials on the benefits of
organized wholesale markets and other related issues, as well as at
CEBA where we engage interested parties in policy development at the
state and regional level.
Questions for the Record
Dr. Uday Varadarajan
Principal, RMI; and
Precourt Energy Scholar,
Sustainable Finance Initiative at Stanford University
the honorable kathy castor
1. Dr. Varadarajan, how would the Build Back Better Act help
utilities and communities choose clean power generation strategies that
work for them?
The proposed Build Back Better Act (BBBA) offers a suite of
incentives to make it much less expensive for utilities and communities
to make the choice to shift to clean power--using the technologies and
strategies that work best for them while maintaining or improving
reliability. Most important among these are provisions that make clean
energy tax credits more readily useable by utilities and communities to
reduce the cost to customers of employing a broader range of clean
technologies and strategies.
In more detail, compared to existing tax credits, the BBBA credits
are more easily monetized, longer in duration, and treat competing
clean technologies more equitably. As a result, the credits will be
more flexible in application, expanding the ranks of eligible entities,
increasing the timeframe for their use, and empowering customers and
communities to select climate-sustaining solutions that are also
tailored to local circumstances. This flexibility should boost
grassroots engagement in furtherance of a clean future and also help
deliver a better return on fiscal investment for taxpayers.\i\
The improved BBBA tax credits:
Reward Performance: BBBA newly provides solar asset
owners with the option to claim the production tax credit (PTC) that
has fueled the growth of the wind industry over the past two decades--
and which wind developers have generally chosen in favor of the
investment tax credit (ITC) currently available to both technologies.
With BBBA, solar and wind will be eligible under the existing PTC
through 2026, after which time a new Clean Energy Production Tax Credit
(45BB) will kick in.
Unlike the ITC, which is claimed all at once when a project is
placed in service and is typically calculated on the basis of a ``fair
market value'' open to dispute, the PTC rewards output, providing a
credit for each unit of energy generated over the first decade of
operations. As such, the interests of solar asset owners, taxpayers,
climate advocates, and ratepayers are aligned in favor of cost
transparency and demonstrated decarbonization performance.
Enable Fair Competition: the PTC is not subject to ``tax
normalization.'' Normalization is a legal restriction within the tax
code that compels regulated investor-owned utilities (IOUs) to keep a
portion of benefits of the ITC for investors, the argument being that
investors must benefit from an ``investment'' credit. Customers are
allowed only to receive a fraction of the financial value of the credit
attenuated over the long operating life of their solar assets. In
contrast, unregulated entities--such as renewable developers--are free
to pass on the benefits of the ITC to their customers as dictated by
market competition, a more economically rational way to balance the
interests of investors and consumers. Put simply, because unregulated
developers are not subject to normalization restrictions, they can sell
electricity at lower prices than IOUs, even when technology and capital
costs are the same. (However, by hindering full and fair competition,
normalization likely allows third-party developers to demand higher
prices for solar than would be the case without the constraint. For a
commodity product like solar generation today, such a barrier to
competition has no compelling justification.)
The normalization disadvantage has created a conflict between the
business interests of IOUs--which sell electricity to nearly 50 million
households and 7 million business accounts in 49 states--and solar
deployment. Utility opposition can be explained by how regulated IOUs
make investment decisions and earn profits. Before an IOU builds a
power plant, it must prove to its regulator that the investment is
prudent. Prudency considers cost relative to other ownership options.
Third-party solar power purchase agreements are unattractive for IOUs,
which earn profits for their shareholders by investing in and owning
assets. IOUs therefore lack the financial motivation to accelerate
solar deployment. In this context, an IOU's financial interests are
likely best served by resisting the transition to solar.
The PTC option will provide a route around the normalization
barrier and accelerate progress toward America's climate goals. Indeed,
according to modeling from the Rhodium Group, allowing renewables to
choose between the ITC and PTC would double emissions reductions by
2031 compared with a straight 10-year extension of the current tax
credits.\ii\
Improve Policy Efficiency: BBBA provides for direct pay
of tax credits. Most clean energy developers and utilities do not have
the tax liabilities necessary to claim tax credits at their full
present value. The prevailing solution has been to negotiate
complicated tax equity workarounds--which reduce the value of the tax
credits passed down to consumers. Changing these tax credits to permit
direct pay would enable developers to realize the credit's whole value,
further lowering the cost of clean energy. The change would also open
up the credits to investors currently excluded from direct access to
tax credits, such as not-for-profit and governmental entities.
Under existing law, companies monetize a cash benefit from the ITC
and PTC only if they can offset taxes due in that year. Otherwise, the
credits must be ``carried forward'' for possible future use. RMI
analysis of financial disclosures shows that in 2019 IOUs had aggregate
tax liability sufficient to build less than 4 GW of new solar and
storage per year--roughly enough capacity to replace just one or two
coal plants.\iii\ Over the last two decades, policymakers have put in
place ``bonus depreciation'' provisions to incentivize investment to
fight recessions. These provisions allowed companies to immediately
deduct as an expense from their pre-tax income very large share--or, in
some cases, even all--of the investment they make in new capital
assets. Utilities therefore often do not owe enough in taxes to see a
current cash benefit from the existing ITC and PTC. Depending on state
regulatory practices, this inability to monetize can result in a
financial burden--a carrying cost--for customers or shareholders.\iv\
A utility can currently opt to purchase clean power from a third-
party developer or partner with tax equity investors--large financial
institutions that have found a market selling their tax liabilities to
developers--to realize the benefits from tax incentives for their
customers. However, the use of tax equity often comes with higher
financing costs that reduce the amount of tax incentive benefits that
can be passed on to customers. And, as noted in connection with the
normalization issue, reliance on third-party capital is at odds with
the core of the utility business model, which is to deploy utility
shareholder capital.
Public power agencies and many cooperative utilities will also
benefit from direct pay. As not-for-profit entities, these utilities do
not currently have direct access to clean energy tax credits. Instead,
they must rely on private-sector developers and investors as
intermediaries. But these private entities have capital costs well
above the low-cost debt that not-for-profits and governments can access
for their fossil investments.
While IOUs, public power agencies, and cooperatives owned around
55% of total generating capacity in the US in 2019, their corresponding
shares of wind and solar were only 15% and 11%, respectively. Direct
pay can significantly improve the ability of these entities--currently
responsible for 80% of the emissions from coal in the power sector--to
deliver cost savings from transitioning to carbon-free electricity.
Incentivize Critical Reliability-Boosting Technologies:
BBBA allows stand-alone battery storage and transmission to qualify for
the up to a 30% ITC with direct pay. Both storage and transmission are
critical for allowing the grid to absorb a higher penetration of
variable clean energy while also allowing a much larger and diverse
group of communities (e.g., along transmission routes and in areas
where storage is valuable even without collocated generation) to
benefit from clean energy tax incentives.
Extend the Duration of Availability of Credits: The new
BBBA credits--the 45BB PTC for wind and solar and the 48F ITC for wind
and solar and stand-alone storage--will be available in full through
the earlier of 2031 or when the US electric sector achieves a 75%
emissions reduction from 2021, while the ITC for transmission is set to
be available through 2026. These are longer horizons than have been
available for clean energy for much of the last decade, which has seen
the PTC and ITC repeatedly face phase-outs and phase-downs that have
been relieved by short-term (often 1-year) extensions. The BBBA
approach will increase investor confidence, counter ``fear of missing
out'' decision making, and mitigate logistical and construction
bottlenecks that have been exacerbated by previous phase-out and phase-
down deadlines.
In sum, BBBA provides far more flexible incentives for clean
energy, with new and expanded tax credits that
utilities and customers can choose to claim (or not
claim) depending on their needs and preferences;
enable communities to act on their own, by directly
accessing tax credits through public power entities as well as via
individual investments in technologies such as stand-alone storage that
invite modular deployment,
achieve technology-neutrality with regard to wind and
solar, and
sustain existing nuclear plants and also incentivize
hydrogen technologies and carbon capture and storage, giving utilities
and communities more options for clean power tailored to local
conditions. As variable renewable energy penetration increases, such
``firm'' resources can help maintain grid stability.
2. In your view, how will the Infrastructure Investment and Jobs Act
promote electric grid reliability and how would the Build Back Better
Act build on that foundation?
The Infrastructure Investment and Jobs Act (IIJA) provides billions
of dollars to reduce the grid impact of extreme weather events that are
increasing in frequency as a result of climate change, including $5
billion for grid resilience and reliability upgrades and $3 billion for
smart grid technologies.\v\
IIJA also includes incentives to build out transmission and
distribution lines and gives meaningful authority to help federal
agencies navigate land use disputes that often delay grid improvements.
Grid expansion that keeps pace with renewable deployments is critical
for future grid reliability.\vi\
BBBA will build upon IIJA by adding and expanding tax credits for
firm clean resources, transmission, and battery storage systems. RMI
further recommends the inclusion of an ITC tax normalization opt-out
for transmission and stand-alone storage to allow utilities to fully
pass on these benefits to customers. Even if third-party ownership of
such assets is less established than is the case with solar generation,
the potential for normalization to misalign utility interests and clean
energy policy goals (while also increasing customer costs) is
nevertheless without compelling justification.
3. RMI's analysis showed that states all across the country can
benefit from the clean energy tax credits included in the Build Back
Better Act. Could you please explain how consumers in states such as
Indiana or Ohio can benefit from these clean energy tax credits even if
the renewable resources in their states are not quite as abundant as
those in other regions of the country? Specifically, if states like
Indiana and Ohio build relatively less new clean energy generation
within their boundaries, what would make it possible for their
residents to experience some of the economic benefits?
Even in states like Indiana and Ohio that cannot match the
insolation of the Southwest or the wind energy of the Great Plains,
clean resources are often already economic to build. In Indiana, for
instance, the Northern Indiana Service Company plans to retire its
entire coal fleet by 2028 and replace them with cheap renewables, which
will reduce carbon emissions by 90%, save customers $4 billion, and
promote local jobs and economic development.\vii\
With BBBA, clean energy economics will improve across the country.
Individual investment decisions will still need to assess resource
quality, proximity to load, and the value of geographic diversification
in regional power systems. New clean energy technologies, such as
offshore wind on the Great Lakes, or hydrogen plants with CCS and
nuclear small modular reactors (SMRs) on former coal plant sites, may
also play a role in anchoring new investment in Midwestern states,
thanks in no small part to the BBBA's more expansive tax credits.
Because of Indiana and Ohio's current high reliance on expensive
coal and low renewable penetrations (9% in Indiana and 3% in
Ohio),\viii\ consumer savings from BBBA's clean energy provision will
be very large, even if net reductions in in-state shares of generation
occur. In fact, RMI's analysis found that BBBA tax credits would
deliver larger ratepayer savings to Indiana than any other state, over
$800 million per year by 2030. Ohio could see over $100 million in
savings annually by 2030.\ix\
4. Fossil energy production requires extraction that has transformed
huge swaths of the American landscape and oceans. How do solar and wind
energy compare in terms of their use and impact on US lands and
waterways to deliver similar energy services?
A 2013 NREL study shows that if powered on solar power alone, the
United States would need about 22,000 square miles of solar panels--
about the size of Lake Michigan--to generate the entire country's
electricity.\x\ A similar analysis to generate the entire country's
electricity from wind turbines showed that they only needed about 1,200
square miles of wind turbines, or about the size of Rhode Island.\xi\
These equate to approximately 0.7% and 0.03% of the total land area in
the continental United States. And a new analysis by Lawrence Berkeley
National Lab has found that older estimates of solar density are out of
date, with solar panel density increasing by over 50% from 2011-2019,
and energy generation increasing by over 25% over that same time
period.\xii\
Critics of renewables often point to these estimates and then
suggest that fossil fuel generation--which occurs at centralized power
plant facilities that occupy a much smaller footprint--have a much
smaller impact on the landscape. But a fair comparison must take into
account land used for upstream processes like fuel storage, refinement,
and transportation, and, much more importantly, the ongoing annual need
for additional land every year for fuel extraction, such as mining and
drilling, just to maintain existing consumption.
With this wider frame, the land intensity of renewables compares
very favorably with fossil energy.
For example, analysis of U.S. data shows that 1.8 million Gigawatt-
hours (GWh) of electricity from were generated from coal in 2009, which
required disturbing over 117,000 acres in additional land in the
process. This means that each additional acre of new land disturbed by
coal mining ultimately generated 15 GWh of electricity in 2009.\xiii\
Fossil gas produced in new wells using hydraulic fracturing in dry
shale or tight gas formations generally generate a total of between 20-
50 GWh of electricity over the life of the well per acre of land
disturbed, primarily within the first five years of drilling.\xiv\
However, unlike coal or gas generation which will need to disturb
additional lands every year just to maintain production levels, solar
and wind installations can continue generating electricity on the land
they occupy indefinitely. Assuming (conservatively) a capacity factor
of 25.7% and 0.5 acres of land per 3-megawatt wind turbine, a 3-
megawatt wind turbine produces approximately 13 GWh per acre each year.
However, over a 30-year asset life, a single 3-megawatt wind turbine
can generate 200 GWh while significantly disturbing just a half-acre of
land.\xv\ Fixed-tilt solar installations in the US, on the other hand,
would appear to be much less land-efficient at first glance, as an acre
of land produces on average 0.4 GWh of electricity per year.\xvi\ But
that facility can generate 12 GWh over 30 years without the need for
additional land. Moreover, unlike coal mines, solar facilities can also
be located on rooftops or other lands that are primarily used for other
purposes. This means that our estimate likely overestimates the new
land that needs to be disturbed to generate electricity from solar PV.
And, of course, acreage devoted to wind and solar can continue to
produce through successive asset generations, in theory boosting the
efficiency of land use in perpetuity. Note that we must be careful to
account for the additional land used for mineral extraction globally to
construct successive generations of solar and wind farms as well.
However, as we discuss below, these challenges can be overcome by
following best practices for recycling and reuse. All in all, the
renewable nature of these resources indeed implies that in the long run
they are likely to be far more land-efficient compared to coal or
fossil gas resources.
5. Could you please explain how building electrification would
benefit low-income households? How would it protect them from indoor
air pollution? How would it reduce energy costs?
This winter Americans will see home energy bills increase
significantly, in large part due to spiking natural gas costs.\xvii\
The burden will weigh most heavily on the 4.8 million households
already facing energy insecurity.\xviii\ Fortunately, electrification
of household heating and cooking, when combined with a switch to
renewable resources that rely on free fuel from the sun and wind, will
help insulate low-income households from energy price volatility.
Electrification will also reduce air pollution from burning gas,
wood, and biomass, practices that contribute to more negative health
effects than burning coal in many states.\xix\ Household combustion is
the main reason that the indoor environment is often more polluted than
the outdoors.\xx\ In low-income communities where respiratory diseases
are prevalent, building electrification will have an outsized
beneficial impact on health outcomes.
While new all-electric, single-family homes are now less expensive
to build and operate than new traditional mixed-fuel homes,\xxi\ the
BBBA adds a suite of incentives to help retrofit older buildings,
particularly those occupied by low-income households. Particularly
noteworthy are the High Efficiency Electric Home Rebates, two-thirds of
which must be directed to low-income and tribal communities, and the
Home Energy Performance-Based Whole-House Rebates and Training Grants.
6. Like all technologies, clean energy technologies can lose
efficiency or wear out over time. However, clean energy technologies
typically have long productive lifespans. The National Renewable Energy
Laboratory estimates solar panels maintain productivity for at least
20-25 years, and electric vehicles batteries are commonly warrantied
for 8-10 years, with NREL data showing batteries can last well beyond
that timeframe. When clean energy technologies do have to be retired,
what opportunities do we have in the United States to reuse and recycle
critical materials used in the production of clean energy technologies
such as solar panels and EV batteries?
Based on RMI review of regulatory filings, including numerous
integrated resource plans (IRPs), the anticipated depreciable life of
utility-scale solar (and wind) assets is typically 30 years or longer.
This greater asset utilization (compared with the NREL assumption of
20-25 years) implies significantly reduced recycling needs.
When retirement and recycling is necessary, solar panels are about
80% glass and aluminum by weight, both materials which already have
extensive recycling supply chains.\xxii\ Copper and silver are also
significant inputs and can be readily recovered and reused.
Recycling pathways for wind are admittedly more complicated.
Turbines are made primarily of either glass or carbon fiber blended
with epoxy resin, which makes separating the materials difficult for
recycling. However, innovative processes have been developed to recycle
current wind turbine materials, such as a recent announcement by GE to
recycle wind turbines for cement production, as well as new
technologies under development that would make recycling future wind
turbines much easier.\xxiii\ And wind manufacturers are stepping up
their commitments to eliminate turbine waste and shift to recycling.
Electric vehicle batteries primarily use lithium-ion battery packs.
Although the recycling industry here is currently in an early stage, it
is beginning to scale,\xxiv\ driven by projected payback periods of
under one year for demonstration scale plants (ca. 1,000 tons per year)
\xxv\ and an expected global annual EV battery recycling need of nearly
400,000 tons by 2025.
As innovation progresses, technologies improve, and demand
increases, recycling costs will fall and recycling production will
rise. A similar process happened with the current lead-acid battery,
used in current gasoline-powered cars, where a recycling industry
scaled up as those batteries became dominant, and we now recycle 98% of
lead-acid batteries.\xxvi\
REFERENCES PAGE
\i\ https://rmi.org/one-simple-tax-change-could-unlock-critical-
clean-energy-infrastructure/
\ii\ https://rhg.com/research/build-back-better-clean-energy-tax-
credits/
\iii\ https://utilitytransitionhub.rmi.org/#top-line-insights
\iv\ See ``Rebuttal Testimony of Uday Varadarajan on Behalf of
Environmental Law & Policy Center and Iowa Environmental Council,''
before the Iowa Utilities Board, Docket No. RPU-2019-0001 (15 August
2019).
\v\ Such is critical as weather-related burdens on utilities are
expected to grow considerably in coming years. A recent BloombergNEF
analysis projects $4.1 billion in annual losses to utilities each year
from climate-driven extreme weather events; see https://www.bnef.com/
insights/28039
\vi\ https://rmi.org/one-simple-tax-change-could-unlock-critical-
clean-energy-infrastructure/
\vii\ https://www.nipsco.com/campaigns/future
\viii\ https://www.eia.gov/state/analysis.php?sid=IN and
https://www.eia.gov/state/analysis.php?sid=OH
\ix\ https://rmi.org/rmi-reality-check-proposed-clean-energy-
incentives-would-save-electricity-customers-billions/
\x\ https://www.energy.gov/eere/solar/solar-energy-united-states
\xi\ https://www.businessinsider.com/wind-turbines-to-power-earth-
2016-9
\xii\ https://emp.lbl.gov/publications/land-requirements-utility-
scale-pv
\xiii\ https://www.gem.wiki/The_footprint_of_coal
\xiv\ RMI analysis based on EIA average natural gas fleet
efficiency of 0.13 kWh/cf (see https://www.eia.gov/tools/faqs/
faq.php?id=667&t=2), EIA oil and gas well production curves by state,
play, and county
(see https://www.eia.gov/analysis/drilling/curve_analysis/), and
estimates of land disturbed by Marcellus shale wells of roughly 28
acres per well published by the
Nature Conservancy (see https://
www.energy.gov/sites/prod/files/2014/07/f17/
pittsburg_qermeeting_minney_statement.pdf
\xv\ These calculations do not account for coal waste facilities,
manufacture facilities, or transmission.
\xvi\ https://emp.lbl.gov/publications/land-requirements-utility-
scale-pv
\xvii\ https://www.npr.org/2021/10/13/1045723713/home-heating-
costs-this-winter-natural-gas-electric
\xviii\ https://www.futurity.org/covid-19-energy-bills-income-
2505662/
\xix\ https://rmi.org/uncovering-the-deadly-toll-of-air-pollution-
from-buildings/
\xx\ https://rmi.org/indoor-air-pollution-the-link-between-climate-
and-health/
\xxi\ https://rmi.org/all-electric-new-homes-a-win-for-the-climate-
and-the-economy/
\xxii\ https://www.seia.org/sites/default/files/2020-01/SEIA-
Recycling-Program-
Factsheet-January%202020-web_0.pdf
\xxiii\ https://www.utilitydive.com/news/ge-announces-first-us-
wind-turbine-blade-
recycling-program-with-veolia/591869/,
https://www.usatoday.com/story/news/factcheck/2021/11/30/fact-check-
recycling-can-keep-wind-turbine-blades-out-landfills/8647981002/
\xxiv\ https://www.wastedive.com/news/lithium-ion-battery-
recycling-ev-li-cycle-retriev/608778/ Benchmark Mineral Intelligence,
``Lithium-ion battery supply chain technology development and
investment opportunities,'' (June 2020).
\xxvi\ https://www.nature.com/articles/d41586-021-02222-1
Questions for the Record
Amy Myers Jaffe
Research Professor and Managing Director,
Climate Policy Lab
The Fletcher School at Tufts University
the honorable kathy castor
1. Ms. Jaffe, the Build Back Better Act makes it cheaper for
Americans' next car to be an electric vehicle. More EVs on the road
will reduce demand for oil. How would reducing demand for oil protect
U.S. national security interests?
For the last five decades, the world has experienced economic
swings and geopolitical conflicts centered around the oil and gas
commodity price cycle. In multiple periods historically dating back to
the 1970s but including more recently, 2006-2009 and 2012-2015, rising
global economic growth has been accompanied by a sharp rise in the
price of oil, which in turn, created discontinuities and financial
crises that have jeopardized U.S. national interests, economic health,
and the well-being of lower income Americans. On all three fronts--
energy markets, financial markets, and energy geopolitics--the
geopolitical and economic outcomes of wild energy market oscillations
have become intolerably high. We have seen multiple global financial
meltdowns accompanied by rising social and economic inequity. The
investment cycle in energy production capacity has tended towards a
pro-cyclical pattern, contributing to greater volatility that
intersects with geopolitical risk in increasingly cataclysmic ways. In
2008, oil prices hit $147 a barrel and U.S. economic growth fell
precipitously. Over 3.6 million American jobs were lost between
December 2007 and January 2009.
Attenuating the cycle in global oil demand by decoupling oil use
from economic growth is the best way to prevent this kind of repeating
crises from occurring over and over again. Multiple studies have shown
that countries with lower energy consumption to GDP ratios experience
less inflation-induced GDP losses. Reducing the oil intensity of the
U.S. transport sector protects both individual consumers and the
overall economy.\1\ Achieving fuel diversity by adding more EVs to the
U.S. transport sector is one major way to reduce the oil intensity of
the U.S. economy and thereby insulate the U.S. economy from sudden,
adverse oil price shocks and geopolitical leverage. Energy efficiency
standards is another way.
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\1\ Mahmoud El-Gamal and Amy Myers Jaffe, Oil, Dollars, Debt, and
Crises, Cambridge University Press, 2010
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Continuing to maintain oil intensity in our transportation sector
gives an opening to oil producing countries to interfere with the U.S.
election process by undertaking temporary oil market supply cutbacks in
hopes to boost U.S. gasoline prices to try to influence economic health
and thereby election outcomes. Oil producers are similarly incentivized
to try to raise oil prices to discourage U.S. environmental legislation
by creating a false narrative that environmental regulation will lead
to rising gasoline prices. Such misinformation confuses the issue
because, of course, basic supply demand principles are clear: Less
demand for gasoline will lead to lower prices, not ``cause'' higher
prices. The less demand there is for oil and the more decoupled road
fuel is from high dependence on oil, the more elastic the price of fuel
will be; that is, consumers will have more power to shift among
different diverse fuel sources. The more decoupled economic activity is
from oil, the less monopoly power OPEC has in markets.
EVs are an effective tool to reduce OPEC market power and to
decouple the U.S. economy from the ill-effects of oil price shocks.
U.S. oil production is millions of barrels a day too low to meet U.S.
domestic demand for road fuel. Even if U.S. oil production could
recover to over 12.9 million b/d seen in November 2019, up from 11.6
million b/d currently, U.S. domestic oil supply would still fall short
of covering current U.S. oil demand of roughly 20 million b/d. Adding
electric vehicles to U.S. fleets would bring U.S. oil demand closer in
balance with demand. The U.S. currently allows the exports of gasoline
and diesel fuel. U.S. refined product exports average around 5 million
b/d/.
EVs, by reducing U.S. domestic oil demand, would bring U.S. oil use
and production into closer balance. Exported surpluses increase
competition globally to lower world oil prices. As other countries also
increase EV sales, the need for oil globally will also be reduced and
the oil intensity of the global economy will fall, further adding
further to energy security and reducing the market power and
geopolitical influence of OPEC and Russia.
Recent calculations by UC Davis Institute for Transportation
Studies (ITS-Davis) highlights the potential of electric vehicles to
lower U.S. oil use. The study of low carbon transition for cars and
trucks in the U.S., by Lew Fulton, Marshall Miller, and Qian Wang,
estimates that EVs could reduce U.S. gasoline consumption from 103.7
billion gallons of gasoline equivalent (billion GGE) in 2025 to 56
billion GGE by 2040 or the equivalent of a reduction of one million
barrels a day of oil equivalent. Diesel use could drop from 50.6
billion GGE to 29 billion GGE by 2040, or the equivalent of 460,000
barrels a day of oil equivalent. (See Figure 1 below).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
2. There is a global competition to build the vehicles of the future.
How would incentives for domestic manufacturing of clean vehicles help
the United States compete and how would that bolster our ability to
protect our national interests?
Leading in energy and vehicle innovation ensures that the U.S.
military and space programs have a technological edge over geopolitical
rivals and lowers the cost of addressing climate change. It has spurred
new markets, industries and companies in the United States in recent
years.
Without public funding and related political leadership to guide
optimal outcomes, the United States could fall behind other nations
that have well-developed, national initiatives such as China and
Europe. A U.S. failure to address the challenge of the emerging race in
manufacturing of smart and clean vehicles would be analogous to the
United States opting to ignore the risks that the Soviet Union's
superiority in space in 1957 might have threatened America's national
security. Imagine today if the United States had inferior access to
satellite and other kinds of sophisticated defense related aerospace
technologies. That is, in effect, what it would mean if the United
States does not address China's efforts to dominate the new digital
energy and vehicles market with its own brand of smart drones, cyber
surveillance technologies, and automated vehicles and electric networks
that will not only underpin future economic trade in clean energy
products, but also boost their relative capability in asymmetric
warfare technology. The U.S. Pentagon has recognized this future and
began funding research in automated machines and vehicles in 2004.
The U.S. Pentagon began funding an effort on the development of
autonomous vehicles in 2002. Since then a new geostrategic race to
dominate critical digital technologies for automation and electric
mobility has begun in earnest. While most Americans think of such
products as the latest in experimental commercial endeavors by Waymo to
foster ride hailing services in self-driving cars in places like the
suburbs of Arizona and efficient drone and electric AV delivery by Nuro
or UberEats, major militaries are now competing in the spheres of
autonomous vehicles and drones, tapping artificial intelligence,
machine learning, and massive data analytics, to gain an edge in
asymmetric warfare. The U.S. Congress set a goal that by 2015, ``one
third of the operational ground combat vehicles of the U.S. military be
unmanned.'' \i\ That deadline has come and gone but now the United
States faces intense competition in this space from China.
China's industrial policy is aimed to deliver a range of
technologies that will dominate the future global economy, including 5-
G networks, solar panels, battery storage, electric and autonomous
vehicles, drones, and commercial robotics, high performance computing/
artificial intelligence applications, and high-speed rail. Many of
these technologies are fundamental to superiority of weapons systems.
Since Beijing first announced its Science and Technology initiative in
2006, it has launched the world's fastest supercomputer and become the
world's largest drone manufacturer.
China's unparalleled size as the world's largest consumer country
gives the country an economic and strategic advantage. The size of
China's online shopping industry now totals over $1 trillion. Its car
market is also the world's largest. China produced 72 percent of the
world's lithium-ion batteries in 2019, while U.S. manufacturing
accounted for only 9 percent. China dominates the market for production
of battery chemicals, cathodes, anodes, and battery cells.
China hopes to utilize its consumer spending power to attract
innovative companies and to attain top status in critical strategic
industries in clean energy. Innovative U.S. companies ranging from
those that with technologies to 3D print cars to makers of advanced
materials have shifted to China after failing to find public funding in
the United States.
China has been particularly aggressive targeting smart, connected
vehicles technology including self-driving cars and has engaged in
espionage against U.S. companies to gain access to American
technological knowhow. The dual use nature of the technology raises the
stakes, as well as vulnerability to cyber-attack. U.S. Justice
Department officials have focused on the problem of intellectual
property theft, but it is not sufficient to close the door to Chinese
intellectual property theft. What is needed is an affirmative strategy
that paves a positive response to how the public sector can promote the
superiority of America's technological edge and broader the
participation of more American workers in the process. For its part,
China is focused on winning the race to install 5-G networks in its
major cities, in part so it can attract self-driving automotive
industries that might be reluctant to miss out on the opportunity to
pilot their wares more quickly at scale. The United States currently
lags behind.
Domestic advanced vehicle manufacturing must be part and parcel of
any effort that the United States makes to maintain its economic,
military, and diplomatic stature as a global world power. The global
electric vehicle market, estimated at $162 billion in 2019, and is
projected to hit $1 trillion by the late 2020s. It is hard to fathom
how the American car industry can remain globally competitive without a
large push to participate in this growing sector.
Recognizing the importance of advanced vehicles to future economic
competitiveness and security, the European Union, worried about future
dependence on China for its clean energy future, has committed to a $1
trillion initiative to create an internationally competitive battery
supply chain, including mining, recycling, and manufacturing to its own
shores. France and Germany have announced a $5 billion to $6.7 billion
consortium of automobile and energy firms to enhance Europe's electric
car battery manufacturing capability. The European Union will be
providing public subsidies. Even with the COVID-19 pandemic, European
leaders are emphasizing European stimulus packages will support the
planned shift to clean energy. The European Council reaffirmed that the
roadmap for economic recovery will feature the green transition and
digital transformation with a ``central and priority role in
relaunching and modernizing our economy.'' \ii\
The United States needs a concerted effort to ensure that its car
industry remains internationally competitive and is producing the
vehicles that will be demanded in global markets in the coming years.
Given large interventions in domestic advanced automobile industries by
governments of all other major economies, it behooves the United States
to keep pace to avoid the risk of not only further job losses in the
sector, but also a deterioration of its supremacy in manufacturing and
utilizing advanced, automated vehicles for national defense purposes.
3. Some of the climate investments in the Build Back Better Act could
also help us meet our short-term energy needs, such as providing
incentives to capture methane emissions from fossil oil and gas
production. We're expecting high natural gas prices in many parts of
the country this winter. Should Congress encourage oil and gas
companies to stop methane leaks?
Methane leaks are wasteful and environmentally damaging. It is
critical that methane leakage into the atmosphere be ended to reduce
U.S. greenhouse gas emissions, and specifically methane emissions, in
line with targets set forth at the 2021 Glasgow climate meetings. In
some cases, methane emissions result from poor maintenance of
equipment. In other situations, routine flaring and venting stems from
poor or sloppy corporate planning, where oil fields are brought online
without consideration of proper coordination to an evacuation strategy
for the associated gas (eg it is either just assumed it will be ``ok''
to flare or vent gases that have no transport access or market uptake
despite rules to the contrary or companies fail to find an alternative
solution when there is an unexpected delay in construction transport
infrastructure).
Either way, it is inexcusable to literally burn natural gas into
the sky as a routine operation, regardless of whose fault the
transportation bottleneck is. The sky should not be used as a garbage
dump for natural gas to allow private companies to make money producing
associated oil. Companies are looking increasingly at other options for
stranded natural gas production such as connecting it to impromptu data
centers or transportation fuel applications to find outlets for gas
that is lacking buyers.
Colorado has already implemented strict regulations on methane
requiring oil and gas companies to find and fix methane leaks and to
install technologies to limit or prevent emissions at existing
operations. PHMSA and Department of Interior should follow suit.
Companies operating in Colorado have had no difficulty complying with
these stricter rules, which cover not only production wells but also
tanks and performance standards for pipelines. Technologies including
sensors, infrared cameras on drones, and satellite imagery are being
used by industry to identify sources of leaks. The use of these
technologies creates jobs and improves environmental practices.
Methane leakage from oil and gas operations is an important source
of greenhouse gas emissions in the United States. Methane emissions
from the energy sector is recorded at 267.6 million metric tons of
CO2 equivalent in 2019, according to EPA estimates. However,
recent scientific studies indicate that this estimate is likely too
low.\iii\ Federally-mandated methane restrictions from the U.S. oil and
gas sector could reduce the methane emissions equivalent to 920 million
metric tons of CO2 between now and 2035. Some of that
methane (roughly 41 million tons annually) could be captured and sold
to consumers, helping lower energy costs to households and businesses.
Some of the largest U.S. natural gas companies, such as EQT and Apache,
are already moving to end methane leakage, meaning their operations
will already be compliant with any new federal restrictions. It is
desirable for the rest of the industry to take this path to preserve
access to European and Asian liquefied natural gas markets where
requirements for certification of low carbon intensity are becoming
more prevalent.
4. Do you agree that fossil fuel production companies should be
responsible for preventing pollution from the production infrastructure
they build? And should those same companies also be responsible for
appropriately decommissioning energy infrastructure they build and
remediating any environmental impacts?
Taxpayers should never be saddled with the cost of appropriately
decommissioning energy infrastructure and remediating environmental
impacts instead of the companies that generated the profit from
operating that infrastructure.
Stronger assurance regulations are needed to deal with an
increasing burden of decommissioning liabilities. Congress should
support Interior's proposed fitness to operate standard for evaluating
potential lessees based on companies' environmental and safety records,
as well as credit worthiness to sustain liabilities that might accrue
following an accident like the one seen last year in Newport Beach,
California, involving facilities of a highly leveraged, indebted
private oil company. All companies should be required to underwrite
adequate bonding for accidents and decommissioning as part of their
licensing and permitting process. Increasing bond requirements will
become increasingly imperative as the energy transition gains pace and
more fossil fuel facilities reach retirement age. Bankruptcy should not
be the mechanism oil and gas leaders and their investors use to bypass
the business costs of winding down operations.
5. Why might it make sense to increase royalty rates on oil and gas
production within federal lands and waters?
U.S. oil and gas development on federal lands is structured on
concessionary terms where private investors carry the risk of
exploration and the government is shielded from that risk, collecting
instead fixed royalties and taxes. Under this system, the investor is
left with all of the windfall if oil prices rise significantly, but
equally all of the downside if prices collapse. Currently, U.S. royalty
rates are 12.5% for onshore leases and $18.7% for offshore leases,
depending on depth.
Consideration of the appropriate level of royalty rates is a
function of a number of factors, including the competitive standing
within the global market for fiscal terms for exploration and
production opportunities. U.S. exploration companies consider the
overall potential internal rate of return (IRR) that can be achieved in
capital investment across a variety of geographies and locations. The
size of potential resources, political and currency risk, and the
competitiveness of overall fiscal terms influence an exploration
company's decision to select one opportunity over another. Federal
royalty rates are just one element that determines the attractiveness
of a U.S.-based resource play to potential drillers.
To answer the question of whether it might make sense to increase
royalty rates on oil and gas production within U.S. federal lands and
waters, the goals to that increase must be considered. Trade-offs
between competing `intentionalities' need to be considered. An increase
in royalty rates can be used to achieve the following aims:
1) To increase federal government revenue
2) To adjust U.S. fiscal terms in alignment with global levels
3) To ensure the federal government is better compensated during
periods of high oil prices and plentiful windfalls
4) To discourage development of marginal acreage and incentivize
capital investment only in the most prospective regions
5) To slow down oil and gas development by raising costs to
investors
On a commercial basis (not considering other goals), the optimal
level for royalties on U.S. federal lands should reflect a level (when
combined with other taxes and charges) that is competitive with fiscal
terms offered globally. Too high a royalty rate could prompt
exploration companies to shift capital spending to other countries with
more competitive terms for exploration. Too low a royalty rate compared
to international locations means the U.S. federal government is
``leaving money on the table'' so to speak and has room to increase its
take. It should be noted that royalties are just one element of
exploration fiscal terms.\iv\
In assessing the benefit of changes in the level of royalties for
oil and gas development on U.S. federal lands, it is important to
consider the purpose of the change. If the federal government is
considering a royalty increase to improve revenues from its leasing
programs but wants to do so in a manner that promotes optimum
development of core producing areas, it should consider a sliding scale
approach that varies the royalty rates based on resource potential and
level of oil prices. A variable royalty rate that would increase in
times of high oil prices would allow the federal government to garner
more revenue in a manner that would have less negative impact on the
level of investment. For example, a higher royalty rate could be borne
easily in markets where oil prices surpass $70 or $80 a barrel than in
markets where oil prices are averaging $30 or $40 a barrel. Some
international fiscal regimes are structured around a sliding scale of
royalties and taxes that are tied to changing level in oil prices.
Generally speaking, higher royalty and tax rates for exploration and
production could also serve to discourage investment in marginal, low
prospective production regions.
REFERENCES PAGE
\i\ Brown, Meta, ``Driverless Cars, Analytics and Tough Standards
for 21st Century Innovation,'' Forbes, August 29, 2015,
https://www.forbes.com/sites/metabrown/2015/08/29/driverless-cars-
analytics-and-tough-standards-for-21st-century-innovation/#68cd340445a6
\ii\ A Roadmap For Recovery: Towards a more resilient, sustainable
and fair Europe, https://www.consilium.europa.eu/media/43384/roadmap-
for-recovery-final-21-04-2020.pdf
\iii\ Jeffrey S. Rutherford et al, Nature Communications, August
2021
https://www.nature.com/articles/s41467-021-25017-4
\iv\ https://www.boem.gov/sites/default/files/oil-and-gas-energy-
program/Energy-
Economics/Fair-Market-Value/2018-GOM-International-Comparison.pdf
[Whereupon, at 3:11 p.m., the committee was adjourned.]
[all]