US renewables sector shrugs off likely demise of Clean Power Plan

The Clean Power Plan is in big trouble under new EPA chief Scott Pruitt. But the renewables sector is not losing much sleep.

With the confirmation late last week of Scott Pruitt as the new head of the US Environmental Protection Agency (EPA), the Clean Power Plan is in grave danger. Yet many in the renewables industry are relatively unperturbed.

There is little doubt that Pruitt, a climate sceptic who sued the EPA more than a dozen times in his previous role as attorney general of the oil-rich state of Oklahoma, will attempt to dismantle or weaken the Clean Power Plan (CPP), among other Obama-era environmental policies.

Indeed, many in the renewables sector had all but written off the CPP even before Pruitt’s confirmation. 

“I think we can probably count on the fact that the Clean Power Plan is dead,” Michael Storch, executive vice president at Enel Green Power North America, said at an industry conference two weeks ago. Massachusetts-based EGP-NA is among the continent’s largest renewables developers.

Tom Werner, chief executive of US solar group SunPower, told analysts last week: “We’re not forecasting any implementation of the Clean Power Plan.”

The CPP’s demise would have serious implications for how the world views America’s commitment to fighting climate change. Whether its collapse would make much of a difference to the renewables market is a separate question, however. Many US utilities see wind and solar as increasingly attractive options wholly outside the issue of climate change.

The renewables industry, which today relies much less on climate change as a selling point than in the past, has mixed views on the potential impact of the CPP’s unraveling.

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Unveiled by the Obama administration in 2014 and finalised the following year, the CPP mandates a 32% reduction in carbon pollution from the US power generation fleet by 2030 on 2005 levels – effectively forcing many existing coal-fired power plants into an early retirement.

The policy’s launch was cheered by the renewables industry, which has seen it as a possible market tailwind in the 2020s, when long-standing federal tax credits for wind and solar are scheduled to shrivel and disappear.

At a time of deep uncertainty in the energy business – with regard to technologies, prices and policies – the CPP seemed at least to bring some additional clarity as to the market’s direction of travel.

“We felt a lot better about the next decade last year than we do today,” says Mark Anderson, senior vice president for public affairs at EDF Inc., whose EDF Renewable Energy unit is a major US developer.

But the CPP had a rough start, with more than half of US states coming out against it, and things have only got worse from there. The policy is currently tied up in federal courts.

Even were the Supreme Court to rule in the CPP's favour, the Trump administration has numerous options for rendering it impotent, at least for the foreseeable future.

Keeping calm and carrying on

The EPA – which commands an $8bn annual budget and has 15,000 employees – is tasked with writing and enforcing regulations based on laws passed by Congress. Pruitt, who has received substantial financial backing from the fossil fuels industry, has argued for years that the EPA overstepped its authority under the Obama administration, and that greater power over environmental matters must be devolved to the states – many of which are unsupportive or even dismissive of climate policies.

As he took the helm at the EPA on Tuesday, Pruitt seemingly took a more conciliatory approach, saying: “We as an agency and as a nation can be both pro-energy and jobs and pro-environment.”

But reports suggest Trump may be ready to sign executive orders rolling back the CPP as soon as this week.

Despite all this noise, many in the US renewables industry are not overly concerned about the fate of the CPP, saying the long-term cost trajectory of wind and solar is what really matters. The fundamental question is whether wind and solar can compete without subsidies in the 2020s. If they can, the CPP would have been largely irrelevant anyway.

“As much as it’s important what this congress and administration do, [utilities] recognise this is not necessarily what’s going to hold sway for the next 10, 20 years,” says Arthur Haubenstock, vice president for government and regulatory affairs at 8minutenergy, a major US solar developer.

“Utilities and [their regulators] make decisions based on the long term, where they see prices going, what they see happening around the world with concerns about carbon,” Haubenstock says. “The smart money is based on investments over the long term.”

Storch agrees, noting that there are plenty of other tailwinds for renewables in the 2020s, some likely to carry more weight than the CPP would have.

Storch cites the “enormous surge” in corporations procuring renewables in recent years, and the fact more than two dozen states have binding renewables targets in place – including 50% targets for 2030 in both California and New York, the nation’s first- and third-largest state economies.

“I don’t see any of those things going away, and if anything they’re likely to gain more and more momentum [under Trump]."

“I think we’re in the right place at the right time, in terms of what we have to offer,” he says. “It’s just going to take a slightly different shape than it might have.”

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