New clean power rules force utilities to take clean energy seriously

On Thursday, the Biden administration issued rules to dramatically reduce carbon emissions and pollution from U.S. power plants, while top officials weighed in with an important message: Clean energy is more than ready to supplant the fossil-fueled power plants the new regulations are intended to curb.

The long-awaited rules, the result of nearly a year of work at the U.S. Environmental Protection Agency, will require individual states to craft plans for ensuring that coal-fired plants slated to stay open past 2039 control 90 percent of their carbon pollution from 2032 onward. Newly built ​“baseload” fossil-gas-fired power plants that operate more than 40 percent of the year must do the same.

These mandates would help slash emissions from the power sector, which currently accounts for about one-quarter of the country’s carbon footprint. EPA estimates the rules will avoid nearly 1.4 billion metric tons of carbon pollution through 2047, equivalent to the annual emissions of 328 million gas cars.

“By developing these standards in a clear, transparent, inclusive manner, EPA is cutting pollution while ensuring that power companies can make smart investments and continue to deliver reliable electricity for all Americans,” said EPA Administrator Michael S. Regan.

Power plant operators affected by the rules have essentially two pathways to stay in business: Retrofit their facilities with technologies that can prevent 90 percent of emissions, like carbon capture, or swap out their fossil-fired assets for clean power installations.

Critics warn that these rules could threaten grid reliability because they will effectively force the closure of many coal and fossil gas plants, the latter of which remains the country’s primary source of electricity. Demand for electricity is growing quickly after two decades of stagnation, and utilities and regulators have warned of significant reliability risks if power plants are shuttered prematurely and cleaner resources can’t be added fast enough.

These opponents, which include Republican state attorneys general and fossil-fuel and utility-industry trade groups, have argued that retrofitting power plants with expensive, unproven technologies like carbon capture will drive up energy prices.

Regan and other top Biden administration officials disputed those criticisms, claiming that carbon-capture technology supported by federal incentives can meet the needs of power plants on the timeline the rules set out. But they also stressed the appeal of the other path forward for the power sector: clean energy.

Ever-cheaper solar panels, wind turbines, lithium-ion batteries, and other carbon-free technologies, combined with hundreds of billions of dollars of federal backing from the Inflation Reduction Act, have made clean power both the lowest cost and most reliable option for the future, they said.

“We are anticipated to add more capacity to the grid this year than we have in 20 years — two decades — and the projection is that 96 percent of that new power capacity will be clean,” Ali Zaidi, the national climate adviser to the White House, said on a press call introducing the ​“111 rules,” named after the section of the Clean Air Act that gives EPA legal authority to regulate carbon emissions as a pollutant.

Clean energy ​“is something that’s providing power to 70 million homes on the grid today,” he said. ​“And if you look at where we are today, I think it gives you a sense of why we can be ambitious moving forward.”

Supporters of the rules, which were first proposed in May 2023, echoed that message, describing them as a baseline that can speed up the transition for utilities, many of which have already pledged to achieve carbon-free or ​“net zero” carbon energy between 2040 and 2050.

“The federal standards lay a good floor, and state policy and state regulations help raise the ceiling,” said Heather O’Neill, president and CEO of clean energy industry trade group Advanced Energy United. ​“As we see increasing energy demand, we have a suite of technologies that can meet that demand, and do so in a way that’s cost-effective, that’s reliable, that provides grid resilience, and that’s clean.”

The rule’s opponents are certain to mount intense legal challenges, throwing the future of the rules into question. A lawsuit could set up another clean power showdown at the U.S. Supreme Court, which in 2022 blocked a previous power plant rule from the Obama administration. But in the meantime, states, utilities, and regulators will need to start planning for the rules to become a reality.

Providing a ​“backstop” to IRA subsidies

To be clear, the new EPA rules are not ​“what’s driving the changes in the power sector,” said Frank Sturges, an attorney with the nonprofit group Clean Air Task Force. Instead, ​“you’ve got Inflation Reduction Act incentives and you’ve got market forces” doing that work, he said.

The climate law’s tax credits have bolstered the already competitive economics of clean energy, making it less costly than newly built gas plants across most of the country, according to analysis from nonprofit groups and industry analysts. Meanwhile, coal-fired power, already struggling against competition from cheap fossil gas, is now uncompetitive against clean energy and energy storage in almost every part of the country, according to analysis by think tank Energy Innovation.

Amid these fundamental shifts in the economics of clean energy, the new EPA rules ​“work as a backstop for a lot of the incentives that Congress has put in place,” Sturges said.

That backstop is a tool that federal regulators can use to push utilities and state regulators to more rapidly shift away from fossil fuels. Analysis from the Sierra Club has found that a majority of U.S. utilities, including many that have set carbon-cutting goals ahead of state mandates, are moving far too slowly to meet the Biden administration’s goal of a zero-carbon grid by 2035.

EPA’s new carbon emissions rules are accompanied by additional rules on other emissions like mercury and toxic power-plant wastewater discharge that will also force the country’s remaining coal plants to ​“clean up or make an exit plan,” Julie McNamara, a senior analyst and deputy policy director of the Climate and Energy Program at the Union of Concerned Scientists, said in a statement.

“It’s untenable that coal-fired power plants have gone so long without carbon limits despite their staggering climate toll,” she said.

About 70 percent of the country’s coal fleet has closed over the past decade, pushing coal’s share of electricity generation down to a record low of 16 percent last year. The new rules set hard deadlines to clean up the remainder of the country’s coal plants, including those in coal-friendly states like Wyoming and West Virginia, which have made burning coal a policy priority.

Questions about grid reliability and gas-fired power plants

As for fossil gas, the EPA’s rules have a specific target: ​“baseload” plants, which operate frequently, and thus emit a lot of carbon. The rules leave more flexibility for ​“peaker” plants — those called on to meet spikes in electricity demand — to continue operating to ensure grid reliability.

Peaker plants, which run during fewer hours of the year, ​“are not a significant climate problem,” Rob Gramlich, president of consultancy Grid Strategies, said in an email. Instead, it’s ​“the high capacity factor units” — gas-fired power plants intended to run more steadily throughout the year — that ​“are the ones to worry about from an emissions standpoint.”

The EPA power plant rules also provide ​“some reliability safety valves,” Gramlich added. These include allowances to continue operating power plants that haven’t yet achieved their required emissions reduction targets but which state regulators have deemed necessary for grid reliability, an EPA official said.

Concerns about reliability also prompted EPA to exclude the massive existing fleet of fossil-gas-fired power plants that generate most of the country’s electricity from the rules released this week. EPA made the decision in February to focus only on existing coal and newly built baseload gas plants, drawing criticism from climate groups.

“This omission leaves significant uncertainty about how emissions from existing gas plants will be addressed, undermining our efforts to fully address the climate crisis,” Marcene Mitchell, senior vice president of climate change at the World Wildlife Fund, said in a statement. ​“The Biden Administration has a responsibility to set a clear direction for how fossil fuels will be phased out.”

EPA Administrator Regan said during a Wednesday pre-briefing that the agency will take up the issue of existing gas plants in a forthcoming rulemaking.

The rules come as utilities across the country are seeking to build massive fleets of new gas-fired power plants to meet fast-growing demand for electricity. Many utilities and regulators are concerned that a combination of fast-growing power demand and increasing coal retirements raises the risk of grid outages during extreme weather events. They point to new gas plants as the solution.

But O’Neill of Advanced Energy United cited analysis from federal investigations into major grid outages during winter storms in Texas in 2021 and in the U.S. Southeast in 2022 that found they were largely attributable to cold-weather-related problems at fossil-gas power plants’ pipeline networks.

“There’s this outdated view that gas plants have superior reliability to advanced energy solutions,” she said. ​“When you put clean technology solutions together, they create a more reliable and resilient grid.”

Looming legal challenges

Regan also addressed the elephant in the room: the EPA’s readiness to fend off legal challenges to the rules. ​“These are four separate rules that we believe stand very strongly on their own authorities,” he said. ​“We have spent time ensuring that each path taken is durable.”

Still, the law’s opponents are expected to dispute the rules in court. They accuse the Biden administration of overreach, given that Congress has not acted to regulate power-sector emissions.

In a letter sent to Regan and White House climate adviser John Podesta this week, U.S. Representative Andrew Garbarino, a New York Republican and co-chair of the bipartisan House Climate Solutions Caucus, stated that the Supreme Court’s 2022 decision against the Obama administration’s clean power rule, the EPA’s previous attempt to regulate power-sector carbon emissions under the Clean Air Act, ​“established that major questions such as new carbon emissions standards for power plants should be determined by legislation.”

Garbarino’s use of the phrase ​“major questions” evokes the legal theory the Supreme Court cited in striking down the Obama-era rule, which holds that federal agencies must act based on strict interpretations of laws passed by Congress. Critics of that decision fear that it could open the door for the Supreme Court’s conservative majority to overturn the new EPA rules, as well as a host of other federal agency rules and decisions.

But Sturges noted that the EPA’s new rules have been carefully crafted to adhere to the strictures laid out in the Supreme Court’s 2022 decision. ​“Presumably somebody will challenge this, and EPA will be defending it,” he said. ​“Hopefully it’s a boring case, looking at the statutory standard and whether the EPA built a sufficient technical record.”

The path to compliance

In the meantime, states are now under pressure to begin crafting plans to comply with the new rules, particularly as they apply to existing coal-fired power plants, Sturges said. The regulation gives states 24 months to develop those plans, and another year for EPA to review and either accept or reject them. The rules for new gas-fired power plants will follow a different course, with EPA developing standards to be applied by states.

The new rules are technology-neutral, but the assumption — both from the EPA and analysts — is that power plant owners will look to carbon capture and sequestration (CCS) technology to comply. They can also attempt to curb emissions by switching power plants to run on hydrogen, ammonia, or other carbon-free fuels.

Utilities have long cited CCS technology as a cornerstone of their low-carbon planning. But it’s far from clear if the technology is capable of reducing power-plant carbon emissions by 90 percent in a cost-effective way. Billions of dollars of Department of Energy funding directed at power plant CCS projects in the 2010s failed to yield a single successful demonstration; the only project that was actually completed shuttered in 2020 after a track record of mechanical problems and financial overruns.

Of late, utilities have changed their tack on CCS, arguing that the technology is too expensive and underdeveloped to meet the 2040 deadlines set forth in the EPA’s rules.

“CCS is not yet ready for full-scale, economy-wide deployment, nor is there sufficient time to permit, finance, and build the CCS infrastructure needed for compliance by 2032,” Dan Brouillette, president and CEO of the Edison Electric Institute, an investor-owned utility trade group, said in a Thursday statement. ​“While CCS and other 24/7 clean energy technologies could be important tools for reducing emissions in the future, EPA’s record does not support a finding that CCS is demonstrated today.”

Climate activists and energy analysts skeptical of CCS have pointed to this two-sided stance from utilities as evidence that the best course for combatting power-sector carbon emissions is to avoid costly retrofits altogether and to instead replace fossil-fueled power plants with clean alternatives.

Combining clean energy solutions — scaling up renewable energy and batteries, expanding transmission grids to allow power to be transferred between regions, and investing in energy efficiency and technologies that shift when customers use power to reduce peak grid stresses — are more complicated for utilities, regulators, and grid planners to handle than relying on the century-old system of large central power plants. But they’re also the better solution to the climate, cost, and reliability challenges the country faces, McNamara of the Union of Concerned Scientists argued.

And the new rules, even with legal challenges looming, might just be enough to force utilities to take a clean energy future seriously — many of them for the first time.

“One of the most important aspects of EPA’s rulemaking is its ability to kickstart a virtuous cycle of power sector planning that fully and deeply considers the fate and future of fossil-fuel-fired power plants, including in a carbon-constrained environment,” McNamara said in an email to Canary Media. ​“Even if undertaken reluctantly, the very fact that states, utilities, and regulators all across the country now have to consider that future means one of the hardest parts of the transition process is suddenly underway.”