While U.S. utilities have made great strides in reducing carbon emissions in the absence of a unifying federal policy, the lack of national standards has made regulating energy markets a challenge, FERC commissioner Neil Chatterjee said Tuesday during a panel hosted by the nonprofit ConservAmerica.
The success of the last few years makes a strong case for a market-based solution, Chatterjee said, but the patchwork of policies created by diverse state regulations has put FERC in the difficult situation of trying to balance market efficiencies with state rules.
FERC has become a "beacon of stability in a volatile" political situation, Chatterjee said. But with the polarization surrounding current discussions of federal clean energy standards, he said he is feeling agitated about FERC's ability to maintain that stability if Congress takes partisan action on climate change.
FERC stands to play a critical role in accelerating the adoption of renewable energy in the U.S., particularly where the need for expanded transmission is concerned, participants in Tuesday's panel on national clean energy standards said. However, Chatterjee expressed concern that the current political climate could impede FERC's ability to maintain stability in energy markets.
Although utilities are accustomed to making long-term decisions about assets intended to operate for decades, in recent years, the political climate has created instability in the energy market, Chatterjee said. The U.S., he explained, has essentially lacked a federal energy policy outside the tax code since 2005, and has pursued and then withdrawn from efforts such as the Clean Power Plan and the Paris agreement with changes in presidential administrations.
Amid this back-and-forth action, FERC has become a source of stability for electric utilities, Chatterjee continued. Which is why he said he is nervous about current talks in Congress of a federal clean energy standard.
"We need permanence and stability," he said, "and that's what makes me nervous about the way [the clean energy standard] is being drafted. It's a matter of votes. No single Republican is going to vote on this, so you need all the Democrats on this. You can't afford to lose a single one. If the power shifts in a few years and it's reversed, that's not helpful either."
But Chatterjee expressed support for federal carbon pricing, explaining that he believed a federal price on carbon could help to unify disparate state policies without attempting to supplant them. In the absence of uniform standards, Chatterjee said, FERC had found itself in the uncomfortable position of weighing market efficiencies against "the right of states to make their own energy choices."
"It's been a real struggle," he said. "It wasn't as if the commission went in trying to pick and choose winners and losers. We were trying to have effective and efficient market signals, and tried to see how best to strike a balance."
Other participants on Tuesday's panel weighed the pros and cons of carbon pricing vs. a national clean energy standard. Establishing a price on carbon would work nicely in competitive markets, according to Peter Kelly-Detwiler, cofounder of energy consulting firm Northbridge Energy Partners. But he said it could have unintended consequences if it increases the cost of electricity and drives consumers back to fossil fuels to, for example, fuel their cars.
A national clean energy standard, on the other hand, would close 185 coal generating plants and stop the development of 250 new gas plants, he said. This could accelerate decarbonization but potentially put a heavier burden on states that have further to go toward the 2030, 80% carbon-free energy target that has been floated as a possible national standard.
Roger Martella, chief sustainability officer for GE, supported the idea of a national clean energy standard, but raised questions about the reliability measures it would require and expressed a desire to see a "glide path" to prevent too many new renewable resources coming onto the grid all at the last minute. While David Brown, a senior vice president for federal government affairs and public policy at Exelon, said his company has long supported the idea of carbon pricing, but that ultimately for both policies the "devil lies in the details."