9/20/2024
It is time for a new National Sustainable Energy Policy to support a clean, modernized energy system. The power goes out every time the weather is bad, on our antiquated electrical grid. The energy sector is the largest contributor to emissions of greenhouse gasses that are causing climate change. Consumers see rising prices for electricity. Data centers and AI applications will only add pressure on electric prices as their demands for electricity intensify, as will market shifts towards electrifying cars and buses. For our nation to meet climate goals while addressing increasing demands for electricity, we will need to break down roadblocks to clean energy.
Transforming the nation’s energy system to one based on renewable and sustainable resources is a critical element in responding to climate change mitigation and adaptation. Unfortunately, practitioners in the renewable energy systems space currently encounter significant regulatory and institutional barriers to rapid and efficient implementation of new technologies and practices. National energy policy is needed, including an update to the energy industry’s regulatory framework, to advance the modernization of our country’s electricity delivery system.
Regulatory Issues
The current regulatory framework is built around centralized energy generation from utility monopolies that deliver electricity to customers residing across a wide geographical territory. Under the National Energy Act of 1992, partial deregulation of the nation’s electricity system took place, leaving a patchwork quilt of conditions in place across the country: 17 states are fully competitive with customer choice for electricity generation and gas supplies; 9 are deregulated for gas suppliers only; and 23 remain fully regulated for electricity and gas.
Modernizing the nation’s electrical grid system means moving away from this current model of centralized energy generation towards generating energy on site or nearer to the consumer. In this emerging, more distributed energy system, customers may also be generators of the power they consume, they may have on-site storage for all or part of their demand, and buildings can even become virtual power plants by generating excess electricity that can be shared with others in need of that energy. Manufacturers and large-scale energy users explore the increasing benefits of co-generation, combined heat and power operations, and on-site storage. New high energy intensity operations like data centers and AI operations could benefit from co-locating efficient power generation on site and piping excess heat to neighboring facilities in need of that heat. A new regulatory system that accommodates customer generation can accelerate the necessary large-scale advance of renewable energy systems.
Major existing regulatory and institutional barriers to a new and sustainable energy policy
The regulatory system has accumulated policies and practices over decades, proving resistant to change even as technology advances have accelerated. The most significant regulatory and institutional barriers to modernization include:
Policy fragmentation across jurisdictions
Federal, state, and local jurisdictions have differing and sometimes conflicting requirements making national markets difficult to pursue. To correct policy fragmentation, we need more standardization of methods and processes in a systems-oriented approach to regulatory infrastructure modernization.
Permitting complexity
Multiple agencies require differing and overlapping permit requirements, poorly sequenced with no clear path among multiple authorities. Grid integration challenges face transmission and distribution capacity constraints, as well as interconnection and Regional Transmission Organization market rules, that pose barriers to renewable energy implementation, in modern utility operations, and impede net-zero greenhouse gas emissions outcomes.
Grid integration challenges
Utility systems have capacity constraints as well as a lack of interconnection infrastructure to support “two-way traffic” among customer/generators with or without on-site storage.
Lack of uniformly recognized guidelines for RECs
There is no standard framework for defining Renewable Energy Certification (REC) credits that track and verify demand reduction or customer renewable energy generation across jurisdictions. Different states, and sometimes different utilities within states, have differing definitions, pricing and verification methods applied to RECs.
Erratic and unstable incentives
Production tax credits, investment tax credits, subsidies, land use allocations for federal land are subject to change with budget cycles unless established in law. The unstable incentives send the wrong pricing signals to the economy and foster inefficient choices for decades, impeding the progress to market transformation and decarbonization.
In addition, standard interconnection procedures are needed for 1) virtual community power plants with or without storage; 2) standards regarding energy storage, steam/heat distribution or sale from combined heat and power operations, whether by a utility or a non-regulated entity; and 3) demand side management tied to time of use cost savings. The integration of such services into the electric grid would benefit from innovations in communication technology and AI for real-time synchronization of both supply and demand side resources over daily and seasonal cycles.
Opportunity for legislative action on national sustainable energy policy:
Three federal legislative initiatives will be pending over the next two years and could be legislative vehicles for the adoption of a national sustainable energy policy:
- Reauthorization of Tax Reform Act of 2017
- Regulatory Modernization and Permitting (especially shortening timelines)
- Funding decarbonization and electrification initiatives from the Inflation Reduction Act
- Budget authorization for programs under the Bipartisan Infrastructure and Jobs act and the Inflation Reduction Act.
A national energy policy is needed to address the urgency of climate action as well as the mishmash of regulatory fabric accumulated over several decades that impedes swift progress towards the new clean economy. This need offers a unique opportunity to a new Administration. It is important for the next President to address a forward-looking energy policy that empowers and accelerates the critically necessary modernization of our nation’s energy system. Every citizen is affected, every day, by whether or not our energy system is cost-efficient, safe and reliable. Resolving the regulatory quagmire will help pave the way towards modernizing our nation’s electric infrastructure and ensuring a clean and sustainable energy future.
Resources:
Enerdatics. Addressing Policy and Regulatory Challenges in Renewable Energy Projects. July 6, 2023.
G. Olabi, Khaled Alsaid, Khaled Obaideen, Mohammad Ali Abdelkareem, Hegazy Rezek, Tabbi Wilberforce, Hussein M. Maghrabi, Enas Taha Sayed. Renewable Energy Systems: Comparisons, challenges and barriers, sustainability indicators, and the contribution to UN sustainable development goals. International Journal of Thermofluids. 20(2023) 100498. www.sciencedirect.com/journal/international-journal-of-thermofluids
Seetharaman, Krishna Moorthy, Nitin Patwa, Saravanan, and Yash Gupta. Breaking barriers in deployment of renewable energy. Heliyon 5 (2019) e01166. doi: 10.1016/j.heliyon.2019. e01166
- National Association of Regulated Utility Commissioners and National Association of State Energy Officials https://www.naseo.org/issues/buildings/naseo-naruc-geb-working-group
National GEB Roadmap: U.S. DOE, A National Roadmap for Grid-interactive Efficient Buildings (May 2021)
U.S. DOE, Connected Communities (overview presentation)
NASEO, “Demand Flexibility and Grid-interactive Efficient Buildings 101” (September 2022) and “Grid-interactive Efficient Buildings: State Briefing Paper” (October 2019)
Simon Black, Ian Perry, Nate Vernon-Lin. Fossil Fuel Subsidies Surged to $7 Trillion. International Monetary Fund Blog. August 24, 2023. https://www.imf.org/en/Blogs/Articles/2023/08/24/fossil-fuel-subsidies-surged-to-record-7-trillion
Database of State Incentives for Renewables and Efficiency. https://www.dsireusa.org