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Breaking Down the Biden Energy Plan
Under the Biden-Harris administration, federal policy on energy will be significantly different from his predecessor. President Joe Biden has laid out a detailed climate and energy plan with numerous initiatives that could shape the future of not only domestic energy policy but also global policy.
It is important to note, many of these initiatives are politically dependent on congressional approval. Our team at Evolution Energy Partners (EEP) has broken down key aspects of the Biden plan, explaining in detail the current status of each of these initiatives, their likeliness of being enacted, and their impacts on energy consumers.
Net-Zero Emissions by 2050
Biden’s energy plan outlines a goal of net-zero emissions by 2050, supported by initiatives designed to spur investment in electric vehicles, clean power generation, building retrofits, and more. The President set the 2050 goal on day one of his administration via executive order, with Congress enacting legislation with an enforcement mechanism to ensure the goal is achieved, as well as a target emissions reduction goal by 2025. This ambitious energy policy may face many challenges without the required support to drive it through each legislative branch of the government.
A Carbon-Free Power Sector by 2035
Another aspect of Biden’s plan includes a goal to ensure the U.S. power sector is carbon-free by 2035. As part of this effort, Biden enacted stricter emissions limits, which were passed through an executive order on day one of his term. These limits would likely have minimal effects on demand and production in the short to medium term. Should the legislation pass in congress, there could be significant downside for oil and gas producers, as the plan would limit new natural gas plants and accelerate the retirement of coal-fired power plants. However, producers will have the option of keeping natural gas and coal plants active through carbon capture technologies which remain cost-prohibitive in the current environment.
An Increased Focus on Renewables
On renewable generation, Biden has pledged to reform and extend tax incentives aimed at generating energy efficiency and clean energy jobs. He plans to leverage private sector expertise in clean energy investments through financing mechanisms while taking best practices from state-level clean energy standards. This may include providing additional renewable credits to developers of clean energy projects. Biden intends to have tens of thousands of wind turbines and millions of solar panels installed throughout the U.S. within his first term. Such targets would likely require legislation, including the $400 billion in renewables R&D that has been proposed. Additionally, the plan calls for simplifying the permit process for renewable projects, which again may be enacted through executive order, thus removing barriers to entry for renewables developers.[/vc_column_text][vc_row_inner][vc_column_inner width=”1/2″][vc_empty_space height=”12px”][vc_column_text css=”.vc_custom_1611586529702{margin-top: 2px !important;border-top-width: 2px !important;}”]Nevertheless, it is critically important to take note of the technological progress the renewables sector has made in the past 10 years.
Costs for utility-scale solar projects fell by 82% from 2010 to 2019,
due to economies of scale and technology breakthroughs. Auction results for renewables continue to be favorable for years to come, and with federal tax credits and subsidies in this space, one should expect to see these costs drop further. If legislation were to pass ensuring
carbon-neutral power generation by 2035, consumers will likely only see a shift in the type of electricity they purchase. Price will be relatively unaffected due to economies of scale combined with recently extended federal tax credits and technological advancements in the space.[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/2″][vc_single_image image=”2167″ img_size=”large”][/vc_column_inner][/vc_row_inner][vc_column_text]
Building Retrofits & Efficiency Upgrades
Biden’s energy plan also includes a goal of 50% reduction in the carbon footprint of U.S. building stock by 2035. Four million commercial buildings will be upgraded to high efficiency LED lighting and advanced heating and cooling systems. This includes many government buildings and schools. The plan will also focus on upgrading indoor air quality through technologies such as bipolar ionization and UV lighting to ensure further safety in case of future pandemics. Finally, Biden’s plan calls for the implementation of a national building code process, with building performance standards similar to New York’s LL84 or Boston’s BERDO.
There is quite a bit of a gray area when discussing building retrofits, with no specific incentives or funding mechanisms mentioned to support these efforts. Keep in mind, however, that many utilities and governments already have significant rebate programs in place for these energy retrofits, and EEP is a trusted expert in navigating such programs. We estimate that these projects would be funded through existing financing programs, although congressional budget negotiations, especially regarding infrastructure, will have a significant effect on this program.
Advanced Research Projects Agency on Climate & Long-Term Goals
On the research side of things, an Advanced Research Projects Agency on Climate (ARPA-C) will be developed, with the goal of developing additional technological breakthroughs designed to further the progress towards 100% clean energy. Some of these initiatives include grid-scale energy storage at 10% of the cost of lithium-ion batteries, zero net energy buildings at zero cost, production of carbon-free hydrogen with renewables, and the elimination of refrigerants that contribute to global warming.
These goals will not be successful without support from congress to advance research on these renewable technologies. For example, energy storage is still in very early phases and is simply not cost-effective for most facilities and regions. Solar power, which has benefitted from heavy research and development is now cost-effective in many regions of the United States.
What Does This All Mean for Commercial Customers?
In short, the Biden-Harris administration will have an undefined impact on electric and natural gas costs for commercial customers in the short to medium term. Congressional approval on many aspects of this plan will be required to be successful. So far, we have seen executive orders to reenter the Paris Climate Accord, a reverse to the rollbacks put in place on vehicle emission standards, and a revoked permit for the Keystone XL pipeline. We will also likely see the elimination of fossil fuel subsidies and simplified requirements for renewables projects. Even with these initiatives in place, electricity costs are likely to remain as projected by current markets, and the premium for green power will continue to decrease as we have seen in recent history. We expect the short-to-medium term effects to be largely concentrated on oil and gas, with Biden implementing significantly higher fuel standards in vehicles and additional subsidies and credits on electric vehicles. Although prices will likely remain stable, a clear outcome of the Biden-Harris administration will be increased focus on ESG metrics which are increasingly becoming more important and demanded by socially conscious stakeholders.[/vc_column_text][vc_cta h2=”EEP will keep you informed”]As always, the EEP team will be closely monitoring both the legislative environment and energy markets to keep our customers informed on changes that may affect their current energy strategy. For any questions about the current market, contact the EEP team today.[/vc_cta][/vc_column][/vc_row]