House Budget Resolution Would Have Serious Implications For U.S. Energy Independence

The U.S. House Energy and Commerce Committee passed its portion of the $3.5 trillion budget resolution last week. As MSCI’s partners at the Energy Equipment and Infrastructure Alliance (EEIA) explained, the bill contains a provision aimed directly at eliminating natural gas and coal fired electricity generation.

The mechanism is called the “Clean Electricity Performance Program,” and it sets out a system of money grants paid to, and financial penalties assessed on, power producers based on their year-over-year increase in production of clean electricity. Under the legislation, clean electricity is defined as generation that emits no more than .1 metric ton of carbon dioxide (CO₂) equivalent per megawatt hour (mWh) generated. Since the average natural gas plant emits about .4 metric tons/mWh, for its output to qualify as clean electricity, 75 percent of its CO₂ emissions would have to be removed.

The formula would grant the power producer $150 for each megawatt hour of increased clean electricity generated, but only if the increase is at least four percent above the previous year’s production. Conversely, a penalty applies if the producer does not increase its clean electricity output by at least four percent from the previous year. If producers fail to reach that level, they would be required to pay the U.S. Department of Energy $40 per megawatt hour of shortfall from a four percent increase. In other words: millions of dollars in penalties.

The EEIA said this measure “is clearly an attempt to force utilities to limit or eliminate additions to gas and coal-fired generating capacity in favor adding solar or wind generation; or alternatively equipping gas-fired capacity with carbon capture. That would force the gas-fired producer to decide whether to invest in retrofitting existing capacity with carbon capture or invest that money into new renewable generation.”

Sen. Joe Manchin (D-W.Va.), a key moderate vote in the Senate and chair of that chamber’s energy committee, has said he opposes the program, so it is possible this idea will not make it into the final budget reconciliation bill.