The recent announcement by the Environmental Protection Agency (EPA) to delay for further study its proposed emission standards for smog and toxic chemicals has been hailed by the Chamber of Commerce and National Association of Manufactures and condemned by both environmental and health advocates.
But I suspect many utility executives are shaking their heads at the Administration for contributing to the same investment uncertainty the Chamber’s friends claim is hurting the economy.
A few years back, when I used to speak at/attend energy conferences, I was struck by the split among utility and energy industry executives on the prospects for new rules on global climate change gases. Their debate was about the need for investment certainty; they needed to know the rules, but Congress hadn’t decided.
To be sure, there were die-hard coal advocates and climate change deniers who adamantly opposed any limits that might force them to spend money on mitigation or replacements. But there were also many responsible executives who acknowledged the science and who realized that sooner or later they’d have to deal with it through some strategy other than denial or lying.
I’ve heard lots of utility reps and executives say that while they’d prefer not to be forced, the thing they most needed was certainty about what the rules would be. They know the science will eventually require mitigation, so what they needed to know from an investment perspective was what standards and goals they’d have to meet. They wanted flexibility in how to get there, not simply in how soon, but what they’re choices were. Tell them the rules, and they’d fight about the stringency or the timetable, but in the end, they’d figure out how to get there. They always have.
Only weeks ago, electric industry folks anticipating tougher EPA rules were telling us they had tentative plans to replace dozens of very dirty coal plants over the next decade or so. Even utilities that had been strongly coal-based in the past realized more stringent environmental and climate change rules were inevitable, because they can read the science and they’re not stupid.
They’d either have to retrofit those dirty old clunkers — at enormous expense and competitive risk — or replace them with more efficient, cleaner plants. And if they didn’t, independently-owned new natural gas-fired plants would eat their lunch, even if wind and other renewables didn’t come on fast enough. They needed to make a decision, and for that, they needed to know the rules.
Today, the neanderthals at the CofC and NAM are celebrating their ability to leverage the emergent GOP know-nothings and denialists to intimidate the EPA and the White House into delaying EPAs proposed standards. They’d already killed any meaningful climate change legislation and are pressuring EPA and the White House to stop further efforts to deal with climate change through emission standards. But the science is not going away. So all this does is increase investment uncertainty for those utilities and manufacturing executives who don’t live with their heads in the sand.
Does anyone in the White House get this? Next week, the White House will invite the CEOs of major US corporations to Blair House for a conference on how to improve business investment and spur the economy. The Administration reportedly wants corporations that are sitting on a trillion dollars or two in retained earnings to start investing that money to put people back to work.
It doesn’t make sense for consumer-oriented businesses to be investing billions now in new equipment when their existing plants can easily meet the current levels of depressed demand and the prospects for rapidly growing demand in the future are not good. Why should they risk investments now?
But the same argument doesn’t apply to utilities and independent power producers. Their typical investments take 5 to 10 years before coming on line (nukes will take longer, if they’re ever built here again), and they need to start replacing old, uncompetitive and very dirty plants now. Moreover, the cost of borrowing to make those investments are extremely low today; if they delay, it will only cost more. This is their moment.
Unfortunately, bowing to the CoC types, the Administration via EPA just made investment uncertainty worse by telling business that EPA won’t stick to their own schedules for what the investment rules will be. It’s like the right hand doesn’t even know what the other right hand is doing.