The Clean Power Plan issued August 3 by President Obama and the U.S. Environmental Protection Agency (EPA) clearly expects that power from the renewable sector, especially wind and solar, will play a big role in cutting carbon dioxide emissions from U.S. power plants by 32 percent between 2005 and 2030.

In order for renewables to meet that challenge, energy storage will have to be a reliable, economic and sustainable component. Batteries will be needed to support renewables as one of the three key “building blocks” of the EPA plan:

• Operating coal plants more efficiently
• Running existing natural gas plants more often so that coal plants can run less often
• Increasing the use of renewable power to about 27 per cent of US generation capacity by 2040

The EPA plan’s purpose is to cut CO₂ emissions from the generation of electricity from fossil fuels, with coal-fired plants the primary target. Natural gas is viewed as a “transition” fuel so that power from renewables will have sufficient time to “ramp up”. Nuclear power also will have a chance to grow.

Data from the US Energy Information Administration (EIA) show that if the Obama clean power plan is fully implemented, the share of the nation’s electric power generated by renewables would grow from the present 10 per cent to about 27 per cent by 2040. Natural gas, however, is likely to emerge as the primary source. The share of coal is expected to decrease, although it still will have a significant role in the country’s power supply. (Nuclear may remain about the same or somewhat less.)

Each state has been assigned an emissions reduction target and will be required to develop plans by next year to meet those targets. If they don’t, then EPA will step in and impose a plan. All this is to be accomplished by the end of next year. Will it?

Virtually no one expects any of these plans to be finalized by next year since opponents of the plan, led primarily by the coal industry, are launching a series of legal challenges that likely will take several years to resolve. Debates will take place in Congress. Legal challenges will proceed at federal and state levels, the U.S. Court of Appeals and, ultimately, the U.S. Supreme Court.

It may be useful for companies that operate mines for metals to pay close attention to how this controversy over challenges to EPA’s authority evolves.

The legal challenges center on whether EPA even has the statutory legal authority from Congress to pursue this regulatory initiative. The issue is what Congress intended. When a House-Senate conference met in 1990 to resolve differences between the two chambers over amendments to the Clean Air Act, one of the important issues was section 111.

The House language said EPA could not use Section 111 to regulate an emission source that already was regulated by another section, 112, of the Act. However, the Senate said EPA could not write a second rule covering an already regulated pollutant. But, since EPA at the time didn’t regulate greenhouse gases, the agency claims it has the authority to develop new regulations for CO₂ since those emissions were not previously regulated under sections 111 or 112. Rather than reconciling these two very different provisions, the House-Senate conference simply put them both into the final bill.

The Obama Administration points to several Supreme Court decisions that give federal agencies like EPA “deference” in interpreting statutes. Opponents of the EPA plan, however, claim that specific legislation is required since the 1990 House-Senate conference mistakenly left the two versions unresolved.

It was a classic “cut the deal and worry about the details later” political exercise. That was 25 years ago and later has become now. There are several questions that arise from all this. The questions are political and economic.

Economic

One of the more important issues raised by the EPA proposal is whether increasing the country’s reliance on power from renewable resources like wind and solar can be done economically. The wind and solar industries say that while the cost of their technologies has dropped dramatically in recent years, they still need tax credits, grants and other incentives from the federal government.

In the case of state governments, where rate-making commissions decide how much utilities can charge consumers to integrate renewable facilities into their power grids, utilities say they will not be able to raise capital required to meet federal standards without authorization from their commissions.

Nevertheless, many utilities and commissions are coming to agree that public opinion is increasingly demanding that electricity come from “cleaner” sources such as natural gas, renewables and, in the case of southeastern part of the country, nuclear. This suggests the Obama clean air plan may not be less about changing the way utilities function, but rather accelerating changes already taking place.

As to renewables, the need for efficient, economic and sustainable batteries will become especially important. The big question is whether battery chemistries such as lithium-ion, nickel metal hydride, sodium sulfur, etc. will be able to equal the standards of economics and sustainability as lead-based batteries without significant government subsidies. So far, the answer is no.

Political

As the dispute over EPA’s clean power plan evolves, it is useful to consider the “political environment” surrounding the coal industry. One of the reasons that the debate over clean air has centered on coal is political. It is a fact that the majority of the coal industry’s supporters are Republicans. What this means is that many Democrats, including President Obama, who have been actively opposed by the coal industry’s political action committees, feel no “obligation” to help coal.

In Congress, the coal industry maintains strong support among many Republicans and they are expected to push legislation to block EPA from implementing its clean coal plan. If such legislation passes, President Obama is certain to veto it. That veto would very likely be sustained since, in the Senate, Republicans would not be able to attract enough Democrats to overturn a Presidential veto. This is why the future of the EPA plan is virtually certain to end up in the U.S. Supreme Court.

It’s also worth noting some of the reactions to the EPA plan. Not surprisingly, it was strongly condemned by the American Coalition for Clean Coal Electricity (ACCCE), a trade group representing many of the largest US coal producers. The ACCCE said:

“EPA’s final carbon rule reveals what we’ve said for months – this agency is pursuing an illegal plan that will drive up electricity costs and put people out of work. This rule fails across the board, but most troubling is that it fails the millions of families and businesses who rely on affordable electricity to help them keep food on the table and the lights on.”

Yet, it is also worth considering a statement from another trade group representing some of the coal industry’s largest customers in the investor-owned electric utility industry, the Edison Electric Institute (EEI). The EEI statement said:

“Throughout this rulemaking process, EEI raised a number of issues, and EPA seems to have responded to some of our key concerns. While we are still reviewing and analyzing the rule’s specifics and the impact of the restructured interim goals, the final guidelines appear to contain a range of tools to maintain reliability and better reflect how the interconnected power system operates.

“We appreciate EPA’s significant outreach over the past year. Given the length and complexity of this rule — and the many stakeholders it affects — challenges will remain. EEI and its member companies will continue to work with the states as they develop plans that meet their state energy needs.”

For a major trade association like EEI to take such a measured approach to the EPA clean power plan suggests that the coal industry will face a turbulent political environment in the years ahead.