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The pace of the U.S. energy transition could now accelerate with President Biden

By Clyde E. Rankin III, Andrew Ketner and Gina Sato

With a change in the administration in Washington, D.C., and Joe Biden taking over as president, the pace of the ongoing energy transition in the U.S. will accelerate.

Baker McKenzie attorneys outline some of the changes that could come under a new administration.

The Biden campaign made it clear from the start that a Biden administration would recommend legislation and implement regulatory changes to mandate and enhance major shifts in the production of energy that are already underway in this country.

The next four years and beyond should be an exciting time for everyone involved in the energy sector, as well as for everyday consumers of energy. What are some of the changes that we could expect to see in the near term under a Biden administration?

Electrical Generation

At the end of 2019, approximately 17.5 percent of the total U.S. utility-scale electricity generation was from renewable energy sources (up from approximately nine percent in 2000). If distributable solar PV is taken into account, the percentage rises to approximately 18.3 percent. Wind is the largest renewable energy source (7.3 percent), followed by hydro (6.6 percent), solar (1.8 percent), biomass (1.4 percent) and other (0.4 percent).

The growth of renewable energy as the preferred source of new electrical generation is even more impressive when looked at as a percentage of new electric capacity added to the grid over the past two years. Wind energy capacity increased by over 9,000 MW in 2019, which was the third strongest year of new wind installation.

This fast pace continued into 2020, although disruptions in the supply chain caused by the onset of the Covid-19 pandemic have slowed the pace somewhat.

Solar Power Growth

Equally impressive over the past two years is the growth in solar energy production. In 2019, approximately 40 percent of all new electric capacity added to the grid came from solar, the largest share in solar's history. Solar has become more competitive due to rapidly declining costs, increasing demand both in the private and public sectors and continued support from federal policies, including the Investment Tax Credit.

The coronavirus has also impacted the supply chain in the solar industry, with the distributed solar market having been impacted the most, due to a shortage of sales personnel and installers. Utility-scale projects appear to have been affected less, although the development pipeline may be affected or at least it will experience delays.

The shift to renewable energy sources for the generation of electricity occurred with little support from the Trump Administration and a dearth of federal policies (other than the tax credits that were initiated under prior administrations and continued in a limited manner only because of support in Congress).

This shift has been supported by corporate America, driven in part by shareholder/investor demands, employee support and consumer preferences. Even "Big Oil" has jumped on the bandwagon. Not wanting to miss out on this new market, many majors are setting renewable energy goals and establishing renewable/clean energy divisions.

The lack of significant federal support will change dramatically with the new administration and the passage of legislation to support the renewable energy industry. If the Biden administration is to meet its goal of a carbon pollution-free power sector by 2035, however, then legislation and executive orders will need to be enacted in the first days to have a chance of meeting that timeline.

Look for legislation and executive orders that would support the development of new technologies, including renewables and hydrogen, increased battery storage for solar and wind energy production, the extension of tax credits, expediting the tedious permitting process for offshore wind energy facilities (off both coasts and the Gulf of Mexico), facilitating the construction of updated and new transmission lines and incentivizing the transition from fossil fuels to renewable energy sources at all levels of the economy, utilizing some of the best practices from states, including the renewable portfolio standards that have been adopted by 30 states, the District of Columbia, and three territories.

There is much to be done to achieve the energy transition that has been espoused by the Biden campaign and which, in many ways, is already underway in the country. The proposed agenda for energy transition and reform is ambitious, and we have seen similar agendas initiated in the past only to fall short of the stated goals.

This time may be different, however, given the exigency of the current situation with the accelerated deterioration of the climate and the absence of U.S. leadership in this area over the past four years. In most instances, the energy transition is not a question of if-but a question of when. The stakes are too high now for the transition not to be completed.

Clyde E. "Skip" Rankin III is a partner in New York and chair of the North America Projects practice at Baker McKenzie.

Andrew Ketner is an associate in Baker McKenzie's Energy Transactions practice in Houston. Gina Sato is an associate at Baker McKenzie's Projects practice in New York.

This column has been edited for length, and is reproduced with permission. Published Sep. 3, 2020. Copyright 2020 by The Bureau of National Affairs, Inc. (800-372-1033) www.bloombergindustry.com

 


Q1 2021