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At least for the foreseeable future. But is the Manchin-Barrasso bill actually worth it?
So … is the permitting reform bill any good or not?
Earlier this year, Senators Joe Manchin of West Virginia and John Barrasso of Wyoming proposed a bill that would change federal environmental rules so as to spur a buildout of new energy infrastructure around the country.
Their proposal would have loosened rules for oil and gas drilling and exporting while changing federal law to encourage the construction of more clean energy.
These renewables-friendly changes included creating a new legal regime that would push utilities and grid operators to build significantly more long-distance power lines, triggering a nationwide boost to renewable resources. They would also have changed the regulations governing geothermal power generation, allowing new enhanced geothermal wells to play by the same federal rules that bind oil and gas.
The legislation was announced in July and then … nothing happened.
Now it seems likely to come back. Congress is eyeing its final agenda items for the year, and permitting reform is one of them. Representative Bruce Westerman, a Republican who chairs the House Committee on Natural Resources, is currently said to be revamping Manchin and Barrasso’s proposal to include reforms to the National Environmental Policy Act, a bedrock law that guides the process — but not the outcome — of virtually every major decision that the federal government makes and requires it to study the environmental impact of its policies.
We don’t know what those changes will look like yet, though they’ll have to come soon — the new Congress gets sworn in in just a few weeks. Which means lawmakers will have to get the proposed changes, process them, and decide whether to vote for them in a very short period of time — just a few days.
So during this liminal period, then, I wanted to take a moment to look at the other parts of the bill. Earlier this year, we got a sense of what the bill’s quantitative effects might be. They suggest that the legislation — at least in the initial version proposed by Manchin and Barrasso — could very well help cut U.S. emissions, or at least leave them flat. But after that? It starts to get complicated.
Republicans have long pushed for changes to the federal government’s permitting regime.
But in recent years, Democrats — who hope to prompt a national surge of clean energy construction — have come aboard too. The Biden administration, frustrated that some parts of the Inflation Reduction Act and Bipartisan Infrastructure Law haven’t resulted in the large-scale projects they hoped for, has come to back permitting reform explicitly, although they have not endorsed Manchin and Barrasso’s bill.
“The president has been clear … that we believe permitting reform should pass on a bipartisan basis — and that we believe permitting needs to be optimized for building out a clean energy economy,” John Podesta, a White House senior advisor who is now the country’s top climate diplomat, said in a speech last year.
The White House’s support of bipartisan permitting reform is more than just posturing: Because of Senate math, any changes to the country’s permitting laws almost certainly must be bipartisan. Until a bare majority of Democratic senators exists to kill the legislative filibuster, it will take a vote of at least 60 senators — a so-called supermajority — to alter most pre-existing federal legislation.
So the question, then, is: Is this attempt at permitting reform worth passing? Is this package of fossil fuel concessions and clean energy incentives likely to reduce emissions more than it increases them?
I won’t try to answer that question comprehensively today, and we can’t even answer it fully until we know the scope of Westerman’s changes. But I do want to share an analysis from the center-left think tank Third Way and other researchers that suggests that the answer is “yes.”
This analysis, released in September, argues that Manchin and Barrasso’s bill would modestly increase emissions by encouraging more oil and gas drilling on federal lands. But that increase would likely be dwarfed by a large decrease in emissions prompted by building out the country’s electricity transmission grid.
More specifically, it finds that while the pro-fossil fuel provisions could raise global climate pollution by as much as 6.1 billion metric tons by 2050, the bill’s support for transmission could cut emissions by as much as 15.7 billion metric tons in that time (although the final number, as you’ll see, is a very high end estimate). That’s because, as I’ve written before, building the grid will allow for more renewable, geothermal, and other forms of zero-carbon electricity generation to get built. And the country can only reduce emissions by building more zero-carbon electricity.
Some of those emissions increases from oil and gas are now likely to occur whether or not the bill passes — the Trump administration will encourage fossil fuel extraction and export far beyond what a Harris administration would have done.
But even in a more conservative scenario, the transmission provisions would still cut emissions by 6.5 billion metric tons by 2050, Third Way’s synthesis says. That would mean — when compared to the pro-fossil policies — that the bill has a much more modest effect overall, cutting emissions by just over 400 million tons through 2050.
These aren’t the only numbers out there. An analysis by Jeremy Symons, the former vice president of public affairs at the Environmental Defense Fund, argues that the bill’s loosening of some Biden-era restrictions on liquified natural gas export terminals will result in a tremendous LNG boom. He asserts that the bill’s LNG provisions could increase global emissions by 8.5 to 11 gigatons; his analysis, however, draws heavily from a controversial, initially erroneous, and now updated study from the Cornell ecologist Robert Howarth that contends American natural gas is far worse for the climate than coal.
Third Way did not include Symons’ study in its analysis. Instead, it cites a different study led by the Princeton professor Jesse Jenkins (with whom I cohost Heatmap’s Shift Key podcast) that uses natural-gas emissions estimates more in line with the broader scholarly literature. That modeling study indicates that the LNG provisions in the Manchin-Barrasso bill could increase emissions by as much as 3.3 gigatons — or decrease them by 2.4 gigatons.
I’m not going to get more into the LNG question in this story. And it’s somewhat less important than it was earlier this year because Trump administration is likely to approve as many LNG export terminals as it can. (That doesn’t mean those terminals will get built: Right now, a dozen LNG terminals have been approved but not built due to a lack of global demand for more LNG.) Instead, I want to dive into two specific provisions in the bill — on oil and gas leasing and transmission — that reveal the broader challenges of trying to speak concretely about this proposal.
By far the most climate-friendly provisions in EPRA concern its support of long-distance electricity transmission. As I’ve covered before, the lack of electricity transmission is now one of the biggest barriers to building new wind, solar, and other clean energy in the United States; the construction of new wind farms, in particular, seems to be slowing down because of a lack of available power lines to carry their electrons.
Manchin and Barrasso’s proposal aims to build more transmission largely by granting new powers to the Federal Energy Regulatory Commission, the independent agency that oversees the country’s power grids. EPRA would, for instance, allow FERC to step in and approve transmission lines that are “in the national interest” if a state has not acted on a given project within a year. The law also clarifies who should pay for a new power line, encoding the idea that customers who benefit from a line should pay for it. And it lets FERC approve payments from developers to the communities where new transmission infrastructure gets built, potentially smoothing approvals at the local level.
The bill also instructs FERC to write a rule that will require each part of the country to build a minimal amount of power lines that allow regions to exchange power with their neighbors. This measure — meant to spur new “interregional” transmission infrastructure — aims to knit the national grid more closely together and lower power costs on average.
How much would these policies reduce national emissions? The truth is, that’s extremely difficult to model. “There’s nothing in the EPRA that says, Thou shalt build this much transmission,” Charles Teplin, a grid expert at the think tank RMI, told me.
Instead, the bill aims to kick off a process that will result in more transmission getting built. That transmission should — in theory — bring more renewables online. But what will the size of that buildout be, and how many emissions will those renewables displace?
Answering these questions requires, again, estimating the uncertain. To come up with a reasonable, conservative figure to represent the amount of regional transmission that might get built under the new FERC process, they looked at what happened when a similar process was overseen by the Midwest’s grid. Then they rounded down that figure significantly.
Teplin and his colleagues also assumed that some big power lines that have already been proposed nationwide — roughly 15 gigawatts, to be exact — will get completed faster because of these new laws, so their analysis starts to bring them online by 2029. One only need look at the nearly two-decade saga of SunZia, a large power line that crosses New Mexico and Arizona, to see how long it can take to finish those projects today.
Under those assumptions, the law should more than double the rate of America’s transmission buildout, Teplin and his team estimated. Right now, the country builds perhaps 1 gigawatt of new transmission lines every year; under their assumptions, that would leap to 2 to 4 gigawatts a year.
So how many emissions would these new lines avoid? Using a report published by Grid Strategies, a power sector consulting firm that advocates for more transmission, Teplin and his colleagues estimate that each “gigawatt-mile” of new transmission will let operators add about 32 gigawatts of solar and wind to the grid each year. (This suggests that, most of the time, the lines would run at about 30% of capacity.)
Finally, the team assumed that electricity from these new renewable projects will replace power from natural gas plants. That, too, is an approximation: Some of those new wind and solar farms will drive out coal plants; others might replace non-emitting resources like nuclear or hydroelectric dams; but in general they will reduce gas burning.
When you put all those figures together, RMI’s analysis suggests that the legislation could build roughly twice as much new clean energy generation by 2050 as exists in all fossil-fuel power plants today. These new resources would help avoid about 6.5 gigatons of greenhouse gas emissions by the middle of the century.
That may seem like a big number — but Third Way was actually able to reach an even larger estimate. Teplin and his team didn’t try to differentiate, for instance, between the effects of a recent FERC order, which requires utilities to build more transmission within regions, and the proposed Manchin-Barrasso bill, which shores up the legality of that FERC order and would also induce utilities to build more power lines between regions. Some legal experts argue that the recent FERC order will be on shaky ground if the Manchin-Barrasso bill doesn’t pass; others say it’s stable enough as-is.
If you assume that courts will kill the FERC order unless Congress acts, then that should raise your estimate of what Manchin-Barrasso might do. That’s essentially what Third Way did — by giving the bill more credit for the resulting regional transmission buildout, they say that its carbon upside could be as large as 15.7 gigatons over the next 25 years. I’m not sure I would be that aggressive, but I think the transmission provisions would likely initiate a big buildout of renewables.
The Manchin-Barrasso bill contains a number of provisions that aim to increase the leasing of federal land for oil and gas drilling. One set requires that the Interior Department must offer a minimum amount of acres every year for oil and gas leasing. It also says that the land offered must be land that oil and gas companies actually want to lease.
This would address one of Republicans’ biggest objections to how the Biden administration has handled oil and gas extraction on federally owned land. As part of the Inflation Reduction Act, Manchin required that the government offer a minimum amount of oil and gas acreage for every acre of public land it leased to wind and solar developers. But Republicans have accused the Biden administration of getting around this rule by, in essence, offering useless or otherwise undesirable land.
(This concession, I should add, is now essentially moot until 2029, as the Trump administration will hasten to nominate the parcels that oil and gas companies are most excited to drill on. But it could bind a future Democratic administration, requiring them to offer good parcels for oil and gas leasing at the same time that they offer federal land for renewable development.)
The bill would also change some of the rules around the drilling allowed on the borders of federally owned land. Under the Manchin-Barrasso bill, companies could drill a vertical well on privately owned land, then extend it horizontally underground into federal land to extract oil or gas.
These provisions, too, are difficult to model. Much like the transmission proposal, they won’t lead to a guaranteed amount of drilling (although they will essentially produce a minimum amount of fossil fuel leasing). Nor will they substantially change the drilling that happens under Donald Trump or a future Republican president because any fossil fuel-loving administration is already free to go much further than these provisions would require them to.
To estimate the emissions impact of these provisions, the think tank Resources for the Future first tried to draw some error bars around their analysis. As a worst-case scenario, analysts modeled what would happen if the onshore drilling that happened during the Trump administration occurred every year from 2025 to 2050. Under this “Trump forever” scenario, emissions increase about 2.1 gigatons from 2025 to 2050. Under a less dire scenario, they would increase by about 0.6 gigatons during the same period.
These estimates almost certainly exceed what EPRA would actually do, Kevin Rennert, the director of RFF’s federal climate policy initiative, told me.
“None of the provisions would require the levels of leasing that we’re analyzing in the high-leasing scenario,” he said. “It’s clear [that the model is] a high upper bound on what EPRA itself would drive.” The provisions in the Manchin-Barrasso bill, in other words, are aimed much more at putting a floor under a future Democratic administration than they are raising a ceiling for a future Republican administration.
(Over all these discussions hangs a curious question about drilling for oil and gas on public land: How important is it, really? But that’s a question for another time.)
How you feel about this reform effort ultimately depends on how you feel about gambling. Is it worth hamstringing a future Democratic president’s ability to hem in oil production in exchange for unleashing a wave of new transmission under the Trump administration? How much do you weigh building more renewables versus selling more fossil fuels to the world?
Trump’s victory last month also changes the calculus. His administration will increase onshore oil and gas leasing regardless of whether this bill passes or not. He will stop the Energy Department’s effort to slow down the construction of LNG terminals and approve a new wave of projects. All of the bill’s support for fossil fuels, in other words, would be moot — Trump will do that stuff anyway. So the question becomes whether the bill’s support for new transmission infrastructure 1) actually builds new power lines, and 2) provides a useful tailwind for renewables and clean energy during what would otherwise be a difficult four years.
You can go in almost endless loops through the politics here. Given Trump’s antipathy toward renewables, why should we expect his administration to allow a transmission buildout in the first place, regardless of what Congress says? In which case, maybe the bill isn’t worth it. But on the other hand, maybe it is — since Trump’s going to do everything he can to juice fossil fuels and fight renewables, why not pass the bill and give power system regulators in blue and purple states an extra tool to juice clean energy construction? And hey, given Trump’s friendliness toward the AI boom, maybe he’ll wind up having to build more transmission just to service data centers.
We can’t make that political call quite yet. Until we know exactly how Westerman’s addition to the legislation would change NEPA, it’s hard to say where lawmakers should come down. But what’s clear is that this may be Congress’s last chance to deal with permitting reform for a while. Next year, the Republican majority is likely to be focused on tax cuts, and it’s not even clear that the reconciliation process would allow for changing permitting law. “We’re pretty pessimistic that you could include anything on permitting or transmission or any of these other things in the reconciliation process,” Devin Hartman, a policy director at the center-right think tank the R Street Institute, told Heatmap this week.
So this is it for permitting reform — it’s now or never for this set of changes. In a year full of surprises for climate and environmental law, we may yet get one more.
Jael Holzman contributed reporting.
Editor’s note: This story has been updated to correct the magnitude of emissions reductions from the Manchin-Barrasso bill found in Third Way’s analysis.
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Current conditions: In the Atlantic, the tropical storm that could, as it develops, take the name Jerry is making its way westward toward the U.S. • In the Pacific, Hurricane Priscilla strengthened into a Category 2 storm en route to Arizona and the Southwest • China broke an October temperature record with thermometers surging near 104 degrees Fahrenheit in the southeastern province of Fujian.
The Department of Energy appears poised to revoke awards to two major Direct Air Capture Hubs funded by the Infrastructure Investment and Jobs Act in Louisiana and Texas, Heatmap’s Emily Pontecorvo reported Tuesday. She got her hands on an internal agency project list that designated nearly $24 billion worth of grants as “terminated,” including Occidental Petroleum’s South Texas DAC Hub and Louisiana's Project Cypress, a joint venture between the DAC startups Heirloom and Climeworks. An Energy Department spokesperson told Emily that he was “unable to verify” the list of canceled grants and said that “no further determinations have been made at this time other than those previously announced,”referring to the canceled grants the department announced last week. Christoph Gebald, the CEO of Climeworks, acknowledged “market rumors” in an email, but said that the company is “prepared for all scenarios.” Heirloom’s head of policy, Vikrum Aiyer, said the company wasn’t aware of any decision the Energy Department had yet made.
While the list floated last week showed the Trump administration’s plans to cancel the two regional hydrogen hubs on the West Coast, the new list indicated that the Energy Department planned to rescind grants for all seven hubs, Emily reported. “If the program is dismantled, it could undermine the development of the domestic hydrogen industry,” Rachel Starr, the senior U.S. policy manager for hydrogen and transportation at Clean Air Task Force told her. “The U.S. will risk its leadership position on the global stage, both in terms of exporting a variety of transportation fuels that rely on hydrogen as a feedstock and in terms of technological development as other countries continue to fund and make progress on a variety of hydrogen production pathways and end uses.”
Remember the Tesla announcement I teased in yesterday’s newsletter? The predictions proved half right: The electric automaker did, indeed, release a cheaper version of its midsize SUV, the Model Y, with a starting price just $10 shy of $40,000. Rather than a new Roadster or potential vacuum cleaner, as the cryptic videos the company posted on CEO Elon Musk’s social media site hinted, the second announcement was a cheaper version of the Model 3, already the lower-end sedan offering. Starting at $36,990, InsideEVs called it “one of the most affordable cars Tesla has ever sold, and the cheapest in 2025.” But it’s still a far cry from Musk’s erstwhile promise to roll out a Tesla for less than $30,000.
That may be part of why the company is losing market share. As Heatmap’s Matthew Zeitlin reported, Tesla’s slice of the U.S. electric vehicle sales sank to its lowest-ever level in August despite Americans’ record scramble to use the federal tax credits before the September 30 deadline President Donald Trump’s new tax law set. General Motors, which sold more electric vehicles in the third quarter of this year than in all of 2024, offers the cheapest battery-powered passenger vehicle on the market today, the Chevrolet Equinox, which starts at $35,100.
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Trump’s pledge to revive the United States’ declining coal industry was always a gamble — even though, as Matthew reported in July, global coal demand is rising. Three separate stories published Tuesday show just how stacked the odds are against a major resurgence:
As you may recall from two consecutive newsletters last month, Secretary of Energy Chris Wright said “permitting reform” was “the biggest remaining thing” in the administration’s agenda. Yet Republican leaders in Congress expressed skepticism about tacking energy policy into the next reconciliation bill. This week, however, Utah Senator Mike Lee, the chairman of the Senate Committee on Energy and Natural Resources, called for a legislative overhaul of the National Environmental Policy Act. On Monday, the pro-development social media account Yimbyland — short for Yes In My Back Yard — posted on X: “Reminder that we built the Golden Gate Bridge in 4.5 years. Today, we wouldn’t even be able to finish the environmental review in 4.5 years.” In response, Lee said: “It’s time for NEPA reform. And permitting reform more broadly.”
Last month, a bipartisan permitting reform bill got a hearing in the House of Representatives. But that was before the government shutdown. And sources familiar with Democrats’ thinking have in recent months suggested to me that the administration’s gutting of so many clean energy policies has left Republicans with little to bargain with ahead of next year’s midterm elections.
Soon-to-be Japanese prime minister Sanae Takaichi.Yuichi Yamazaki - Pool/Getty Images
On Saturday, Japan’s long-ruling Liberal Democratic Party elected its former economic minister, Sanae Takaichi, as its new leader, putting her one step away from becoming the country’s first woman prime minister. Under previous administrations, Japan was already on track to restart the reactors idled after the 2011 Fukushima disaster. But Takaichi, a hardline conservative and nationalist who also vowed to re-militarize the nation, has pushed to speed up deployment of new reactors and technologies such as fusion in hopes of making the country 100% self-sufficient on energy.
“She wants energy security over climate ambition, nuclear over renewables, and national industry over global corporations,” Mika Ohbayashi, director at the pro-clean-energy Renewable Energy Institute, told Bloomberg. Shares of nuclear reactor operators surged by nearly 7% on Monday on the Tokyo Stock Exchange, while renewable energy developers’ stock prices dropped by as much as 15%
Researchers at the United Arab Emirates’ University of Sharjah just outlined a new method to transform spent coffee grounds and a commonly used type of plastic used in packaging into a form of activated carbon that can be used for chemical engineering, food processing, and water and air treatments. By repurposing the waste, it avoids carbon emitting from landfills into the atmosphere and reduces the need for new sources of carbon for industrial processes. “What begins with a Starbucks coffee cup and a discarded plastic water bottle can become a powerful tool in the fight against climate change through the production of activated carbon,” Dr. Haif Aljomard, lead inventor of the newly patented technology, said in a press release.
Last week’s Energy Department grant cancellations included funding for a backup energy system at Valley Children’s Hospital in Madera, California
When the Department of Energy canceled more than 321 grants in an act of apparent retribution against Democrats over the government shutdown, Russ Vought, President Trump’s budget czar, declared that the money represented “Green New Scam funding to fuel the Left's climate agenda.”
At least one of the grants zeroed out last week, however, was supposed to help keep the lights on at a children’s hospital.
The $29 million grant was intended to build a 3.3-megawatt long-duration energy storage system at Valley Children’s Hospital, a large pediatric hospital in Madera, California. The system would “power critical hospital operations during outage events,” such as when the California grid shuts down to avoid starting wildfires, according to project documents.
“The U.S. Department of Energy’s cancellation of funding for [the] long-duration energy storage demonstration grant is disappointing,” Zara Arboleda, a spokesperson for the hospital, told me.
Valley Children’s Hospital is a 358-bed hospital that says it serves more than 1.3 million children across California’s Central Valley. It has 28 neonatal intensive care unit beds and nationally ranked specialties in pediatric neurology, orthopedics, and lung surgery, among others.
Energy Secretary Chris Wright has characterized the more than $7.5 billion in grants canceled last week as part of an ongoing review of financial awards made by the Biden administration. But the timing of the cancellations — and Vought’s gleeful tweets about them — suggests a more vindictive purpose. Republican lawmakers and President Trump himself threatened to unleash Vought as a kind of rogue budget cutter before the federal government shut down last week.
“We don’t control what he’s going to do,” Senator John Thune told Politico last week. “I have a meeting today with Russ Vought, he of PROJECT 2025 Fame, to determine which of the many Democrat Agencies, most of which are a political SCAM, he recommends to be cut,” Trump posted on the same day.
Up until this year, canceling funding that is already under contract with a private party would have been thought to be straightforwardly illegal under federal law. But the Supreme Court’s conservative majority has allowed the Trump administration to act with previously unimaginable freedom while it considers ruling on similar cases.
Faraday Microgrids, the contractor that was due to receive the funding, is already building a microgrid for the hospital. The proposed backup power system — which the grant stipulated should be “non-lithium-ion” — was supposed to be funded by the Energy Department’s Office of Clean Energy Demonstrations, with the goal of finding new ways of storing electricity without using lithium-ion batteries, and was meant to work in concert with that new microgrid and snap on in times of high stress.
That microgrid project is still moving forward, Arboleda, the hospital’s spokesperson, told me. “Valley Children’s Hospital continues to build and soon will operate its microgrid announced in 2023 to ensure our facilities have access to reliable and sustainable energy every minute of every day for our patients and our care providers,” she added. That grid will contain some storage, but not the long-term storage system discussed in the official plan.
Faraday Microgrids, formerly known as Charge Bliss, didn’t respond to a request for comment, but its website touts its ability to secure grants and other government funding for energy projects.
In a statement, a spokesman for the Energy Department said that the grant was canceled because the project wasn’t feasible. “Following an in-depth review of the financial award, it was determined, among other reasons, that the viability of the project was not adequate to warrant further disbursements,” Ben Dietderich, a spokesman for the Energy Department, told me.
The children’s hospital, at least, is in good company. On Tuesday, a Trump administration document obtained by Heatmap News suggested the Energy Department is moving to kill bipartisan-backed funding for two direct air capture hubs in Texas and Louisiana. And although California has lost the most grants of any state, the Energy Department has also sought to terminate funding for new factories and industrial facilities across Republican-governed states.
Rob and Jesse break down China’s electricity generation with UC San Diego’s Michael Davidson.
China announced a new climate commitment under the Paris Agreement at last month’s United Nations General Assembly meeting, pledging to cut its emissions by 7% to 10% by 2035. Many observers were disappointed by the promise, which may not go far enough to forestall 2 degrees Celsius of warming. But the pledge’s conservatism reveals the delicate and shifting politics of China’s grid — and how the country’s central government and its provinces fight over keeping the lights on.
On this week’s episode of Shift Key, Rob and Jesse talk to Michael Davidson, an expert on Chinese electricity and climate policy. He is a professor at the University of California, San Diego, where he holds a joint faculty appointment at the School of Global Policy and Strategy and the Jacobs School of Engineering. He is also a senior associate at the Center for Strategic and International Studies, and he was previously the U.S.-China policy coordinator for the Natural Resources Defense Council.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
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Here is an excerpt from our conversation:
Robinson Meyer: Your research and other people’s research has revealed that basically, when China started making capacity payments to coal plants, in some cases, it didn’t have the effect on the bottom line of these plants that was hoped for, and also we didn’t really see coal generation go down or change in the year that it happened. It wasn’t like they were paying these plants to stick around and not run. They were basically paying these plants, it seems like, to do the exact same thing they did the year before, but now they also got paid. And maybe that was needed for their economics, we can talk about it.
Why did coal get those payments and not, say, batteries or other sources of spare capacity, like pumped hydro storage, like nuclear? Why did coal, specifically, get payments for capacity? And does it have to do with spinning reserve? Or does it have to do with the political economy of coal in China?
Michael Davidson: When it came out, we said exactly the same thing. We said, okay, this should be a technology neutral payment scheme, and it should be a market, not a payment, right? But China’s building these things up little by little. Over time we’ve seen, historically, actually, a number of systems internationally started with payments before they move to markets because they realize that you could get a lot more competitive pressure with markets.
The capacity payment scheme for coal is extremely simple, right? It says, okay, for each province, we’re going to say what percentage of our benchmark coal investment costs are we going to subsidize. It’s extremely simple. It does not account for how much you’re using it at a plant by plant level. It does not account for other factors, renewables, etc. It’s a very coarse metric. But I wouldn’t say that it had had some, you know, perverse negative effect on the outcome of what coal generation is. Probably more likely is that these payments were seen, for some, as extra support. But then for some that are really hurting, they’re saying, okay, well then we will maybe put up less obstacles to market reforms.
But then on top of that, you have to put in the hourly energy demand growth story and say, okay, well you have all these renewables, but you don’t have enough storage to shift to evening peaks. You are going to rely on coal to meet that given the current rigid dispatch system. And so you’re dispatching them kind of regardless of whether or not you have the payment schemes.
I will say that I was a skeptic, right? Because when people told me that China should put in place a capacity market, I said, China has overcapacity. So if you have an overcapacity situation, you put in place a market, the prices should be zero. So what’s the point? But actually, when you’re looking out ahead with all of this surplus coal capacity that you’re trying to push down, you’re trying to push those capacity factors of those coal plans from 50%, 60%, down to 20% or even lower, they need to have other revenue schemes if you’re not going to dramatically open up your spot markets, which China is very hesitant to do — very risk averse when it comes to the openness of spot markets, in terms of price gaps. So that’s a necessary part of this transition. But it can be done more efficiently, and it should done technology neutral.
And by the way that is happening in certain places. That’s a national scheme, but we actually see that the implementation — for example, Shaanxi province, we have a technology neutral scheme that would include other resources, not just coal.
Mentioned:
China’s new pledge to cut its emissions by 2035
What an ‘ambitious’ 2035 electricity target looks like for China
China’s Clean Energy Pledge is Clouded by Coal, The Wire China
Jesse’s upshift; Rob’s upshift.
This episode of Shift Key is sponsored by …
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A warmer world is here. Now what? Listen to Shocked, from the University of Chicago’s Institute for Climate and Sustainable Growth, and hear journalist Amy Harder and economist Michael Greenstone share new ways of thinking about climate change and cutting-edge solutions. Find it here.
Music for Shift Key is by Adam Kromelow.