Energy Week: "Inaction Is Not an Option"

Spring is in the air and, last week, Governor Josh Shapiro rolled out a strategy to rejuvenate Pennsylvania’s status as an energy innovator. Since taking office 14 months ago, the governor has certainly been consistent on at least two fronts: (1) he describes himself as “competitive as hell” and has directed state agencies, including the Department of Environmental Protection (DEP), to leverage every single federal dollar available from the historic Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) to position Pennsylvania as a clean energy leader; and (2) he evaluates potential climate and energy policy measures through his three-part test of taking real action on climate, protecting and growing energy jobs, and ensuring affordable, reliable power for consumers in the long-term. Not surprisingly, these themes featured prominently as Shapiro traveled across the state and spoke at four different events to announce his plan.

Barnstorming the Commonwealth

On Monday, March 11, Governor Shapiro hit an event in northeast Philadelphia touting the promise of the proposed “Mid-Atlantic Clean Hydrogen” Hub (or MACH2), which received a preliminary award of $750 million in federal BIL funds last October. NRDC supports a smart approach to utilizing electrolytic hydrogen to help decarbonize challenging industries like steelmaking and maritime shipping, but it’s critical that hydrogen production must meet well-designed criteria and be targeted to efficient end-uses to avoid this nascent industry becoming a climate and fiscal boondoggle.

Tuesday saw the governor head west to Butler County to celebrate DEP plugging its 200th orphaned/abandoned gas well using BIL grants. By utilizing these unprecedented federal funds, the Shapiro admin has plugged more wells since last January than the state did over nearly the previous decade combined. It’s estimated there are hundreds of thousands of these unplugged abandoned wells scattered across Pennsylvania (the vast majority of which remain undocumented), and they continue to spew methane (a potent greenhouse gas) and other toxic pollutants into our air and waterways. Working to identify, prioritize, and clean up these legacy sources of pollution is a no-brainer.

And the big reveal was the focus of events on Wednesday at a Scranton union hall and Thursday at a Harrisburg steam plant, where Shapiro unveiled a two-pronged legislative package to: 1) dramatically increase the percentage of the Commonwealth’s electricity sourced from clean energy; and 2) cap and cut carbon pollution from Pennsylvania's fleet of fossil fuel-fired power plants while generating billions of dollars to reinvest in communities.

Like Peas and Carrots: Ambitious Renewables Targets + Cap & Invest to Cut Carbon

At the state level, two tried-and-true policies that have driven the lion’s share of power sector decarbonization across the country are 1) scaling up clean energy; and 2) cutting pollution from dirty sources of energy through smart cap-and-invest programs. 

On the campaign trail, Shapiro pledged to increase Pennsylvania’s moribund clean energy targets, which were first established by the Alternative Energy Portfolio Standards (AEPS) Act nearly two decades ago and which have flatlined since May 2021; separately, he also committed to bringing a diverse set of stakeholders together to find common ground on a path forward for participation in the Regional Greenhouse Gas Initiative (RGGI). Previous updates and coverage on the RGGI Working Group and status of the RGGI litigation can be found here and here.

NRDC and other stakeholders are still awaiting legislative language and, as is always the case in Harrisburg, the devil will very much be in the details. However, based on what the governor outlined and what we can glean from the cosponsor memos (PA Climate Emissions Reduction Act or “PACER” here, and PA Reliable Energy Sustainability Standard or ”PRESS” here), we are excited to roll up our sleeves and engage in what will hopefully be a robust public dialogue with lawmakers about both bills.

PACER

In line with one of the recommendations from his RGGI Working Group, Shapiro proposed a PA-specific cap-and-invest program for the power sector. He declared this would allow the Commonwealth to “chart its own energy future” and that, if enacted, “no one outside our state will dictate to us what we can and can’t do.” To be clear, Pennsylvania would maintain complete control over these decisions by participating in RGGI, but it’s worth noting the points of concern that Shapiro chose to emphasize and is trying to address.

PACER would also establish a new plan for investing the significant revenue generated by the sale of carbon credits at Pennsylvania-run auctions, as the governor indicated 70% of the funds would be returned directly to ratepayers as on-bill rebates by the Public Utility Commission. This might not prove to be an apples-to-apples comparison, but the most recent RGGI regional auction saw an allowance clearing price of $16, which would have led to approximately $233 million in proceeds for Pennsylvania. Investing 70% of those funds in electric bill savings would translate to over $160 million from one quarterly auction alone. The remaining 30% of PACER funds are proposed to be invested in: projects for energy job creation; lower overall energy bills for low-income Pennsylvanians (through establishment of a year-round LIHEAP program, for example); and more traditional investments in clean energy and energy efficiency projects.

The RGGI Regulation on the books (known as the “CO2 Budget Trading Program”) contains a number of Pennsylvania-specific program design elements, including the state’s base budget of CO2 allowances (that declines annually through 2030) and the various set-aside accounts that provide allowances to certain Pennsylvania generators (waste coal and CHP facilities) without cost. It’s not yet known whether PACER would involve changing any of these details, which will help determine the program’s ambition, viability, and durability. But as NRDC has expressed previously, if there’s a legislative path to establish an additional or alternative cap-and-invest program that provides benefits equal to, or greater than, what RGGI would provide, why not take it under consideration?

PRESS

As the governor noted, Pennsylvania has fallen behind other states in the race to create clean, reliable, and affordable energy. The Commonwealth currently generates about 60% of its electricity from natural gas, nearly ⅓ from our zero-carbon nuclear fleet, and a mere 2-3% from renewable sources. With PRESS, the governor announced the “next generation of AEPS,” an initiative that would guarantee renewables provide at least 35% of electricity sold in Pennsylvania by 2035. The cosponsor memo also shows that PRESS would introduce a new Tier III, shift some sources of generation between the tiers, and add eligibility for new resources that have not yet been deployed at scale (and that likely cannot be until the 2030s).

PRESS would allow those sources to compete for credits alongside cleaner generation, which potentially creates a pathway for broader political support. PRESS would also allow for Tier I sources based in Pennsylvania to be eligible for Tier II and Tier III credits, meaning that utilities could ultimately meet PRESS targets by selling up to 50% of electricity exclusively from renewables by 2035.

So What's Next?

As we await more details on the governor’s energy plan, it’s encouraging at the outset that these policies are being considered in tandem as “companion legislation.” Governor Shapiro and the General Assembly are not facing a zero-sum game here. A cap-and-invest structure like RGGI combined with energy portfolio standards featuring strong renewables targets are time-tested, well-documented policy mechanisms with a proven track record of economic, health, and emissions benefits. The governor is taking ownership of these two foundational power sector policies and showing he wants Pennsylvania to be a national leader in delivering more jobs, cleaner air, and a brighter future. The legislature will soon be faced with a choice - not a binary between cap-and-invest and clean energy targets - but between action and inaction. And we’ve already seen what choosing to do nothing looks like.