Supreme Court Ruling on EPA Regs: No near-Term Clean Energy Effects

By Christian Roselund

On 30 June, the U.S. Supreme Court delivered a ruling limiting the ability of the U.S. Environmental Protection Agency (EPA) to regulate greenhouse gases under a plan proposed during the administration of former President Obama. Legal experts say that the ruling in West Virginia v. EPA has implications for the regulatory authority of the federal government. However, CEA expects it to have no near-term effect on changes in the U.S. electricity fleet including the ongoing shift away from coal and towards solar, wind, and battery storage.

The court’s majority opinion found the EPA’s regulation of greenhouse gases in power plants via the Clean Power Plan in 2014 to be outside the scope of its authority under the Clean Air Act. This opinion found that Congress, not the EPA, has the authority to proscribe changes such as those found in the Plan. However, under the Trump Administration the Clean Power Plan was scuttled. And even if the plan had been implemented, timelines for deployment lagged real-world changes in the nation’s electricity mix.

The final version of the Clean Power Plan published in 2015 aimed to reduce CO2 emissions from power plants by 32% by 2030, compared to 2005 levels. However, in 2021 U.S. power sector emissions had already fallen to 1,551 million metric tons, a 35% reduction versus 2005 levels. This has been accomplished by a slight reduction in demand, a switch from coal to gas, and the replacement of fossil fuels with
renewable sources.

Other EPA regulations have contributed to changes in the U.S. power mix. Experts cite the Mercury and Air Toxics Standards (MATS), which went into effect in 2012, as helping to accelerate the decline of the U.S. coal fleet. However, even the removal of MATS would be unlikely to have much of an effect, as individual coal plants have either installed equipment to comply with MATS or shut down.

The primary federal policies that have affected clean energy deployment over the last ten years have been tax policies: the Investment Tax Credit (ITC) for solar and the Production Tax Credit (PTC) for wind. Research by Lawrence Berkeley National Laboratory has shown that state-level renewable energy mandates have also been a main driver of wind and solar deployment.

W. Virginia v. EPA effectively pre-empts and restricts future EPA action affecting the electricity sector, were the agency to attempt to propose such regulation. CEA estimates that the earliest any such regulation could potentially have effects is in the 2025 – 2030 timeframe, as it takes multiple years for EPA to finalize controversial, sweeping regulations like the Clean Power Plan. However, the Biden Administration had not made substantial moves to revive the Clean Power Plan or issue anything like it and is even less likely to do so now.

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Source: West Virginia et al. v. Environmental Protection Agency et al. (U.S. Supreme Court)

News coverage: Supreme Court’s EPA ruling upends Biden’s environmental agenda (Washington Post)

News coverage: The Supreme Court’s big EPA decision is a massive power grab by the justices (Vox)

Materials Costs Lead to Surge in EV Prices

By Anjali Joshi

The cost of manufacturing EVs is expected to surge this year due to rising prices for key raw materials. The average price of a lithium-ion battery pack had declined nearly 90% from 2010 to 2020 as the global battery cell production increased tremendously. However, in the last few years raw materials like lithium, cobalt, and nickel have witnessed continuous price increases and sharp supply shortages due to this booming demand from the EV sector.

According to Benchmark Mineral Intelligence, since January 2020, lithium prices have surged by over 700%, cobalt by 100%, nickel by 250%, and graphite by over 25%. Out of these raw materials, lithium is the biggest concern as its supply is growing at a pace lower than the global EV battery demand.   

In response to the rising price of raw materials, both cell and EV makers are making upstream integration investments in raw material production and refining and cathode/anode powder production. These investments are attempts to secure long-term supply of key raw materials. This situation today is similar to the situation in 2018, when EV makers were forced to move one step up across the battery value chain by collaborating with battery cell makers in order to bring down the price of battery cells and packs.

While battery cell makers are regularly announcing large-scale “gigafactory” expansions, capacity expansions in raw material production such as mining projects will not be enough to match the growing demand from the downstream sector, at least over the next two to three years. Rising raw material prices have prompted cell suppliers to push up prices to EV manufacturers, which are ultimately passing on costs to EV buyers. US-based EV makers like Tesla and Rivian Automotive have already raised prices of some of their EV models in early 2022 due to the high-cost pressure tied to raw material supply shortage and increasing prices. 

Rising inflation, along with higher EV prices, is likely to force some customers to delay their purchase decisions, while other buyers wait for some lower price EV models to be launched in 2023. However, despite a tight supply for EV batteries and increased EV prices, Bloomberg New Energy Finance and other market analysts expect the overall demand for EVs to keep growing. According to the International Energy Agency (IEA), 2 million electric cars were sold worldwide in Q1 2022, up by three-quarters from Q1 2021.

Source: CEA Research

U.S.-German clean energy initiative Sun & Wind Belt puts spotlight on security

Business group’s 2022 Berlin Energy Transition Dialogue Side Event addressed need to break energy dependence on Russia and move faster to renewables

29. March 2022, Berlin — The transatlantic business initiative Sun & Wind Belt launched its 2022 program with a U.S.- German roundtable event on Monday, 28. March, focused on building security through energy independence. Viewed live online by a global audience, the discussion was an official Side Event of the 2022 Berlin Energy Transition Dialogue, the German Energy Ministry’s annual conference focusing on clean energy and energy independence.

Speaking at the event, former Austrian Chancellor Christian Kern underscored the Transatlantic Sun & Wind Belt’s objective of strengthening U.S.-German partnership on renewable energy: “We need to build a U.S.-German supply chain,“ asserting that it is “of utmost importance to increase our [energy] independence.”

In response to the Russian invasion of Ukraine and the growing public awareness of the risks of energy dependence on autocratic regimes, the Sun & Wind Belt brought together experts to examine the intersection of security and clean energy: Erin Sikorsky (Director of the Center for Climate & Security), Kern (currently Managing Director of the Blue Minds Company), Prof. Dr. Veronika Grimm (German Council of Economic Experts), Angelina Galiteva (Board Chair of California’s grid operator ISO), and Rich Hossfeld (SB Energy CEO, member Softbank Group).

Coming from the public and private sectors, the speakers addressed the urgency of the energy transition and the breadth of solutions being implemented in both countries. The discussion also highlighted the extent to which Germany and the United States can accelerate adoption of renewables by sharing knowledge and working in tandem.

The event featured a keynote presentation by Prof. Sikorsky:

“In addition to preventing the most catastrophic security outcomes from climate change, a more rapid move to clean energy would also pull the rug out from under petro-dictators like Putin.” Addressing the longer-term security challenge Prof. Sikorsky pointed out that, “the geopolitical reality is that countries with economies rooted in oil may not transition without a fight.” But she closed with the warning: “The longer we wait, the slower we go, the harder and more painful it gets.”

Prof. Dr. Grimm noted the costs we are already facing:

“We have very long relied on the cheapest alternative, gas supplies from Russia. We haven’t diversified because of the price […] but we will now experience that resilience is costly, energy security is costly, security per se in Europe will be costly.” In addition to the consequences economists are now warning about, Grimm called attention to the risk of not halting oil and gas imports: “What are the long-run consequences of financing the war?”

Kern extended the discussion to socio-political risks:

“The situation I fear is that we’ll have no choices if there is a further escalation of the conflict [with Russia]. If we do not cap gas prices, this could cause extreme social damage […] and an immediate backlash—and would definitely prevent us from reaching our climate targets.” Considering this nexus of factors, Kern explained, “We have a triangle of concerns: we need secure energy, clean energy, and affordable energy.”

Galiteva underlined how renewables address security and climate risks, along with offering a growing price advantage:

“The lowest cost resource on the grid, by far, are renewables and we should be transitioning faster. If we want the highest value, most diverse, most reliable grid, it has to be reliant on renewables. And, of course, on the technologies that support the renewables, so we can reliably operate 365 days a year, 24 hours, 7 days a week, every hour of every day.”

Pointing to the centrality of reliable energy regulation that prioritizes renewables, Hossfeld stated:

“Today there is more capital sitting on the sidelines, waiting to invest in [renewable energy] manufacturing, infrastructure, and projects, than I’ve seen in 15 years. All they’re looking for — given how long it takes to build — is a stable policy framework to guide that investment. This is an outstanding opportunity for policy-makers to put in place that framework and unlock hundreds of billions or trillions of dollars in a pretty short time frame to achieve decarbonization.”

His statement reinforces the Transatlantic Sun & Wind Belt’s core policy demand in both Germany and the U.S. The initiative advocates for a joint regulatory framework that will enable investors, along with renewable solution providers across the entire value chain from manufacturing to transmission to storage, to scale up funding and production and thus to achieve the energy transition faster.

Transatlantic Sun & Wind Belt co-founder Milan Nitzschke (CEO SL Naturenergie) concluded: “There‘s nothing more peaceful and secure than an energy source you don’t have to fight about because it’s ubiquitously available and affordable to everyone.”

The organization will continue to roll out events and advocacy efforts throughout 2022 together with the roundtable’s facilitator, Berlin-based cleantech strategy agency DWR eco.

Link to event:

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About the Sun & Wind Belt

The Transatlantic Sun & Wind Belt is the first German-U.S. business initiative to promote the acceleration of the transition to renewable energies and the green transformation more broadly, aiming to drive in-depth cooperation between the United States and Europe. Founded in 2021, the group has gained support and engaged participation from the largest private sector actors in the renewable energy sector on both sides of the Atlantic. With the goal of establishing a stable and transparent joint regulatory framework that prioritizes renewable energy, the Sun & Wind Belt initiates dialogue with political stakeholders and promotes the exchange of expertise, best practices, and investment between the U.S. and Germany—the two largest market-based leaders in renewable energy development and deployment.