"I think the new Congress is going to be very challenging for the wind energy industry," says Keith Martin, a Washington-based partner at law firm Chadbourne & Parke.
The 112th Congress, sworn in on January 5, has a very different face from the regime of the past two years. Republicans have taken control of the House of Representatives, the lower chamber of the US legislative branch, and cut the Democrats' majority in the Senate. With the new power dynamic comes a different set of legislative priorities. Renewable energy is unlikely to be as high on the list as it has been, says Martin. "The Republicans have an all-of-the-above approach to energy, which means renewables will not get favoured over other types," he says.
That preference is bound to have an impact on the wind industry's push for a national renewable electricity standard (RES), which would require utilities to supply a minimum percentage of their power from renewable sources. An indication of that came early, when Michigan Republican Fred Upton, who has taken over as the new chair of the House energy and commerce committee, used a December opinion piece on the Daily Caller website to slam a federal RES as a subsidy that "artificially props up" the industry. "Renewable energy sources have an integral role, but the free market must prevail without the government inserting itself - yet once again - where it does not belong," he wrote.
If a mandate is considered at all, observers agree, it is likely to be a wider clean energy standard (CES) that could include nuclear energy, coal plants using carbon capture and storage, hydropower and even natural gas.
"This is more in keeping with the Republican mantra," Jonathan Weisgall, vice-president for legislative and regulatory affairs for MidAmerican Energy Holdings Company, said during a recent roundtable discussion examining energy priorities among the new legislators in Washington.
The idea of a CES is also gaining some traction among Democrats who have seen proposals to implement a more narrowly focused RES wither. Energy minister Steven Chu said in December that he was willing to discuss the idea and urged Congress to seriously think about it. Jeff Bingaman, a New Mexico Democrat who chairs the Senate energy and natural resources committee and sponsored a bill in the last Congress that would have set a RES of 15% by 2021, told reporters he is "open to looking at" a CES, despite his opposition to the idea in the past.
The concern among renewables advocates is that the inclusion of non-renewable technologies in a CES target would dilute its ability to drive significant new investment in renewable-energy capacity. But it is an option some believe the sector must consider in light of new political realities. "We need to start thinking more broadly in the renewable-energy industry about working with some other groups, such as nuclear and clean coal, towards a broader clean-energy standard," Richard Glick, director of government affairs for Iberdrola Renewables told the round-table discussion.
"There seems to be enough support for a broader standard among Republicans in both the Senate and the House. If an energy bill moves in the next Congress, we have a decent shot of getting a clean energy standard into it that might work for everybody," he said.
President Barack Obama has said he wants to "immediately engage" with Republicans on an energy bill this year, but whether it comes to fruition remains to be seen. Other issues, including the oft-repeated Republican priority of tackling the country's $14 billion debt, seemed to be taking precedence as the year began.
"We're taking a cautiously optimistic approach in our forecasting," says Tim Stephure, a senior analyst at Cambridge, Massachusetts-based IHS Emerging Energy Research. "We think there will be a comprehensive energy policy eventually, but we're not sure whether that is something we can expect in the near term or whether it will be pushed back to be part of an election platform in 2012."
For a broad energy bill to garner support in a cost-cutting Congress, it will have to be more targeted than previous efforts, says John Shelk, CEO of the Electric Power Supply Association. "I don't think you can just load it up, as in the past, with something for everyone. The bill will become too big, be too costly and be perceived as helping projects that are going to move anyway or tipping the scales in ways that ought to be left to the private sector," he told the round table. "On the other hand, something that does something relatively surgical to help each of the fuels has a chance."
One item that is clearly off the table is creation of a cap-and-trade system to deal with greenhouse gas emissions, says Martin. The House of Representatives in the last Congress passed legislation setting a cap on carbon, but with Republicans now in charge, law makers on both sides agree there is no chance of a repeat.
In fact, says Martin, Congress is expected to try to block the Environmental Protection Agency (EPA) from implementing regulations - which came into effect on January 2 - to control carbon emissions from industrial facilities such as power plants and refineries.
Republicans are eyeing votes to either kill the EPA rules outright or impose a moratorium on their implementation. Another strategy would be to choke off the funding the EPA needs to put the new regulations into practice. "We are not going to let this administration regulate what they've been unable to legislate," Upton declared in early January.
The administration does possess tools to fight back. "Obama has some considerable defensive powers still to block these sorts of measure by vetoing them," says Martin. "There has to be a two-thirds vote in each house to override a veto, which is going to be a tall order."
Whether he would choose to use his veto and risk alienating voters in coal-producing and coal-consuming states, however, is not clear. "A veto would complicate his re-election effort in 2012, particularly in the industrial Midwest," says Glick.
The wind sector should also not expect much progress on transmission policy in the 112th Congress, observers agree. While there have been attempts to legislate on transmission issues, they have become mired in the politics of who should have the authority to site new lines and how costs should be allocated. Things are unlikely to get any easier in the new Congress, says Stephure. "It's a very contentious debate," he adds. "I don't think we've seen a lot of progress and that, I think, will continue to have a long-term horizon for any kind of deal."
For now, action on transmission is shifting to the Federal Energy Regulatory Commission (FERC), which has been looking into the issue of cost allocation. "I think everyone has decided to punt the issues to FERC," says Glick. "If people are unhappy with what FERC does, they may come back to Congress to block it."