CERAWEEK: Federal laws boost energy transition opportunities, but challenges remain

Federal infrastructure and clean-energy legislation enhances the energy transition investment opportunity, power sector executives said March 9 in a CERAWeek by S&P Global panel discussion, but challenges remain in addressing supply chain, regulatory and labor constraints.

Moderator Saugata Saha, S&P Global Commodity Insights president, asked panelists in the session entitled "Clean Energy Investment: How much bigger is the opportunity?" how the federal Inflation Reduction Act of 2022, signed into law Aug. 16, 2022, and the bipartisan Infrastructure Investment and Jobs Act, signed into law Nov. 15, 2021, have been "growing the pie, for all to share," as Secretary of Energy Janet Granholm said during a keynote address on March 8.

Panelist Warner Baxter, executive chairman of the Ameren utility holding company and board chairman of the Edison Electric Institute, said: "We are experiencing challenges in getting transmission built, frankly, because of siting and permitting issues, projects are getting sidelined or canceled."

St. Louis-based Ameren provides electricity for 2.4 million electric customers and more than 900,000 natural gas customers in Illinois and Missouri, and operates a transmission business in the Midcontinent Independent System Operator, which Baxter said recently announced approval of $10 billion in transmission upgrades.

"In 2024, we're going to see significantly more announced," Baxter said, but added he sees "a real need to address siting regulations."

"At the end of the day, we're looking for commonsense solutions," Baxter said. "We have to put reasonable timelines in place. We're not trying to shortcut ground use regulations."

Supply chain issues

Other factors challenging the renewable expansion implicit in the new federal legislation include supply chain and labor constraints, Baxter said.

Panelist NextEra Energy Resources president and CEO Rebecca Kujawa said the IRA's extension of production and investment tax credits for renewable resource investments provides "visibility now for decades."

NextEra Energy Resources is part of NextEra Energy, which has plans to expand its renewable capacity from about 31 GW as of the end of 2022 by another 42 GW by 2026.

Preceding decades featured periods of "boom and bust," Kujawa said.

"We knew we had a production tax credit for wind for a couple of years every single time," Kujawa said. "So, from a customer demand standpoint, now our customers can plan for years going forward. It also can be incredibly impactful for your supply chain."

With the boom-and-bust pattern, makers of renewable energy components had little incentive to invest in expanding production capacity and in cultivating resilient sources of materials, Kujawa said, but the certainty provided by the IRA is "the game changer."

Extending production tax credits to solar and battery storage "locks in potential for decarbonization across industries that we've never even anticipated," Kujawa said.

Ameren's Baxter said: "We're very excited about this."

"When Secretary Granholm talked about making the pie bigger, that's because that's exactly what we're going to be doing," Baxter said.

Capital spending to grow

Energy companies are raising the stakes with billions of dollars in expanded capital expenditure plans, Baxter said, which creates "opportunities for collaboration" on transmission and carbon capture projects.

"It isn't just utilities," Baxter said. "It's a bunch of other local partners, commercial partners, industrial partners. ... These are conversations that weren't being held by anyone before these bills were passed."

Panelist Dong Kwan Kim, vice chairman of Hanwha Group, one of South Korea's largest industrial conglomerates, noted that his company is one of the world's largest producers of solar modules outside China, which faces US trade restrictions due to concerns about forced labor production.

"We're making huge expansion moves," Kim said. "We're going to add 10 GW of module capacity ... by the end of next year. And we've also looked at investing in Washington state."

Hanwha's recent acquisition of one of the world's largest shipbuilders may give the company an opportunity to help expand offshore wind development globally, Kim said.

On the labor constraints issue, Ameren's Baxter said: "You have to be intentional."

EEI members have met with groups such as the International Brotherhood of Electrical Workers, "all the men and women who work with our companies on critical infrastructure ... talking about strategies to make sure we attract the workers" to be trained for the future power infrastructure.