The House Energy and Commerce Committee is considering a proposal that would establish a new U.S. Department of Energy program to provide grants for power companies that increase their percentage of clean energy by certain margins each year and impose fees on those that do not.

The proposed Clean Electricity Performance Program, or CEPP, is being proposed as part of a broader infrastructure package that lawmakers are expected to consider next week. Other key provisions of the broader plan include a methane fee and a plan to invest billions in a more reliable, cleaner energy transmission grid, according to a fact sheet released by the committee Sept. 9.

The CEPP

Under the CEPP proposal, the DOE would establish a new program that would complement existing clean energy tax incentives by providing grants or payments to electricity suppliers from 2023 through 2030 based on how much clean electricity each supplier provides to customers.

To qualify for such a grant, electricity suppliers would have to boost the amount of clean electricity they supply to customers by 4% compared to the previous year. The supplier would receive $150 for each MWh of clean electricity provided that exceeds the amount supplied the previous year by 1.5%. Electricity supplies must use the grants exclusively to benefit customers, including for direct bill assistance, investments in qualified clean electricity and energy efficiency, and worker retention.

An electricity supplier that does not meet the criteria by increasing its clean electricity percentage by at least 4% over the prior year would owe a payment to the Energy Department based on its shortfall. For example, if an electricity supplier only increases its clean energy by 2%, the supplier would owe $40 for each MWh that represents the 2% shortfall.

The CEPP would also provide electricity suppliers the option to defer a grant or a payment for up to two consecutive years, according to the fact sheet. The proposed program defines clean electricity as generation "with a carbon intensity of no more than 0.10 metric tons of carbon dioxide equivalent per megawatt-hour."

Inspired by a push to establish a national clean energy standard, some Democrats earlier proposed a similar payment program to incentivize load-serving entities to add clean power sources and penalizes those that do not meet certain environmental standards. Democratic leaders have said such a program will help the nation achieve Biden's goal of generating 80% of power from carbon-free generators by 2030.

More than a dozen conservation organizations recently launched a campaign aimed at excluding natural gas from the program or clean energy standard. But some industry members have said such climate targets and anti-gas campaigns are unreasonable, noting the important role natural gas could play in the transition to cleaner energy sources while ensuring a reliable power supply.

Whether the program described in the latest fact sheet would exclude natural gas from the program is still unclear.

Mitch Jones, policy director of Food & Water Watch, said the fact sheet is still short on details, "but on our reading, the carbon intensity standard ... would not allow natural gas to count as clean energy." The devil may be in the details, however, in regard to how the Department of Energy would define the capture of carbon from gas plants, Jones said. "We've argued all along that they shouldn’t be counted," considering the record at functioning carbon capture plants, the policy director said.

Other provisions

The broader reconciliation plan also includes $9 billion for a more reliable, cleaner energy grid and grants for states that site new wholesale transmission projects. It would also offer grants and loans to support the construction and modernizing of grid infrastructure across the seams between the eastern and western interconnections, domestic interties with the Electric Reliability Council of Texas, and for offshore wind projects, among other efforts.

The plan would establish a fee on methane emissions from the oil and gas industry, building on a U.S. Environmental Protection Agency program that requires about 8,000 large emissions sources to report their annual emissions. The fee would recognize the cleanest performers and hold companies responsible for their own leaks and emissions, according to the fact sheet.

Industry groups opposed a proposal earlier in 2021 that established a methane fee based on a company's production and midstream handling volumes within a basin and the total annual methane emissions rate of all companies within the basin.

The latest plan would also see the federal government continue to wade into a movement to electrify buildings that has largely played out at the state and local levels in recent years. The legislation proposes $18 billion to fund home energy efficiency and appliance electrification rebates.

Clean energy and climate advocates view the budget reconciliation process as their best shot to pass major legislative provisions to meet President Joe Biden's aggressive decarbonization targets.

Bills advancing through the process are not subject to the Senate's filibuster and need only a simple majority in both legislative chambers to pass. However, such legislation must have a budgetary impact to be included.

Maya Weber and Ellie Potter are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.