FERC Passes Rule Designed To Encourage New Transmission Infrastructure

In a move that comes as many are wondering if the United States has adequate energy infrastructure to support the ever-growing projections for power generation in the coming decades, on Monday, the Federal Energy Regulatory Commission passed a new rule that directed US electricity grid operators that can deliver more renewable energy and be more resilient to extreme weather conditions. In a 2-1 ruling, with the Republican on the Commission voting no, the panel passed the rule that directed grid planners and transmission owners to look 20 years ahead to plan for expected shifts in how electricity is produced and consider a range of possible long-term benefits to building new power infrastructure. The rule also established new requirements for how the costs of building this new infrastructure should be allocated to customers.

Also, on Monday, the panel passed Order 1977, which gives FERC authority to grant permits to electric transmission lines in certain instances where states have not acted. The rule is meant to address permitting delays that have occurred on cross-state transmission projects. These cross-state projects will be necessary if renewable energy is going to be produced in areas of the Great Plains and Southwest and transmitted to power-hungry urban centers. However, states have argued that they should have a significant say in permitting projects that pass through their state and have resisted efforts by FERC to federalize the process. Commissioner Mark Christie, the lone Republican on the panel and the lone no vote criticized the new rule as violating statesâ€™ rights and said that it was a break from what he argued was a bipartisan compromise that would have passed unanimously. Opponents also expressed that such a move would go beyond FERCâ€™s statutory authority and give the agency powers that Congress never intended.

These rules pass as grid operators all over the country are dramatically increasing their load projections for the coming years. This month in Texas, ERCOT said that peak power loads on its system would rise 6% by 2030 to 94.3 gigawatts and that an additional 62 gigawatts of additional load is asking to connect to the grid, increasing that forecast by nearly 2/3. Grid operators and regional planners are all starting to come to the realization that they must make infrastructure improvements fast, or their regions will no longer be able to support industrial and residential growth or, in some cases, even keep up with the load demands from current populations. The region that has the most available power will quickly be the driving factor for where to open new facilities and operational centers. EWTC believes that natural gas-fired power generation, especially peaker facilities that can be built to quickly fill demand when the grid needs it, is the most logical solution to this growing demand. Quick adaptation by grid operations around the country could fuel increased demand for natural gas and support our workforce.

Biden Doubles Down on China Section 301 Tariffs

In a move highlighting the political shift that has occurred in the past decade on tariffs and trade, President Biden this week announced a continuation and a significant expansion in many of the Section 301 tariffs on Chinese goods entering the United States.?? Some of these new tariffs may have significant implications on the supply chains for many EWTC companies.?? While the formal detail list (with HTS codes) has not been released yet, a detail of the planned increases was released.?? We also expect additional details on a potential exclusion process to be forthcoming.

Major relevant highlights:??

The tariff rate on certain steel and aluminum products will increase from the current rate between 0-7.5% up to 25% in 2024.??
Semiconductors will increase from 25% to 50% by 2025.
Electric vehicles will increase from 25% to 100% in 2024.? (Currently, the Chinese EV? market in the US is very limited, but some project it to grow in coming years)
Lithium-ion EV batteries and Lithium-ion non-EV batteries will increase from 7.5% to 25% in 2025.
Solar cells will increase from 25% to 50%
Ship to Shore cranes will increase from 0% to 25%

What does this mean for us? Well, we will know more when the specific HTS codes are released, but likely, the most significant near-term effect will be the tariffs on Chinese steel and aluminum. This could raise the cost of raw materials, which in turn could raise the cost of many products in the supply chain. Some manufacturers use Chinese steel and aluminum to blend into their products to keep production costs low.?

We can also expect that this move will further expedite the production shift on many products away from China and to other locations worldwide.?? It is also important for us to step back and consider the political implications of this move by President Biden.?? When the first Section 201 tariffs were released during the Trump Administration, they were strongly criticized by President Biden and many Democrats.?? Now, the President himself is extending and significantly increasing these tariffs.?? This reality should not be lost on us.?? Tariffs, especially those on China, are now a bipartisan issue.? In a highly partisan time, this now appears to be an issue where both parties are in agreement. (at least the majorities in each party there is still some opposition on both the right and left)? Both parties now appear to support the use and even expansion of tariffs.?? In fact, former President Trump has suggested that if elected, he would move forward with a 10% across-the-board tariff on all goods from all countries and a 60% across-the-board tariff on goods from China.?? So, as we analyze our supply chains and plan for the coming years, we can be nearly certain that whatever happens in November, tariffs are likely here to stay and may even increase and expand in scope.??