By Timothy Gardner and Nichola Groom
WASHINGTON/LOS ANGELES (Reuters) - Environmental groups and some fellow Democratic lawmakers had pilloried U.S. Senator Joe Manchin's bill to speed energy permitting as a handout to fossil fuel companies, but clean energy advocates said the bill's failure would hinder the rapid expansion renewable power needs to combat climate change.
Democratic Majority Leader Chuck Schumer pulled Manchin's bill from temporary government funding legislation on Tuesday after it did not gain enough support.
Environmental groups said the legislation would have accelerated approval for fossil fuel projects, including Equitrans Midstream (NYSE:ETRN) Corp's long-delayed $6.6 billion Mountain Valley Pipeline in Manchin's state of West Virginia.
But it also would have sped up major interstate transmission line projects that clean energy experts say are desperately needed to achieve emissions reductions, and take full advantage of the subsidies in President Joe Biden's massive Inflation Reduction Act (IRA). That law, passed in August, contains $369 million in incentives for industries like wind and solar to curb climate change and boost energy security.
"There are definite limits on the emissions reductions we can get without addressing the grid," said Rob Gramlich, founder and president of Grid Strategies, LLC, a power industry consulting firm. "Transmission takes a long time, we need to get going now as it's going take a while to get any new lines permitted, sited, routed and built."
Siting and permitting new transmission lines can currently take up to a decade. Manchin's bill would have encouraged interstate transmission projects by bolstering the authority the Federal Energy Regulatory Commission, an independent branch of the U.S. Department of Energy, to allocate the cost to customers that would benefit.
The question of how to divide the cost of those lines among customers has long blocked their development.
"That remains the number one challenge in my opinion, how do you recover costs for the interstate highway type lines?" said Gramlich.
A $1 billion line that aims to carry hydropower from Quebec to New England through Maine is among the most high profile transmission battles in recent years, with construction stymied by a state referendum and litigation.
The renewable energy industry said time is getting short to build out a U.S. energy system to lock in the benefits from the IRA tax incentives.
Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association, said U.S. solar power capacity is expected to hit 682 gigawatts by 2032, more than quadruple today's level and enough to power nearly every household east of the Mississippi River.
"A sizeable chunk of this electricity simply cannot reach the homes and businesses that need it without a massive build out of high-voltage transmission lines," Hopper said.
Without permitting reform, the United States is at risk of falling 100 gigawatts short of the 525 to 550 GW the IRA is expected to deliver by 2030, according to the American Clean Power Association, an industry group.
That equates to 550 million metric tons in additional carbon dioxide emissions and the loss of $100 billion in investment and 100,000 potential jobs, it said.
Clean energy backers said the permitting provision could still be attached to other bills later this year that must be passed, such as a big appropriations legislation.
But it could be an uphill battle with progressive Democrats and Republicans who were upset with Manchin's key vote on the IRA that pushed through climate incentives while inflation was around 40-year highs.
Jesse Jenkins, a clean energy expert at Princeton University, tweeted on Tuesday that the permitting bill had been "a big mixed bag for climate & the environment."
"And so is its defeat," he added. "We still need to build new clean energy & transmission at unprecedented pace!" (This story has been refiled to correct a typo in the quote in paragraph 17)