The Clean Energy Standard: A Discussion We Aren’t Having

Editor’s Note: EarthTechling is proud to repost this article courtesy of Natural Resources Defense Council. Author credit goes to Nathanael Greene.

We have a choice when it comes to climate and clean-energy friendly policies.  We can allow fossil fuel companies, entrenched special interests, and their supporters in Congress to block our progress on renewable energy and take our country in a direction Americans don’t want to go.  Or we can move forward with securing America’s leadership in homegrown renewable energy, driving economic growth and jobs, and providing a cleaner, healthier life for us and our children.

On March 1, Senator Bingaman introduced a national Clean Energy Standard (CES)* to boost the amount of clean, safe, reliable renewable energy and energy efficiency produced in America, creating jobs, cutting pollution and reducing our dependence on foreign energy.  NRDC’s President discussed it here, while other Inside Climate News and CAP have written good breakdowns, and the CEO of utility NextEra issued a statement in support.

illinois wind power transmission

image via Shutterstock

We strongly support policies that responsibly increase renewable energy and energy efficiency, and the Bingaman CES is an important step forward.  We especially commend its introduction in this political environment.  There are improvements we would suggest, and a standard that only advanced renewables and efficiency would be better targeted than a broader clean energy standard.  But overall, Sen. Bingaman has offered a highly constructive and thoughtful proposal.  Below we provide a brief overview of the bill, followed by a discussion of both benefits of this bill and aspects that could be improved.

Key Elements of Bingaman CES

  • CES requires more clean power over time:  Starting in 2015, the CES would require utilities above a certain size (exempting most small rural utilities and co-ops) to get a portion of the power they sell annually from a variety of “clean” energy sources.  The amount required ramps up over time, and the number of utilities that must participate in this program increases, until 88% of all our electricity would be from these clean sources by 2035.
  • Definition of “clean” energy focuses on carbon: “Clean” energy is defined in this bill as energy from facilities placed in service after 1991 that emit less carbon than the most efficient coal-fired power plants.  (“clean” here is in quotations due to the fact that the bill does not directly address environmental issues other than carbon).  These facilities would receive up to 1 “credit” per megawatt hour (MWh) of power produced, with some energy sources.
  • Many energy technologies would qualify to receive credits: Under this definition of “clean,” all renewable technologies would qualify to receive one credit per MWh, as would hydropower, some waste-to-energy, some biomass and all new nuclear energy.  Combined heat and power plants meeting certain requirements and coal plants with carbon capture and storage would also qualify for credits.  Natural gas would qualify for a reduced credit at first (about half of one  credit in 2015), and need to keep reducing the carbon emissions over time to continue qualifying for partial credits.
  • Utilities use market-driven strategies to meet CES: Utilities would meet their annual targets with credits from power they produce or purchase, or by purchasing credits from other utilities.  Or, they could pay an “alternative compliance payment” (ACP) that increases over time.  Failure to meet their targets or pay the ACP would result in a penalty.
  • Efficiency plays a small role: While not including energy efficiency as an option to meet the CES targets, state energy efficiency programs would receive a portion of the funds from the utility ACPs and penalty payments (described in the preceding bullet).  Also, this legislation would require a study about the possible inclusion of energy efficiency in the CES.

Main benefits

My colleague Dan Lashof presciently wrote about the CES back in December, highlighting Energy Information Administration (EIA) analysis on different types of clean energy standards.  It’s a good read and provides an overview of the best modeling on this approach.  Several of the benefits below reflect his blog.

  • Addresses Carbon Pollution: Ultimately, the CES represents an important step forward in addressing carbon pollution.  U.S. electric generation is the largest single source of industrial carbon pollution and is heavily dependent on old, dirty technologies that are incompatible with the urgent need to avoid climate change.  Failure to clean up and modernize our coal-heavy electricity sector stands in the way of building the clean energy economy we need. This bill establishes a much needed schedule for cleaning up the power sector’s carbon pollution through a mechanism that is [both] flexible, technology-neutral and rewards innovation and performance.  Per Lashof:

According to EIA, which is hardly known for being optimistic about clean energy technologies, a CES combined with updated energy efficiency standards could reduce CO2 emissions from power plants 20% by 2020 and by 2035 CO2 emissions would be cut by almost half.

  • Incorporates A Carbon Intensity Metric: The mechanism used by the CES to incentivize cleaner energy sources is a metric that will award credits based on an energy source’s carbon-intensity.  This approach attacks carbon pollution in a fuel- and technology-neutral way, and is the correct structure to promote the deployment of advanced, cleaner resources.  The bill’s ultimate targets for deployment of low-carbon resources are entirely justified by the need to act against the ever mounting threat of carbon pollution.
  • Drives Renewable Energy Above Business As Usual: Earlier analysis of different types of CES’s by EIA demonstrated that a technology-neutral, performance-based electricity standard would significantly increase renewable electricity production.  In scenarios analyzed that closely track the Bingaman CES approach, EIA projected that total renewable energy generation would increase by 250% compared to “business as usual” growth (the baseline EIA model run), with equal contributions from hydro (which increases only 30% compared to 2010), wind, and biomass.
  • Moderate Impact on Electricity Costs: Sen. Bingaman highlighted the EIA analysis is his announcement of the CES:

This past fall, I asked the Energy Information Administration to analyze a number of Clean Energy Standard policy options for me. The results of their study showed that a properly designed Clean Energy Standard would have almost zero impact on gross domestic product growth and little or no impact on nationally averaged electricity rates for the first decade of the program.

And again, per Lashof:

According to EIA…a CES combined with updated energy efficiency standards could reduce CO2 emissions from power plants 20% by 2020 while electricity prices fall by 7%. By 2035…electricity prices would be only 15% higher than in 2010, while per capita income would have increased by 49%. Of course, the cost of electricity 25 years from now depends on the pace of technological innovation and EIA tends to be quite conservative in making these assumptions.

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