Senate Energy & Natural Resources Chairman Jeff Bingaman (D-NM) has introduced the Clean Energy Standard Act of 2012, which would require electric utilities to derive increasing percentages of their supply mix from low-CO2 sources. The bill would take effect in 2015, and would require that by 2035 84% of power from large utilities come from low-CO2 sources.
Sources eligible under the legislation include: renewables, such as wind and solar, “qualified” renewable biomass and waste-to-energy, hydropower, natural gas, and nuclear. Facilities with CO2 capture and storage, and some combined heat and power facilities, are also eligible. The bill establishes a market-based credit trading scheme, within which utilities could purchase compliance credits from other utilities.
In the Energy & Natural Resources Committee’s press release, Senator Bingaman offered the following: “[As] we continues [sic] to grow and power our economy, we leverage the clean resources we have available today, and also provide a continuing incentive to develop the cheaper, cleaner technologies that we’ll need in the future. We want to make sure that we drive continued diversity in our energy sources, and allow every region to deploy clean energy using its own resources. And we want to make sure that we do all of this in a way that supports home-grown innovation and manufacturing and keeps us competitive in the global clean energy economy.”
The Act was introduced with no Republican support. Senator Lisa Murkowski (R-AK), the top Republican on the Energy & Natural Resources Committee has said that she will “only get behind such a standard if it replaces federal climate regulations.” [The Hill]
What do you think of the Clean Energy Standard Act of 2012? What about it might you change? Is there any potential for it to replace other federal climate regulations, as Senator Murkowski suggests?
The Clean Energy Standard Act of 2012 is a move in the right direction to require electric utilities generate electricity from clean energy sources to reduce global warming. It lays out a time frame for increasing shares of clean electricity supply and suggested penalties for non-compliance.
However, a major problem with this bill is that it is insufficient on its own. You cannot force electric utilities to meet a specified time frame for clean electricity without addressing the infrastructure issues that make this possible. Electric utilities need to deploy a new national smart electric power network (smart grid) infrastructure to effectively bring on renewable solar, wind, geothermal sources and optimally manage electricity supply/demand with end-user sites. Smart electric power network infrastructure depends on deployment of ubiquitous broadband telecommunications infrastructure to communicate the required energy supply/demand information between end-users and the utilities. The broadband infrastructure would have other major societal benefits in supporting education, telehealth, economic development, and reducing energy consumption by substituting telecommunications for transportation (e.g. telework).
In addition, I believe that any non-compliance penalties, essentially equivalent to carbon taxes for consuming non-clean electricity sources, should be used by the federal government to invest in this smart electric power and broadband infrastructure. In the article published on this site, “Creating an American Infrastructure Investment Strategy”, I propose the creation of a federal government American Infrastructure Investment Corporation to partner with the private sector in building out this infrastructure nationally. State and local governments also have critical roles to play in this infrastructure development.
When are we going to be honest about the impact of “clean energy” standards, renewable energy standards, cap and trade, and all the other policies to cut energy use under the guise of helping future generations? These policies are not things we do for our grandchildren; they are things we would do to them. The costs are hugely back loaded onto future generations, while the front-end costs are often fictionalized with unrealistic assumptions about carbon-reduction strategies.
On March 1, Senator Jeff Bingaman (D–NM) proposed a national Clean Energy Standard (CES). Clean Energy Standards are modifications of the Renewable Energy Standards that have been proposed before and have been enacted by several states and regions. The primary modifications allow nuclear power (or some of it) to count as clean energy and give partial credit for other sources such as natural gas. (Since carbon dioxide is odorless, invisible, and non-toxic, it is Orwellian doublethink to label CO2 “dirty.”) The standard mandates minimum percentages of electric power that must be generated from clean energy sources.
One of the little-known facts about cap-and-trade bills is that 85 percent or more of the carbon reductions would come from the electric power industry alone. So, though a CES may cover only the power industry, it can have economic costs that are almost as big as cap and trade.
Last year, Senator Bingaman requested an Energy Information Administration (EIA) analysis of several clean energy proposals. As with the low-ball estimates of costs done for the cap-and-trade bills, the analyses of Bingaman’s clean energy standards assume huge increases in new nuclear capacity and commercialization of carbon capture and storage.
These assumptions, however, are wildly unrealistic. Though the technical capacity exists for expanding nuclear capacity over the next two or three decades, the regulatory and waste disposal hurdles that stand in the way of significant capacity expansion are not addressed in the Bingaman bill. Proponents of carbon capture and storage (CCS) can’t point to a single commercial-scale project. Full, wide-scale deployment of CCS—and the possibly more problematic disposal of liquefied CO2—is still a pipe dream.
Different analyses of renewable energy standards (RES) had widely varying estimates of economic impact. An analysis of one bill by the EIA projected electricity price increases of only 3 percent. On the other hand, a Heritage Foundation analysis of a generic RES projected increases of 36 percent or more by 2035.
Last month, a study by Robert Bryce of the Manhattan Institute looked at the current prices charged for electricity across states. He found that states with renewable standards had residential electricity rates that are already more than 30 percent higher than states without a renewable standard. The impact is clearer when comparing coal-dependent states with a renewable standard to coal-dependent states without a renewable standard. Those with a renewable mandate saw their residential electricity prices rise at double the rate of coal-dependent states without the mandate between 2001 and 2010. A maximum price impact of 3 percent does not seem plausible given these facts.
What today’s clean energy standards have going for them that earlier plans to restrict carbon dioxide did not is the currently low price of natural gas. If—in contrast to our experience over the past several decades—natural gas prices remain low and stable, the big costs of Bingaman’s CES would not fully come into play until after the end of the EIA analysis time period (2035), when the partial clean energy credit for natural gas would not be enough to meet the tighter requirements as the standard ratchets down. What will our children and grandchildren do then? If they are smart, they would consider repealing any energy-killing mandates we dumped on them.
These comments also appeared on the National Journal Energy Experts blog.
David,
Welcome, I think the addition of some pro-hydrocarbon voices is important to a balanced dialogue.
Could you expand on what you mean by the costs for new generation are back loaded? Because implementation is graduated? What is your base-line for comparison? Are you assuming current levelized prices for qualifying technologies stay flat, or drop at what rate? There’s an awful lot of long-term upward pressure on fossil fuel prices as well.
I am working from the assumption that you pretty safely in the anti-carbon limits camp (based on some of you other pieces), so the question of risk adjusting the impact of climate change doesn’t fit into your equation on net benefit vs. cost to future generations, correct?
The costs of the policies are back loaded. Virtually every analysis of them shows higher costs in the last years than in the first years.
I have never done a comprehensive review of the cost modeling. I know both sides of the argument point to last summer’s CBO report as supporting respective positions. I was hoping you had some specific analysis you could point me to for the back-loaded proposition.
I understand the standards are implemented in steps, so new technologies represent a larger wedge of the generation portfolio over time, but against decreased capital costs (driven by technical improvement) and the increasingly broad tail for coal price (and capital requirements) I don’t necessarily assume the back end is higher – it could be, I just don’t know that to be the case.
I’ve seen recent studies that the most recent Bingaman proposal is pretty close to flat in terms of cost (but mix in a significant amount of natural gas at current prices seems a bit distortive to me as I don’t see gas prices staying low for all that long).
The original concept of a Renewable Energy Portfolio Standard and Clean Energy Standard was to drive “zero emission, zero waste” technologies into the marketplace – which has been adopted by many State governments. The Senate Energy and Natural Resources Committee Chairman’s bill, which includes natural gas and nuclear, undermines that approach and brings in extremely mature technologies into the mix. Since natural gas is the lowest cost resource, even with its high water demand and water pollution attributed because of fracking, the Senate CES bill will not drive one kilowatt of renewables into the market. nor will the Senate bill change existing market behavior, The Bill being an “everything” bill is not only bad public policy, but should be defeated because it will have either no market impact and could possibly undermine renewable energy industries’ path to scaling-up technology manufacturing and deployment and reducing costs further.
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