Thursday, June 14, 2007

The Mandated Renewable Portfolio Standard Debate

Jun 13: The U.S. Chamber of Commerce, the world’s largest business federation representing more than three million businesses and organizations of every size, sector, and region, released a letter to all Senators who are now debating on the Senate Floor a comprehensive energy bill -- S. 1419, the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007 [Previously passed House version is H.R. 6]. The letter indicates the Chamber's strong opposition to and urges a no vote on "an amendment expected to be offered by Energy and Natural Resources Chairman Jeff Bingaman (D-NM) to establish a Federally mandated renewable portfolio standard (RPS) to S. 1419." The Chamber reminds Senators in the letter that it "may consider votes on, or in relation to, this issue in our annual How They Voted scorecard."

The letter indicates, "The Chamber understands such legislation will require utilities to generate at least 15 percent of electricity from renewable energy sources by 2020, or else purchase credits from the federal government or other companies. A mandatory RPS could raise electricity prices for all consumers, result in a wealth transfer among states, and impose new burdens on the reliability of the nation’s electric grid."

The Chamber further indicates, "The amendment’s one-size-fits-all mandate fails to take into account two critical factors: (1) the U.S. is made up of fifty individual states, not all of which possess enough renewable power capability to meet a 15 percent RPS; and (2) the 20 states able to meet this standard have already implemented renewable power programs on their own. A federal RPS will force those states lacking adequate renewable resources to purchase credits from the federal government -- essentially a direct tax on electricity used by businesses and other consumers, driving up energy costs, and hurting economic growth. Moreover, the federal mandate will undercut and/or preempt existing programs in the states that have imposed their own RPS... renewable generation sufficient to meet an unrealistic 15-percent mandatory federal requirement is neither cost-effective nor achievable nationwide."

The Chambers opposition echoes announced opposition also by Ranking Member of the Energy and Natural Resources Committee, Senator Pete Domenici (R-NM). On June 11, On June 11, Domenici announced that Florida had joined what he called a "growing chorus of states and utilities to speak out against a federal renewable portfolio standard." He said, "A one-size-fits-all RPS is the wrong approach. It unfairly punishes states in the southeast -- and the citizens that live in them..." He said he would offer a "Clean Portfolio Standard (CPS) amendment" that will include what he said would be "more clean energy resources like nuclear, hydropower and efficiency standards, in an effort to bring more states into the fold and reduce our emissions.”

On June 12, Senator Bingaman issued a release saying he had "found the cure for the RPS blues!" Bingaman said, "Utility commissioners in the Southeast (and some lobbyists in Washington) are running a temperature about the prospects for a national renewable portfolio standard (RPS). They seem to be feeling under the weather because they think such a law would mean higher costs for consumers. This suspicion is supported by 'evidence' in a study commissioned by - surprise, surprise - the utility industry’s biggest trade association, the Edison Electric Institute..."

Bingaman released what he called the "cure" which he said "puts in context any overheated allegations that a national renewable portfolio standard would harm consumers." He announced the a new 29-page study, prepared by "experts" at the Energy Information Administration (EIA) entitled, Impacts of a 15 Percent Renewable Portfolio Standard. Bingaman indicates that a key finding of the EIA study is that, "The increased use of renewable energy in a national RPS leads to only slightly higher electricity expenditures (0.5 percent) by 2030 and lower coal and natural gas prices." He said, "So, if fear of renewables is the fever, EIA’s new analysis surely is the cure."

According to EIA, the specific 15% Bingaman RPS proposal which it analyzed would exempt smaller electricity providers – those with fewer than 4 billion kilowatthours in annual sales – from meeting the requirement, and would not allow current generation from existing hydroelectric and municipal solid waste facilities to meet the requirement. However, retail sellers who generate from existing hydroelectric and municipal solid waste facilities are allowed to exclude this generation from their sales base when calculating their required renewable share. The RPS would allow affected electricity providers to generate their own renewable energy or trade renewable energy credits to assure compliance. Compliance could also be achieved by purchasing credits from the government at an inflation-adjusted rate of 1.9 cents per kilowatthour credit. Generation from distributed generators, represented by end-use photovoltaic installations in this analysis, would earn three credits for every kilowatthour of generation.

Some of the results of the EIA analysis included in an executive summary include:
  • The RPS leads to a large increase in biomass generation, which grows to almost 320 billion kilowatthours in 2030, triple the level in the reference case. Wind and photovoltaics also show significant increases in generation.
  • By 2030, solar installations produce about 8 percent of qualifying renewable generation, but account for approximately 20 percent of the total credits held because of the triple credits awarded to distributed photovoltaics.
  • The increased use of renewable sources in the RPS case leads to lower coal generation. Nuclear and natural gas generation are also lowered to a lesser degree.
  • Relative to the reference case, retail electricity prices rise by an average of 0.9 percent over the 2005 to 2030 period in the RPS case. Reduced demand for coal and natural gas in the RPS case results in slightly lower prices for these fuels by 2030 when compared to reference case projections.
  • Compared with the reference case, end-use sector expenditures for electricity rise while end-use sector expenditures for natural gas fall. From 2005 through 2030, cumulative expenditures for electricity and natural gas by all end-use sectors taken together by all end-use sectors are $18 billion (0.3 percent) higher.
  • Compared with the reference case, cumulative residential expenditures on electricity from 2005 through 2030 are $7.2 billion (0.4 percent) higher, while cumulative residential expenditures on natural gas are $1.0 billion (0.1 percent) lower.
  • Total electricity-sector carbon dioxide emissions are reduced by 222 million metric tons (6.7 percent) in 2030 relative to the reference case. Over the 2005 to 2030 period, cumulative energy-related carbon dioxide emissions are reduced by 2,925 million metric tons (1.7 percent).
Access a release from the U.S. Chamber (click here). Access a release from Senator Domenici (click here). Access a release from Senator Bingaman (click here). Access the new EIA study (click here). Access a release from the Edison Electric Institute and links to their analysis (click here). Access legislative details for H.R. 6 (click here). Access the Senate floor voting on energy bill amendments as the debate continues (click here). [*Energy]