Thursday, May 17, 2012

Clean Energy Standard Act Gets Mixed Reviews At Hearing

May 17: The Senate Energy and Natural Resources Committee, Chaired by Senator Jeff Bingaman (D-NM), with Ranking Member Lisa Murkowski (R-AK), held a hearing on the Clean Energy Standard Act of 2012 (CESA), S.2146, introduced by Senator Bingaman introduced the bill on March 1, 2012  [See WIMS  3/1/12]. Witnesses included U.S. Department of Energy, Assistant Secretary for Policy & International Affairs; Energy Information Administration; Resources for the Future; Center for Climate and Energy Solutions; Delaware Department of Natural Resources and Environmental Control; American Iron and Steel Institute; Duke Energy; and Jacksonville Electric Authority, Jacksonville, FL.
    Sen. Bingaman opened the hearing with a statement saying, "The purpose of the Clean Energy Standard is to establish a national standard for electricity to make sure that we leverage the clean resources we have today and provide a continuing incentive to develop the cheaper, cleaner energy technologies of the future.  By design, it would drive continued diversity in our sources of energy, and it would also allow every region to deploy clean energy using resources appropriate to that region. The Clean Energy Standard does this in a way that is intended to support home-grown innovation and manufacturing, and keep America competitive in the global clean energy economy.
    "This is not the first Clean Energy Standard [CES], and it certainly is not intended to be a partisan proposal. In the last Congress, during the discussion of a Renewable Electricity Standard [RES] in the Senate, several Senate Republicans publicly voiced their support for a more inclusive standard, such as a Clean Energy Standard, that would encompass all cleaner forms of electricity production, and not just renewable energy but other types as well, including nuclear power and hydropower and a variety of other options. At the beginning of this Congress, President Obama moved in that direction by calling for a proposal for a Clean Energy Standard in his 2011 State of the Union address. He endorsed that proposal again, and urged Congress to move ahead on something of this type, in this year's State of the Union address.
    "As part of the development process for the Clean Energy Standard, we received input from hundreds of stakeholder groups and citizens. The Energy Information Administration conducted a comprehensive set of policy analyses, and clean energy standard design was the topic of several academic workshops and industry meetings. And we tried to take all of this feedback and incorporate it into the proposal we are discussing today.
    "The Clean Energy Standard will take all electricity generating technologies that exceed the carbon efficiency of the current state-of-the-art supercritical coal generation and award them credits scaled to their relative improvement in carbon intensity over that baseline.  Zero-carbon sources such as new nuclear and renewables will get a full credit per kilowatt-hour produced. Advanced coal technologies, such as oxyfuel combustion, will get partial credit; natural gas will get about a half-credit, and so on.
    "Utilities that sell electricity at retail will acquire and turn those credits in to meet a standard that, overall, will start off being fairly easy to meet.  The standard, though, will become cleaner and more stringent over time.  The result is intended to be a realistic and a predictable market-pull on advanced energy technologies.  By having a long-term, predictable market for advanced electricity generation, the legislation is intended to provide innovators with confidence and the ability to make their best case to investors and project financiers.
    "This proposal is only 25 pages in length. We believe it is simple and straightforward, but would have a transformative effect on the power sector.  The Energy Information Administration projects that adopting the CES would drive substantial amounts of clean energy production across a diverse set of sources, including wind, solar, nuclear, biomass and natural gas. It would also drive enhanced energy efficiency, in particular in the industrial sector. EIA projects that it would reduce emissions from the power sector by 20 percent below their reference case in 2025, and by 44 percent in 2035. This mix of benefits has led to support for the legislation from a diverse group of stakeholders, several of whom we will be hearing from today. . ."
    Dr. Karen Palmer with Resources for the Future (RFF) summarized her testimony saying, "Our modeling suggests that the act will result in substantial reductions in emissions from the electricity sector, resulting in 21 percent fewer cumulative emissions by 2035. The policy has very little effect on national average electricity price for the first decade and leads to lower prices in the near term in some regions of the country. However, after 2025, national average electricity prices will increase as a result of the policy, rising to 18 percent above baseline levels by 2035. The alternative compliance payment (ACP) mechanism will be triggered in all years, generating substantial revenue for states to invest in energy efficiency, while reducing the share of clean energy and the amount of CO2 emissions reductions compared to a CES policy without an ACP. The small utility exemption, which applies to roughly 17 percent of electricity sales initially and roughly 12.5 percent after 2025, creates a difference in electricity prices between exempt and non-exempt utilities under the policy that grows to roughly 50 percent on average by 2035. The exemption results in electricity prices at exempt utilities that are lower with the CES policy than without it for the life of the policy. This large price savings provides an incentive for groups of electricity consumers to create their own small utility, an unintended consequence of the bill."
    Keith Trent with Duke Energy testified that, "I have heard the concern that a Clean Energy Standard is the wrong policy because it picks winners and losers. I believe this claim is a fallacy. A standard does two things. It sets a target for how much power must be derived from a basket of clean energy technologies. It also specifies qualifying criteria for those technologies. If it is structured correctly, the utilities, working with the states will decide how best to meet their obligations under a federal Clean Energy Standard, using the resources that are most appropriate. In deregulated states, technologies would be selected based solely on their relative competitiveness. In Arizona, solar power likely fits the bill. South Carolina could satisfy requirements by continuing to invest in nuclear power. The winners or losers allegation is only accurate if the Clean Energy Standard determines carve-outs for each technology, or it selects which company will supply the technology. . . I commend the Committee for pursuing a Clean Energy Standard that strives to put the U.S. on a coherent path to investment and job creation. Spurring investment in a diverse mix of clean energy sources and technologies -- including nuclear, renewables and cleaner coal -- will go a long way toward improving our economic and environmental outlook."
    James Dickenson with the Jacksonville, FL Electric Authority (JEA), a not-for-profit, community-owned utility with an electric system that serves more than 400,000 customers in northeast Florida said he is, "concerned that any national clean energy standard will create substantial competitive impacts between regions, favoring those that are situated to take advantage of geographic assets that more readily support development of solar, wind and hydropower." He said, "While applauding the inclusion of nuclear energy and the partial credits for natural gas technologies in the Clean Energy Standard Act of 2012 (CES), the move away from existing coal generation, including JEA's, will strand not only large capital investments but the nation's abundant supply of a secure domestic fuel that will be exported to other countries."
    Additionally, Dickenson said, "We are also concerned that the proposed CES requiring large-scale phasing in over a short 20-year time frame is too aggressive." He concluded, "JEA is very concerned that the Clean Energy Standard, as described in S. 2146, is too aggressive and too costly to electric consumers across the country, especially in our service area. The CES further isolates our country's abundant coal resources from being a viable source of energy production. It would require that large capital assets not only be scaled in over a mere 20-year period but would also require existing capital assets to be retired or abandoned before the end of their useful economic lives. All this cost would be borne by electric consumers - our customers, your constituents - in uncertain economic times. The ever-changing focus of environmental concerns and the long-term uncertainty of fuel availability and pricing impact a basic life resource that in part defines our quality standard of living."
    In advance of the hearing, the American Chemistry Council (ACC) issued a statement indicating its concerns with the bill and said it was concerned about "the absence of energy efficiency" and said it "falls short on domestic energy diversity. It discourages the use of coal from the start, and natural gas in later years." [See WIMS 5/16/12].
    The National Alliance of Forest Owners (NAFO) submitted written comments urging the Committee to include a definition of biomass in the legislation "that will promote rather than discourage the use of biomass to meet America's renewable energy goals." NAFO said, "this bill discourages the use of forest biomass. . . The bill defines 'Qualified Renewable Biomass,' using terms and criteria from national forest management that have been the source of protracted litigation for decades. The new definition would overlay the existing framework of well–established federal, state and local laws, which currently govern private forest practices."
    Access the statement from Sen. Bingaman (click here). Access the hearing website for links to all testimony and a webcast (click here). Access legislative details for S.2146 (click here). Access the full text of the Clean Energy Standard Act of 2012 (click here). Access the CES Two-Page Summary (click here). Access the CES Section-by-Section Summary (click here). Access a release from ACC (click here). Access a release and comments from NAFO (click here). [#Energy/CES]
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