White House, analysts, utilities to weigh in on Bingaman CES bill

Source: Nick Juliano, E&E reporter • Posted: Monday, May 14, 2012

Soon after President Obama announced the goal of converting 80 percent of America’s electricity generation to “clean” sources in his 2011 State of the Union address, Senate Energy and Natural Resources Chairman Jeff Bingaman started working to translate the idea into legislation.

Bingaman’s “Clean Energy Standard Act” was introduced earlier this year and has been analyzed by the administration’s energy number-crunchers; this week brings the next step when the New Mexico Democrat convenes the first hearing on the proposal.

While even Bingaman has acknowledged the bill is unlikely to go anywhere this year, he has said considering it will be a good way to start a conversation on how government can establish policy to promote clean energy and reduce greenhouse gas emissions in a post-cap-and-trade environment.

Thursday’s hearing before the Senate Energy and Natural Resources Committee will feature testimony from two administration officials and numerous outside experts.

The marquee draws will be David Sandalow, the Department of Energy’s assistant secretary for policy and international affairs, and Howard Gruenspecht, acting administrator of the Energy Information Administration, DOE’s statistical arm. Sandalow will be the first administration official to weigh in on the specifics of Bingaman’s proposal since it was introduced in March. Gruenspecht, meanwhile, plans to brief the committee on EIA’s analysis released earlier this month of the Bingaman bill (E&ENews PM, May 2).

The hearing also will feature testimony from witnesses representing energy-focused think tanks, state government, industrial energy consumers and electric utilities.

Bingaman’s bill, S. 2146, would require large utilities to generate 84 percent of their electricity by 2035 from clean sources, including renewables, natural gas, and new nuclear and hydroelectric plants.

The bill requires utilities to obtain credits for each megawatt-hour of generation, beginning with a target of 24 percent from clean sources in 2015, and credits are distributed based on the carbon intensity of an electricity source. So carbon-free generation from renewables or nuclear would receive a full credit, while partial credit would be awarded for generation from natural gas or coal fitted with carbon capture and sequestration.

The Obama administration has not weighed in on the specific mechanisms included in Bingaman’s bill, but it has repeatedly voiced support for the general framework the CES bill aims to implement. For example, a White House energy blueprint released in March points to an 80-percent-by-2035 CES as the “centerpiece” of an administration strategy “to create a domestic market for clean energy, drive innovation, and create new energy jobs and industries.” The report notes that Congress would need to flesh out the details of such a proposal.

According to the EIA analysis, retirement of coal-fired power plants would accelerate, with their generation being displaced by a mix of nuclear, natural gas and renewable energy. If the CES bill became law, 97 gigawatts of coal would be retired by 2035, compared to just 33 GW over the same time in EIA’s reference case. Over the same span, nuclear generation would be 62 percent higher, while non-hydro renewable energy would be 34 percent above the base case.

Bingaman’s bill would cause carbon dioxide emissions to fall 44 percent by 2035, compared to where they would be in the absence of any new policy, according to EIA. And it would cause electricity prices to go up, although those increases would be less than 5 percent on average through 2025; by 2035, prices would be about 18 percent higher nationwide, although the increases across different regions would range from 3 to 30 percent.

Outside experts set to testify

Following testimony from administration officials, the hearing will feature a separate panel of outside experts, including Judi Greenwald, vice president for technology and innovation at the Center for Climate and Energy Solutions, formerly known as the Pew Center on Global Climate Change

Greenwald said she would discuss the center’s ongoing analysis of the Bingaman bill and other CES proposals and that her testimony would “generally be very supportive and encouraging of further conversation on this idea.”

Among the main concerns with a proposal like Bingaman’s is its inclusion of natural gas in the basket of “clean” sources along with traditional renewable sources like wind and solar. With gas prices as low as they are now, there is a fear that an improperly designed CES could allow gas to crowd out other sources, although including gas also helps keep costs for consumers down, which can bolster support for the policy.

Greenwald said Bingaman’s bill establishes a “reasonable compromise” in its design because the early-year targets are relatively modest, while they become tighter at a quicker pace in later years. That allows utilities to deploy gas early while still having a long-term signal to deploy renewable energy, she said, although there are differing views as to what the right pace should be.

While the CES is almost certainly not going to become law this year, Greenwald said the hearing would spark an important conversation on how to promote clean energy and allow lawmakers and other stakeholders to determine how a policy should best be designed.

“This is a relatively new idea, related to others, but really deeply exploring this it might as well start now,” she said in an interview Friday.

Also scheduled to appear on the second panel is Karen Palmer, a senior fellow at the nonpartisan think tank Resources for the Future, who earlier this month collaborated on a separate analysis of Bingaman’s bill. That analysis also found that price increases would be modest through 2025 but would average around 18 percent by 2035.

The RFF researchers also found that provisions in the bill that exclude small utilities and allow for utilities to make “alternative compliance payments” rather than expand clean energy generation would limit potential CO2 reductions while also constraining cost increases. Palmer was not available for comment Friday.

Representing utilities on the panel will be Keith Trent, an executive with Duke Energy Corp., which was an early member of the U.S. Climate Action Partnership that rallied industry to support cap-and-trade legislation but has not taken a position on the CES standard. The CEO of the Jacksonville Electric Authority, James Dickenson, also will testify. A Duke spokesman said Trent’s testimony was still being finalized last week and declined to elaborate; a call to JEA was not returned Friday.

The state perspective will come from Delaware Department of Natural Resources and Environmental Control Secretary Collin O’Mara, while industrial energy users will be represented by Thomas Gibson, CEO of the American Iron and Steel Institute. Neither was available for comment Friday.

Bingaman’s bill was introduced March 1 and has attracted nine co-sponsors so far, all members of the Democratic caucus

A spokesman for Energy Committee Republicans, Robert Dillon, said the bill was unlikely to gain much, if any, bipartisan backing. Dillon pointed to the primary defeat last week of Sen. Richard Lugar (R-Ind.), one of a dwindling number of moderates in the GOP and a supporter of efforts to expand clean energy, as a “clear signal to where the Senate is on this stuff.”

“What a CES would do would be to make power more expensive,” Dillon said. “Right now, we don’t think making energy more expensive for the economy and Americans is the right direction we should be going.”