On March 1, 2012 Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (DNM) introduced the Clean Energy Standard Act of 2012, legislation that seeks to reduce greenhouse gas emissions and encourage low-carbon energy sources through the establishment of a federal clean energy standard (CES). The legislation builds off of past renewable energy standard (RES) proposals, such as the RES program included in the heavily debated, and ultimately defeated, cap-and-trade legislation of 2009.1 Although similar to past proposals, the legislation takes a broader view as to the types of energy that can be used to meet the CES, including not only renewables such as wind and solar, but also other low-emission sources such as natural gas, nuclear power, and certain “clean” coal carbon-capture technology.
The legislation is co-sponsored by eight democrats: Sens. Ron Wyden (D-OR), Bernie Sanders (IVT), Mark Udall (D-CO), Al Franken (D-MN), Chris Coons (D-DE), John Kerry (D-MA), Sheldon Whitehouse (D-RI), and Tom Udall (D-NM).
The Clean Energy Standard
The bill would require large retail utilities to obtain a certain percentage of electricity sold each year from clean energy sources, beginning with 25 percent in 2015, and increasing annually by three percent until 2035, at which point 84 percent of power produced by large utilities will need to come from clean energy sources. Large retail utilities are defined as those selling two million or more megawatt-hours of electricity to consumers in 2015, with the threshold to be considered a large utility gradually decreasing thereafter until it reaches one million megawatt-hours for years 2025 and after. The legislation would exclude utilities in Alaska and Hawaii.
Electric utilities could comply with the new CES by either submitting clean energy credits or making alternative compliance payments (ACPs). Companies would be rewarded clean energy credits based on their carbon emissions, with more credits awarded to utilities with lower emissions per unit of electricity. The legislation attempts to reward the “cleanest” resources with the greatest number of credits, thereby incentivizing every utility to become cleaner and more efficient. In lieu of clean energy credits, or in combination with them, companies may make ACPs equal to three cents per kilowatt hour. Beginning in 2017, the ACP would increase automatically by five percent every year, although the legislation would give the Secretary of Energy the discretion to increase the ACP earlier. Utilities that fail to meet the CES through either credits or ACPs would face a penalty equal to 200 percent of the value of the ACP for each kilowatt-hour of electricity sold in violation of the CES.
The legislation faces an uphill battle in the Senate, where some Senators may oppose the bill on the grounds that the CES picks “winners and losers” in the energy market place. However, the bill enjoys strong support from certain renewable energy groups, including the American Wind Energy Association, who have already endorsed the bill. Further, the legislation, which mirrors past CES proposals put forth by President Obama, is supported by the White House.