A Clean Energy Standard (CES) is a policy that requires covered electricity retailers to supply a specified share of their electricity sales from qualifying clean energy resources. Under a CES, electric generators would be granted clean energy credits for every megawatthour (MWh) of electricity they produce using qualifying energy sources. Utilities serving retail customers would use some combination of credits granted to their own generation or credits acquired in trade from other generators to meet CES obligations. Generators without retail customers or utilities that generate more clean energy credits than needed to cover their own obligations could sell CES credits to other companies. Currently, there is no comprehensive federal statute setting a CES. Some states have set their own CES, while others lag behind or are considering legislation to repeal their state CES.
On March 21, 2011, Senator Jeff Bingaman, Chairman of the Senate Committee on Energy and Natural Resources and Senator Lisa Murkowski jointly issued a “White Paper on a Clean Energy Standard [CES].” The purpose of the CES White Paper was “to lay out some of the key questions and potential design elements of a CES, in order to solicit input from a broad range of interested parties, to facilitate discussion, and to ascertain whether or not consensus can be achieved.” Apparently growing out of that discussion came the following “primary elements” of a national CES as it would introduced by Senator Bingaman (the “BCES”):
- Entities subject to the BCES will include all electric service providers that sell electricity to retail consumers.
- Annual clean energy targets should ramp linearly from the current state of “qualifying clean energy generation” to an overall target of increasing clean energy generation by 80% by 2035 and gradually increasing that percentage by 5 percentage points every 5 years until 95% is obtained in 2050.
- Full clean energy credits will be awarded for every MWh of electricity sold to electricity producers using “zero emission technologies.”
- Electricity producers using fossil fuel to generate electricity with a carbon intensity greater than or equal to that of “new supercritical coal generation” will receive zero clean energy credits.
- Partial clean energy credits should be awarded to fossil-fuel utilities generating with lower carbon-intensity than supercritical coal in proportion to their improvement over “new supercritical coal generation.”
- Clean energy credits may be “banked” indefinitely.
- Generation from existing nuclear and hydroelectric utilities should be counted towards the overall target for clean energy generation, but they will not be awarded credits.
On August 16 and September 30, 2011, Senator Bingaman requested the Energy Information Agency (EIA), the statistical and analytical agency within the U.S. Department of Energy, to conduct an analysis of his BCES based primarily on the policies expressed in the elements provided above. Senator Bingaman also requested the EIA to analyze the impact of exempting utilities that generate less than 4 million MWh from compliance with a national CES.
The EIA released its analysis of the BCES plan on November 30, 2011. It contained the following key observations:
- The BCES significantly alters the generation mix by reducing electricity production from coal-fired sources and increasing reliance on natural gas, non-hydroelectric renewable and nuclear.
- Among the renewable sources, wind and biomass have the largest generation increases.
- Projected annual electricity sector carbon dioxide emissions are 22% below current projections by 2025 and 43% below by 2035.
- The BCES has a negligible impact on the cost of electricity through 2022, but prices rise nearly 20% over current projections by 2035 and continue to rise thereafter.
- The BCES case results in minor reductions to projected real Gross Domestic Product (GDP) relative to current projections, with a peak difference of less than 0.5% by 2035.
The full report, including its discussion of alternatives, can be found here. Now that the EIA has released its analysis, some expect draft legislation to be introduced by Senator Bingaman in early 2012.