Clean Energy Standard Update
Since President Obama’s State of the Union address announcing the Administration goal of setting a Clean Energy Standard (CES) deliberations have shifted to Congress. The President has called for utilities to meet a target of 80 percent of their electricity from sources such as solar, wind, natural gas, nuclear and so-called clean coal by 2035 but the real work now begins in moving this through the legislative process. Bipartisan congressional leadership is where this will have to begin and end if the President’s goal is to become a reality.
In the Senate, most of the anticipated action will take place in the Senate Energy & Natural Resources Committee (SENR) where the bipartisan leadership of Chairman Bingaman and Ranking Member Murkowski are essential for success. Senator Bingaman met with President Obama at the White House shortly after the State of the Union to discuss the CES but has remained guardedly supportive of the President’s proposal. Senator Murkowski remains in a listening mode but open to the discussion.
Today, Majority Leader Harry Reid indicated that Murkowski and Bingaman “have an agreement on the standard.” However, within hours of that statement Murkowski stated that the Majority Leader had “jumped the gun.”
Reaching bipartisan agreement will come down to definitions of what is “clean.” “Clean” in the White House agenda focuses on air emissions, primarily greenhouse gas emissions. However, opponents of that approach are more focused on the broader lifecycle of environmental impacts associated with any given energy source. Some don’t consider coal even with carbon capture & storage to be clean noting coal ash and other challenges to the sector. Others don’t consider nuclear “clean” citing waste issues in particular. Secretary Chu during testimony today before SENR on the DOE budget was specific in describing eligible clean energy sources as including nuclear as noted here in a section of his written testimony:
"A Clean Energy Standard will provide a clear, long-term signal to industry to bring capital off the sidelines and into the clean energy sector. It will grow the domestic market for clean sources of energy – creating jobs, driving innovation and enhancing national security. And by drawing on a wide range of energy sources including renewables, nuclear, clean coal and natural gas, it will give utilities the flexibility they need to meet our clean energy goal while protecting consumers in every region of the country."
In the Senate, feasibility of a CES will largely come down to how many votes will be gained by broadening the definition of “Clean” as envisioned by the Obama Administration versus the number of votes that will be turned off by such an approach. One can expect Senate hearings and negotiations to begin in earnest on a CES in mid-to-late March at the earliest.
Feasibility of the Clean Energy Standard in the House of Representatives appears to be more a matter of overcoming distaste by Republican leadership for perceived government mandates of such a legislative approach. House Energy and Power subpanel chairman Ed Whitfield, speaking this morning to National Electricity Forum made his view known on a CES: "My preference is that we not try to establish a federal standard. Now there are some on my committee that disagree with that, I know that some in the Senate disagree with that. So that’s another issue that we’ll be looking at as we move forward.”
Is Coal the Fuel of the Future?
Every one is looking for the silver bullet that will get the United States off of fossil fuels. My hunch is that we’ll pursue all of the alternatives like wind and solar, but we’ll spend a lot of resources making our dirtiest fuel, coal, less dirty. And while clean coal has its skeptics, others recognize it has a place in the mix.
I place myself in the latter camp. I’ve just penned my thoughts on why that’s the case in a guest commentary for Law360. Click here (subscription required) for the full article.
Hanson's Moratorium on Coal - Considering the Implications
Practically, I don’t see how we can stop putting oil in the atmosphere, because that’s owned by Russia and Saudi Arabia. We can make our vehicles more efficient but that oil is going to get used and its going to get in the atmosphere…and it doesn’t really matter much how fast we burn it. But what we could do is stop coal.
Certainly, Mr. Hanson believes that in the context of global warming “desperate times call for drastic measures.” At the same time, the economic and national security consequences of Mr. Hanson’s proposal must be more fully considered. He calls for a phase out of all coal use by 2030 (unless plants can capture the carbon dioxide), to be replaced by solar, wind, and other renewable energy.
Some facts about coal:
- In 2007, coal constituted approximately 50 percent of all electrical generation in the US.
- In the West North Central states, coal accounts for 75 percent of electric generation.
- Our demonstrated reserve base for coal, as reported by the Energy Information Agency (EIA), is 491 billion short tons.
- In 2007, we used about 1.2 billion short tons of coal.
- At this rate, there is about 409 years worth of coal resources remaining in the US.
This is why the US has been called the Saudi Arabia of coal.
Currently, renewable energy constitutes approximately 3.5 percent of electric generation. Thus, under Mr. Hanson’s proposal -- either renewable energy must increase by more than 1,400 percent in the next 20 years or coal-fired power plants must find a way to capture carbon. These figures don’t even take into account the growth in energy demand projected over the next 20 years. EIA projects as much as a 39 percent increase in US electricity usage by 2030.
What concerns me most about Mr. Hanson’s remarks is how he surrenders to the global economics of oil, because “you’re not going to tell Saudi Arabia and Russia, the countries that have oil, not to sell their oil” but, forgoes America greatest resource base.
Similarly, one must consider the national security and economic implications of Mr. Hanson’s proposal. America’s dependence of foreign oil, currently at 70 percent or so, would grow even further presumably at staggering price levels. This would precipitate an even greater transfer of wealth from the US, Europe, and Asia while our own most abundant domestic fuel base would be banned. Does Mr. Hanson assume that the growth in renewables will offset the demise of the US coal industry? And what about the expected world wide growth of coal? The EIA projects that coal use will jump by nearly two-thirds by 2030, three-fourths of which will be accounted for by China alone. What impact will this have on global warming and will US coal exports also be banned?
All of this underscores the intricacies of the debate on climate change. Coal, our country’s most abundant resource, should not be phased-out in favor of Saudi or Russian oil. Instead, in my humble view, we need to consider a wide-breath of initiatives as well as strike a reasonable balance between carbon reduction and economic and national security issues. This would include offshore drilling for oil, Canadian oil sands, construction of new nuclear power plants, conservation and efficiency programs, biofuels and biomass, renewable energy portfolios, transmission line programs, tax incentives, and technology initiatives.
With respect to coal, we should continue to concentrate our national efforts on clean coal technologies, especially those that capture carbon dioxide. There is hope on the horizon with promising new technologies. Recently, the Department of Energy’s National Energy Technology Laboratory announced it hoped to capture 90 percent of the carbon from power plants by 2020 with an incremental increase in generating costs of some 20 percent. Mr. Hanson believes that carbon sequestration technologies will be available within the next 10 years.
Perhaps these are desperate times and while I agree that the US should lead by example, climate change is a border-less issue. While banning coal in the US might demonstrate an unparalleled commitment to climate change, without a world-wide response, that includes emerging nations, especially China, and India, the economic and national security consequences of our actions must be well-considered and ultimately not in vain.
Steve Gardner is an energy partner in the Washington, DC office. He previously served as Senior Counsel to AMAX Coal Company, at the time the nation’s third largest producer of coal.
