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If Carbon Caps Are Coming, Why Mandate Renewables?

With the climate festivities in the House last week, the Senate's getting overshadowed. But this Thursday, Jeff Bingaman's energy committee plans to start marking up its own energy legislation, likely focusing on a federal efficiency standard and a federal renewable-electricity standard for utilities, plus some provisions to upgrade the national grid. (Though the exact agenda's not finalized yet.) Remember, unlike in the House, where Henry Waxman wants to lump all these measures in with a carbon-cap regime, the Senate is doing things piecemeal; Barbara Boxer's environment committee is working on a separate bill for pricing carbon.

Anyway, on a conference call earlier today, Steven Nadel of the American Council for an Energy-Efficient Economy laid out the rationale for a federal energy-efficiency standard, which would require utilities to run energy-saving programs that reduce electricity use by 15 percent by 2020. (Nineteen states already have programs like these, and states that want to go further than the feds, such as Vermont or Massachusetts, could still do so.) Nadel noted that efficiency is, by far, the most cost-effective way of reducing emissions, usually costing about 3 cents per kilowatt-hour saved, compared with 7 to 15 cents per kilowatt-hour for new power plants. Trouble is, most utilities don't reap profits by selling less power. So even if a carbon cap passes, you need additional incentives for efficiency.

The more controversial idea, meanwhile, is the renewable-electricity standard. The Waxman-Markey bill would require utilities to get 25 percent of their power from renewable sources by 2025 (wind, solar, hydro, biomass all count; nuclear and coal with carbon capture don't); the Senate will consider something similar. Many utilities in the Southeast have complained that they don't have enough wind or sunshine to reach those targets. But Marchant Wentworth of the Union of Concerned Scientists claimed his group's analysis found that the region could technically meet at least half of its existing electricity needs via wind, solar, and hydropower.

I asked the energy experts on the call why a renewable-electricity standard was even necessary once you have a cap on carbon emissions. After all, if utilities can meet the cap most effectively by adding new renewables, why bother with an additional mandate? Or, if adding wind or solar or biomass or hydropower isn't the most effective way of reducing emissions, at least in the short term, why saddle utilities with an existing requirement? The answer basically seemed to be that a renewable standard was important for nurturing a market that didn't already exist.

A while ago, I posed this question to Holmes Hummel, a former congressional science fellow who has created a great slideshow on the need for "complementary" policies in addition to cap-and-trade for reducing emissions. Hummel explained that in wholesale electricity markets, the price of carbon would need to get very high—around $60/ton—before pushing dirty coal out onto the margins. So a renewable standard is a good way to manage a steady transition away from coal long before reaching that point. "Otherwise, we end up with a fire drill when the carbon price reaches the tipping point for coal," Hummel e-mailed, "and only the Europeans would have the companies, the manufacturing capacity, or the employees to meet the screaming demand."

I'm not sure I'm wholly swayed by either of those points, but there it is. Another frequent question is why Congress won't allow utilities to meet the renewable targets with nuclear or coal with carbon capture. Those aren't technically renewable sources, sure, but they're low-carbon, which is what we care about. On the conference call today, Bill White of the Energy Future Coalition argued that including, say, coal carbon-capture in the standard wouldn't enable the country to diversify its energy resources, and "doesn't attack the basic problem of fuel volatility." Fine, but those are lower priorities than reducing emissions as quickly as possible, no? (Granted, carbon sequestration for coal still appears to be some ways off, and pricey at that, so it's not even clear it could compete with other low-carbon alternatives right now...)

In any case, a renewable-electricity standard sounds like a fair idea. And the costs do seem to be fairly minimal: One 2008 study by the Lawrence Berkeley Laboratory found that existing state renewable laws have increased electricity rates by less than 1 percent at worst. Still, I'd like to hear a more convincing rationale for why these standards are still necessary if we do pass a nationwide cap on carbon. I'll let you know what I find.

(Flickr photo credit: panhandler)

--Bradford Plumer