The clean energy standard proposed in Senate bill 2146 would raise rates by an estimated 4.6 percent over the first six years, the head of the municipal electric utility in Jacksonville, Fla., told a Senate committee May 17. But starting in 2021, the costs of the legislation would go up significantly, resulting in an increase of about 64 percent over base case costs in the 20-year period from 2015 to 2035, said James Dickenson, managing director and CEO of JEA.
He spoke at a hearing of the Senate Energy and Natural Resources Committee. The committee’s chairman, Jeff Bingaman of New Mexico (D), is the author of S. 2146, the Clean Energy Standard Act of 2012.
The CES proposed in the Bingaman bill “is too aggressive” and too costly to electric consumers, Dickenson said. “In the Southeast, unlike the West, Pacific Northwest and Midwest, we are not blessed with substantial wind resources, elevation changes for hydro power options, or intense sun and expansive open lands for high-intensity solar installations,” he said.
“We are concerned that any national clean energy standard will create substantial competitive impacts between regions, favoring those that are situated to take advantage of geographic assets that more readily support development of solar, wind and hydro power,” Dickenson said. “The move away from existing coal generation, including JEA’s, will strand not only large capital investments but the nation’s abundant supply of a secure domestic fuel that will be exported to other countries.”
“Bringing energy costs down should be our objective,” said Sen. Lisa Murkowski, R-Alaska, the ranking minority member of the energy committee. “I question whether the American people really want a clean energy standard,” she said, particularly at a time when the cost of electricity is going up.
The Energy Information Administration projects that the measure would reduce emissions from the power sector by 20 percent below its reference case in 2025, and by 44 percent in 2035.
With American ingenuity at work, “we can lead the world in clean energy,” said David Sandalow, assistant secretary for policy and international affairs for the Department of Energy. A clean energy standard “provides the long-term price signals that businesses tell us they need to bring capital to the table” to help make this happen, he said.
An analysis done by the EIA found that the Bingaman bill would have a minimal effect on costs until 2025, but that by 2035, costs would rise by an average of 18%, said Howard Gruenspect, acting administrator of the Energy Information Administration, an arm of the Energy Department.
“Would that increase in electric rates be expected to translate into increased bills to consumers?” asked Bingaman.
“No,” replied Sandalow. Despite the rising costs to utilities, the EIA analysis predicts that in 2035, household electric bills “would be lower than they are today by about $5,” he said.
Gruenspecht concurred, saying that residential electric bills are expected to rise by less than the 18 percent average.
The CES proposed in S. 2146 “leads to substantial reductions in carbon, with very little impact on electricity prices in the first 10 years,” said Karen Palmer, research director of Resources for the Future, a Washington, D.C., think tank.
A clean energy standard in the Bingaman bill would raise the cost of electricity, especially for industrial customers, said Thomas Gibson, president and CEO of th American Iron and Steel Institute. The EIA study predicts that while average costs of electricity would go up by 18 percent in 2035, the cost for industrial customers would rise by 25 percent, he said. Increasing electricity rates would put U.S. manufacturers at a disadvantage, he said.
Under the Bingaman bill, small utilities would be exempt from the clean energy standard. In 2015, utilities that sell fewer than 2 million megawatt-hours of electricity would be exempt. The sales threshold for exemption would decrease by 100,000 MWh per year until it reached 1 million MWh in 2025. After that date, the threshold would remain at 1 million MWh.
Unintended result: more public power utilities?
The exemption for small utilities could result in an unintended consequence: that there could be an upswing in interest in cities forming their own utilities, said Palmer of Resources for the Future. Because of the exemption, customers of small utilities would pay a retail average rate of 5.2 cents per kWh in 2035, while customers of large, non-exempt utilities would pay twice that amount, or 11.6 cents, she said. The clean energy standard might “create an incentive for small cities and towns to band together and create their own utility,” Palmer said.
Bingaman said the bill would “drive continued diversity in our sources of energy” and would “allow every region to deploy clean energy using resources appropriate to that region.”
“The Clean Energy Standard will take all electricity generating technologies that exceed the carbon efficiency of the current state-of-the-art supercritical coal generation and award them credits scaled to their relative improvement in carbon intensity over that baseline,” he said. “Zero-carbon sources such as new nuclear and renewables will get a full credit per kilowatt-hour produced.” Advanced coal technologies, such as oxyfuel combustion, would get partial credit; while natural gas would get about a half-credit, he said.
The bill,which is 25 pages long, “is simple and straightforward, but would have a transformative effect on the power sector,” Bingaman said.
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), applauded S. 2146 for its market-based approach, a target that ramps up over time and its broad definition of clean energy.
Colorado’s renewable energy standard “presents an example of what we could see if we adopted a CES,” said Sen. Mark Udall, D-Colo. The renewable standard has worked so well that wind energy now competes with coal-fired electricity in that state, and “some would argue that it’s cheaper than coal,” he said.
“We need to look at long- and short-term costs,” Udall said. “Also, the effect of carbon pollution on our climate.”
As part of the United Nations climate change conferences in Copenhagen, Denmark; and Cancun, Mexico, the United States has pledged to reduce economy-wide carbon dioxide emissions to 83 percent below 2005 levels by 2050, said Palmer. “To be on a linear path to meet this goal, the United States would have to reduce total CO2 emissions in 2035 by roughly 4.1 billion tons from 2005 levels,” she said. The clean energy standard in S. 2146 would contribute 27 percent of the U.S. share of emissions reductions in 2035, she said. — JEANNINE ANDERSON