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Wednesday, March 28, 2012

Clean Energy Standard: Potential Qualifying Energy Sources

Kelsi Bracmort, Coordinator
Specialist in Agricultural Conservation and Natural Resources Policy

Phillip Brown
Specialist in Energy Policy

Peter Folger
Specialist in Energy and Natural Resources Policy

Mark Holt
Specialist in Energy Policy

Michael Ratner
Specialist in Energy Policy

Fred Sissine
Specialist in Energy Policy

A clean energy standard (CES) has been identified as one possible legislative option to encourage a more diverse domestic electricity portfolio. A CES could require certain electricity providers to obtain a portion of their electricity from qualifying clean energy sources. A CES is broader than a renewable energy standard (RES), including “clean” energy sources along with renewable sources. The RES has been a topic of legislative attention since at least the 105th Congress. A CES gained legislative attention with the introduction of the Clean Energy Standard Act of 2012 (S. 2146). The bill would require large utilities to sell a percentage of their electricity from clean energy sources—at least 24% in 2015 and gradually increasing over time to 84% by 2035. Some assert that a CES could lead to economic growth, reduce greenhouse gas emissions, and secure U.S. leadership in clean energy technology. Others argue that it could raise electricity prices, necessitate additional financial investment in grid infrastructure, and—in some cases—depend on energy technologies that are not yet established for widespread commercial-scale use.

Without a CES, some clean energy sources—mostly the renewables—may face barriers to penetrating and gaining traction in the electricity market. Renewable sources (including conventional hydroelectric) constituted roughly 12% of total electric power net generation in 2011. Analysis from the Energy Information Administration (EIA) suggests that without a CES or RES, electricity generation for renewable sources (including conventional hydroelectric) will grow from 10% in 2010 to 16% 2035. EIA analysis indicates that most of the growth in renewable electricity generation, excluding hydroelectricity, in the power sector from 2010 to 2035 will consist of generation from wind and biomass facilities.

Policy, economic, and technical considerations arise when evaluating CES options. A primary question in the CES legislative discussion is which energy sources would be eligible to participate. Congress could take into account the following clean energy source selection criteria: geographic location of the energy source, energy source supply levels, job creation associated with the energy source, the implementation time frame, environmental regulations (existing and forthcoming), and cost. Each potential qualifying energy source has advantages and disadvantages, and has different natural resource, economic, and technical challenges. For instance, the cost to build, operate, and maintain clean energy power plants varies widely, from $63 (natural gas advanced combined-cycle) to $312 (solar thermal) per megawatt-hour. Moreover, some of the sources proposed have encountered public opposition (e.g., nuclear energy). Many proposed sources (e.g., solar) have received government support in the form of research and development assistance or favorable tax treatment. In some cases, the technology that might allow certain sources to qualify for a CES is not yet at commercial scale (e.g., coalfired plants equipped with carbon capture and sequestration). Cross-cutting issues including electricity transmission, variability, and material cost and supply are associated with large-scale electricity production for many of the commonly discussed clean energy sources.

Many questions will need to be answered if a CES is established. How much clean electricity can be generated from each qualifying energy source, given the proposed CES time frame? Should a carbon accounting parameter be assigned to each source? Will a time come when some resources (e.g., wind, solar) used to generate clean electricity cease to be considered a “free” resource? Should energy efficiency be included in a CES, and if so, how should it be included? How would a CES interact with state renewable electricity requirements? Who would assume the costs of new transmission capacity?

Date of Report: March 13, 2012
Number of Pages: 26
Order Number: R41797
Price: $29.95

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