CAPITOL STEPS TO NEW ENERGY

President Obama reiterated his commitment to doubling U.S. New Energy capacity within 3 years in his speech to the joint session of Congress.

To facilitate accomplishing that, Congress will need to expand on the important short-term New Energy provisions in the stimulus package just passed.

A national mandatory cap on greenhouse gas emissions (GhGs) with a marketplace – in which companies can buy credits to emit above their caps and companies that have adopted effective Energy Efficiency methods or acquired New Energy sources can sell unneeded credits for supplementary revenues – will be near the top of the agenda.

The specifics of this legislation remain in serious contention and lobbying is furious over the parameters of the caps and the trading. (See yesterday’s THE CLIMATE CHANGE BUSINESS) Though climate change is an urgent matter, the deadline for the legislation is not until the December 2009 Copenhagen world summit, where a successor agreement to the Kyoto treaty will define a new international cap-and-trade system. It is therefore likely Democratic leaders will postpone finalizing U.S. climate bill details until later in the year.

Another high priority item that will require legislative attention is a national mandatory Renewable Electricity Standard (RES) requiring all U.S. utilities to obtain a specific portion of their power from New Energy sources by a date certain. The White House has consistently said it will seek an RES (sometimes called a Renewable Portfolio Standard, RPS) of 10% New Energy sources by 2012 and 25% by 2025. In the Senate, this legislation is being worked out by the Energy and Natural Resources Committee chaired by Senator Jeff Bingaman (D-NM).

Senate Majority Leader Reid recently said he would start with the RES.

Senator Reid: "We all agree: Let's start with Bingaman's committee and come up with something dealing with renewable portfolio standards, some real good conservation measures in buildings and things of that nature…"

After these 2 pieces of legislation, there is a roster of possibilities.

A recent conference of New Energy heavyweights - headed by former President Bill Clinton, former Vice President, Nobel laureate and climate hero Al Gore and Obama Secretary of Energy and Nobel laureate Steven Chu - added their prestigious voices to a joint call from the American Wind Energy Association (AWEA) and the Solar Energy Industries Association (SEIA) for an upgrade to the national electricity transmission system to ready it for delivering New Energy-generated electricity from the remote areas where New Energy is abundant to the population centers where electricity is high in demand.

Senator Reid said the "…highway to transmit electricity to where it's needed…" and the implementation of a “smart grid” are likely to be next on the schedule.

Senator Reid announces New Energy transmission. From SenatorReid via YouTube.

Senator Reid believes it will be easier to pass climate change legislation after the RES mandating New Energy and the transmission to carry New Energy are in place. Meanwhile, he will allow details of the national cap-and-trade system to work their way through the Senate Environment and Public Works Committee chaired by Senator Barbara Boxer (D-Calif.).

Senator Reid: "It will make it so much easier to do that to get rid of the energy stuff -- so-called low-hanging fruit -- to get something done with transmission…[then we] will be able to move expeditiously to get [the climate change bill] done..As far as getting you a definite time, I can't do that…Our goal is to get that done this year."

click to enlarge

Congressman Ed Markey (D-Mass) is pushing legislation for "decoupling," a somewhat wonky provision that would separate (decouple) utility profits from ratepayer consumption. In place of the present arrangement in which utilities profit only from selling more and more electricity, decoupling substitutes rewards to utilities for increasing ratepayer efficiencies and saving power. As Chairman of the House Energy and Environment Subcommittee (of the Energy and Commerce Committee), Markey is expected to be instrumental in driving Obama administration policy, in service to House Energy and Commerce Committee Chairman Henry Waxman (D-Calif).

A policy as technical as decoupling might in the past have been an unlikely part of administration agenda. President Obama, however, has a thorough understanding of the factors necessary to drive New Energy and Energy Efficiency, understands the importance of decoupling, and brought it onto the national stage with remarks he made during a recent town hall session in Indiana. (See DECOUPLING WASTE FROM GREED, COUPLING EFFICIENCY WITH NEW ENERGY)

Markey raised the decoupling issue while clarifying a provision in the recently passed stimulus bill that provides $3 billion in Department of Energy grants to utilites for what amounts to decoupling, though the word "decoupling" is not included in the bill. The National Association of Regulatory Utility Commissioners (NARUC) and other decoupling critics pushed to get the term removed from the stimulus bill.

The stimulus bill allows governors to allot DOE grant money to utilities if state regulators will implement rate policies that encourage utilites to help customers "…use energy more efficiently and that provide timely cost recovery and a timely earning opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers' incentives to use energy more efficiently."

That’s decoupling, in a lot more syllables.

click to enlarge

Making the wording more general gave more authority to state regulators. The authority of states will also be at issue in the RES and transmission legislation. Congress will need to establish a federal RES that respects individual states’ New Energy capacities. In creating siting policies for the national transmission system, Congress must write a law that allows the Federal Energy Regulatory Commission (FERC) to facilitate new wires without stepping on state regulators’ rights to designate where their wires go.

Winning NARUC endorsement of the final stimulus bill, despite its dissatisfaction with individual provisions, may be a template for winning similar legislative fights.

While enthusiastic about improved effeciency, Republicans remain united in oppositon to the “decoupling” language in the stimulus bill, saying it reduces potential efficiency gains.

House Energy and Environment Subcommittee Ranking Member Congressman Fred Upton (R-Mich.): "With decoupling in states, you don't actually see the savings…It just takes away the incentive for folks, businesses or homeowners that are going to actually install the devices that save energy."

Actually, California – where decoupling has been a policy for 3 decades – has overtly and unequivocably demonstrated remarkable savings clear to ratepayers and policy makers. While the rest of the country’s energy consumption has increased 50%, California’s consumption has remained the same as it was in 1978. While 40% of U.S. GhGs come from electricity generation, only 20% of California’s GhGs come from electricity generation.

click to enlarge

Not much more incentive than savings like those.

The common ground of incentivizing efficieny, in spite of devisive squabbles over language, is what Markey and other Democrats must find if they intend to successfully take the steps to New Energy Senator Reid seeks.

In pursuit of common ground, Congressman Markey has introduced a bill (H.R. 889) to create an efficiency standard. It sets national goals for electricity and natural gas savings through utility efficiency programs, building codes, efficient appliances and other efficiency measures.

Industry opposes Markey’s bill, just as it tends to oppose the RES that will force it to invest in New Energy and climate change legislation that will cap its emissions. Industry no doubt feels the world closing in.

John Anderson, President, industry association Electricity Consumers Resource Council: "Most large industrial facilities are beyond the point where substantial savings can be achieved with plug-and-play measures such as high-efficiency light bulbs, insulation or motors…The next levels are achieved when entire industrial processes are retooled, rebuilt ... these are big ticket items requiring very large outlays of capital. Further complicating this problem is the current credit crunch."

Some industry players can see the handwriting on the wall without recoiling. Rich Wells, vice president of energy at the Dow Chemical Corp., is on record as supportive of Markey’s efforts.

The New Energy economy is on the verge of emerging. It has majorities in both houses of Congress and a staunch ally in the White House. It lacks only a filibuster-proof 60 votes in the Senate to win an RES, new transmission and emissions caps.

Like the stimulus bill, New Energy legislation must find the few Republican votes it needs from those who see efforts like Congressman Markey’s as sensible and goals like Senator Reid’s as inevitable. From common ground, those political leaders can march up the Captiol steps to the New Energy economy.

Congressman Markey gives a great speech about energy efficiency. From RepMarkey via YouTube.

Senate leader outlines 3 steps to meeting Obama's energy goals
Alex Kaplun, February 25, 2009 (NY Times)
and
Stimulus does not require 'decoupling' – Markey
Katherine Ling, February 24, 2009 (E&E News)

WHO
Senate Majority Leader Harry Reid (D-Nev); Speaker of the House of Representatives Nancy Pelosi (D-Calif); Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) and Ranking Member Senator Lisa Murkowski (R-Ala); Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.); House Energy and Environment Subcommittee (of the Energy and Commerce Committee) Chairman Ed Markey (D-Mass.) and Ranking Member Congressman Fred Upton (R-Mich.); National Association of Regulatory Utility Commissioners (NARUC); Energy and Commerce Chairman Henry Waxman (D-Calif.)

WHAT
With the stimulus bill done, New Energy now faces fights for an energy bill and a climate change bill with incentives and provisions to drive growth that will achieve the President’s goal of doubled capacity in 3 years.

In the end, this is the only real question and the only real answer about climate change legislation. (click to enlarge)

WHEN
- Leaders in both the House and the Senate expect to handle energy and climate change legislation before December of this year.
- The world summit to finalize international plans for the post-Kyoto Protocol fight against global climate change will be in December.
- The Obama RES calls for 10% New Energy sources by 2012 and 25% by 2025.

WHERE
- Legislation must pass both houses of Congress before going to the President.
- California’s decoupling program has held that state’s demand constant while the rest of the country’s demand rose 50%.

click to enlarge

WHY
- Bingaman and Murkowski are presently working on a Senate RES and may bring it to the floor before the Spring recess.
- Boxer has already begun working on the details of the climate change legislation but it is expected to be a complicated bill.
- Democrats in the Senate are attempting to use President Obama’s popularity to urge their Republican colleagues to support the energy and climate change legislation.
- Decoupling improved ratepayer energy efficiency from a loss of utility revenues is widely seen as the key to big decreases in energy consumption.
- The stimulus bill rewards state regulators’ efforts to impose decoupling policies but does not use the word decoupling.
- Markey’s H.R. 889 would steadily up efficiency in electricity and natural gas consumption from 1% (electricity demand) and 0.75% (natural gas demand) in 2012 to 15% and 10% by 2020. It would also allow companies to sell efficiency savings to meet the efficiency improvement requirments.
- Waxman has indicated he will bring climate change legislation by Memorial Day.

“America needs an oil change.” From RepMarkey via YouTube.

QUOTES
- Senator Chuck Schumer (D-N.Y.): "We're playing on the same team with the president. We know that his agenda is the agenda that will move America forward…Our Republican colleagues tried to act like they're cheering for the quarterback and then nitpick his play-calling…President Obama and his agenda are one and the same…You can't separate the man from his agenda."
- Congressman John Shimkus (R-Ill.): "[The stimulus language] strongly implies for governors to move to a decoupling regime…There is no confusion that decoupling is a major issue…"
- Congressman Michael Burgess (R-Texas): "Energy efficiency is the type of issue we can work together on…"
- Congressman Markey: "We support an RES; we support a climate bill, and we will try and figure out the best way to get them both done this year…"