American Power Act Contains Little Direct Support for Renewables

Noticeably absent from the package was either a renewable portfolio standard, or renewable electricity standard, which the industry has been lobbying for over the course of the last year.

"The wind energy industry appreciates the efforts of Senators Kerry and Lieberman to address climate change in their proposal. We look forward to seeing provisions on renewable energy like a strong Renewable Electricity Standard as well as energy efficiency to create new clean energy jobs and avoid carbon in the near term in any package considered by the Senate. We urge Senate Leadership to move quickly on strong legislation," said Denise Bode, CEO of the American Wind Energy Association.

This is in direct contrast to bills introduced over the last year. President Obama's proposal called for 25% renewable electricity by 2025, 100% new building efficiency by 2030 and the phase-out of traditional incandescents by 2014. The Waxman/Markey bill mandated 15% renewable electricity with an added 5% efficiency by 2020, 75% new building efficiency by 2030, as well as appliance and lighting efficiency standards.

Overall, however, the bill may indirectly benefit the industry through the reduction of emissions. The bill mandates that utilities, starting in 2013 and other industries in 2016, must participate in a cap and trade system that places a price on carbon. The goal of these measures is to reduce economy-wide global warming pollution to 95.25 percent of 2005 levels by 2013, 83 percent by 2020, 58 percent by 2030, and 17 percent by 2050.

The proposal establishes an annual tonnage limit on greenhouse gas emissions from specified activities. It directs the EPA Administrator to establish allowances equal to the tonnage limit for each year (with one allowance representing the permission to emit one ton of greenhouse gases, measured in tons of carbon dioxide equivalent)

The bill calls for auctions to take place within the existing Regional Greenhouse Gas Initiative, the Western Climate Initiative and the Mid-West Governors Accord. It also sets a hard price collar for carbon, with an introductory floor set at US $12. This would increase at a rate of 3% over inflation annually. The bill also sets a ceiling at $25, which would increase by 5 percent over inflation every year.

The utility industry worked closely with the authors of the bill and they were happy with the outcome.

"Senators Kerry and Lieberman's bill helps 'get our transition right' to clean modern energy in a manner that protects American families and protects American factories, both of which depend on affordable power," said Jim Rogers, Duke Energy's chairman, president and CEO. "It also gives our electric industry the policy roadmap we need to invest tens of billions of private capital to retire and replace aging power plant fleets with modern, efficient and clean plants."

Manufacturers of clean energy technologies would get some relief from the greenhouse gas reduction targets.

"It is essential that any smart energy legislation which seeks to reduce greenhouse gas emissions should not inadvertently discourage U.S. growth in the manufacturing and production of renewable energy sources," said Stephanie Burns, Dow Corning's chairman, president and CEO.

The bioenergy sector will get more clarity from the legislation. Under the proposal, the National Academies of Sciences would be called on to study how different sources of biomass can contribute to energy independence, protect the environment and reduce global warming pollution.

The EPA would review the study and would then submit recommendations to Congress on any adjustments on which biomass sources should be recognized as renewable. Another study, done in collaboration by EPA, DOI and USDA would look at the effects, both present and future, that using biomass for energy would have on food production and the environment. The group would then make recommendations to Congress based on the study.