A Faltering Energy Bill

Barring a major train wreck – which remains within the realm of possibility – congressional conferees may have a final energy bill ready for votes in the U.S. Senate and House of Representatives by the end of this month. The final product, representing more than three years work, will undoubtedly be described by its authors as comprehensive and balanced. In reality, it will be neither.

RE Insider – October 20, 2003 – Barring a major train wreck – which remains within the realm of possibility – congressional conferees may have a final energy bill ready for votes in the U.S. Senate and House of Representatives by the end of this month. The final product, representing more than three years’ work, will undoubtedly be described by its authors as “comprehensive” and “balanced.” In reality, it will be neither. Among the pressing issues facing the United States today are those of growing oil and natural gas imports – particularly from politically unstable regions of the world, escalating environmental and economic damage from greenhouse gas emissions that contribute to global climate change, and an electrical generation and transmission system that is unreliable and – due to its reliance on large central station facilities – insecure. Yet the emerging energy bill will do little to address any of these issues; in fact, it may very well exacerbate all three. Among the best strategies for addressing these energy problems are greatly expanded energy efficiency initiatives and investments in decentralized renewable energy technologies. Yet the energy bill will probably offer little more than crumbs for sustainable energy while continuing and expanding federal support for the mature, polluting fossil fuels and nuclear power industries. It is supremely ironic that completion of work on the energy bill may correspond to the thirtieth anniversary of the OPEC oil embargo that began on October 17, 1973. Over the past three decades, total U.S. oil imports have nearly doubled with imports now accounting for more than half (54 percent) of the nation’s oil consumption. Yet the energy bill largely fails to address oil consumption in the transportation sector – which now accounts for more than two-thirds of U.S. oil use – by not including provisions to substantially raise automobile fuel economy standards. It even fails to include the Senate bill’s directive (passed by more than 90 votes) that would set a goal of reducing oil consumption by one million barrels per day by 2013 (a modest 5 percent of current consumption). Instead it opts for a “drain America first” strategy that may include drilling the Arctic National Wildlife Refuge, opening the door to expanded oil exploration in moratorium areas, and facilitating expanded development in other ecologically sensitive areas as well as subsides for an Alaskan natural gas pipeline. It is true that the final legislation will likely incorporate a Renewable Fuels Standard that will mandate that 5 percent of liquid fuels be derived from renewable sources which could be a boon to the domestic ethanol and biofuels industries. Yet these fuels will be burned in increasingly inefficient cars and SUVs which means they will be wasted and ultimately not reduce the nation’s dependency on petroleum imports. Similarly, natural gas imports have been inching upwards and now exceed 15 percent of total U.S. consumption with future imports increasingly likely to come in the form of expensive LNG shipments from politically unstable sources such as Algeria, Nigeria, and Oman. Presently, more than a quarter of the natural gas used is burned in inefficient and wasteful electricity generating stations. The most environmentally-sound approaches to curbing this waste, and hence imports, include improving the efficiency of (or reducing) electricity end-uses, expanding the use of combined power and heating systems for electrical generation, and displacing natural gas generating plants with renewable electric technologies. A recent study by the American Council for an Energy-Efficient Economy shows that even modest gains in energy efficiency and renewable energy production from these kinds of policies would help reduce gas prices substantially. Yet the energy bill provides, at best, only limited support for any of these strategies. Its efficiency title is expected to include new standards to improve the efficiency of building transformers, torchiere lighting fixtures, exit signs, traffic lights, unit heaters, and compact fluorescent bulbs, as well as directives to the U.S. Department of Energy to set new efficiency standards on several other products. Small tax incentives for combined heat and power as well as efficient new homes, commercial buildings, refrigerators, clothes washers, and fuel cells are also probable. While steps in the right direction, they fall far short of the aggressive efficiency standards, tax incentives, and public benefits fund to support efficiency programs needed to make a serious dent in electricity consumption. That is, the bill completely lacks aggressive measures needed to moderate electricity demand that would reduce the risk of future blackouts while cutting air pollution and greenhouse gas emissions. Moreover, the tax provisions are likely to eliminate incentives for hybrid vehicles, the nation’s best chance to save oil in the next twenty years. The most important provision to expand the use of renewable electricity production and displace natural gas, a Renewable Portfolio Standard (RPS), now appears certain to end up on the conferees’ cutting room floor. Even if a token RPS somehow makes it into the final bill, it is apt to be a provision significantly weaker than those already enacted by many states and far below the projected technical and cost-effective potential for electricity generated from solar, wind, geothermal, biomass, and hydropower resources (i.e., 20 percent or more by 2020). Failure to include a strong RPS coupled with weak or non-existent energy efficiency standards also insures that the final energy bill will do very little to address the growing problem of climate change. Indeed, a climate change title does not even exist in the bill. Proponents of the bill suggest that it includes provisions that will help reduce greenhouse gas emissions and point to increased renewable energy authorization levels such as the $300 million over five years to establish a solar electric (photovoltaic) energy program for the procurement and installation of solar electric systems in new and existing public buildings. Left unsaid, though, is that an “authorization” is merely permission to spend a certain amount of money if the funds can be found; an “authorization” is not an “appropriation.” In reality, federal funding levels for renewable energy programs – i.e., the appropriations – have been cut during each of the last three budget cycles, notwithstanding authorization levels that would allow for significantly higher funding. Given the massive budget deficits now being forecast as a result of the White House’s tax cuts and the war in Iraq, it is extremely dubious that the recent downward funding trend will be reversed; in fact, it is highly probable that renewable energy budgets will be slashed even further regardless of the authorization levels included in the energy bill. Moreover, the levels of federal support given to renewables in the form of direct appropriations and tax incentives are likely to be swamped by those being proposed for the fossil fuels and nuclear industries which have been estimated to total $18 billion. These include $1.1 billion to build a new nuclear power plant, $400 million in loans for oil and gas development loan, guarantees to build a new coal plant that may cost $2-$3 billion, and $350 million for hydrogen production from polluting sources. Not included in this figure is the extension of the Price-Anderson Act which shields nuclear utilities from most liability in the event of a major accident; the precise dollar value of this is incalculable but conservatively worth tens of billions of dollars in saved insurance costs. Consequently, the unbalanced financial incentives provided for in the energy bill for competing energy sources may actually worsen the competitive position of renewable energy technologies in the marketplace. That would further compound the problems with the reliability of the nation’s electrical grid as highlighted by the August blackout in the Northeast and the long power outages in the mid-Atlantic following Hurricane Isabel not to mention the national security risks posed by excessive reliance on highly-centralized and large-scale power generating facilities. Distributed renewable energy electric technologies are uniquely suited to lessening these problems. However, the energy bill fails to create the regulatory framework to tap this potential and, in fact, through provisions such as the proposed revocation of the Public Utilities Regulatory Policy Act (PURPA) as well as the Public Utility Holding Company Act (PUHCA), could make the situation worse. At the least, the energy bill should include mandatory net metering and interconnection standards to enable renewable energy generators to tie into the grid rather than the essentially optional, advisory guidelines that it now includes. It should also include a long-term renewable energy production tax credit (PTC), including a tradable credit for public power and rural cooperatives, that benefits the cross-section of renewable energy technologies. To provide some stability and predictability in the marketplace, any such tax incentive should be enacted for at least five to ten years. By comparison, the proposed renewal of the Price-Anderson Act is 20 years. However, the energy bill now provides for only a three-year PTC extension. Such a short-term PTC threatens to continue the start-and-stop cycle that has plagued the renewable energy industry, particularly wind energy developers, for more than a decade as investments dry up when the existing PTC is set to expire and its supporters scurry around madly trying to get another extension. Wind energy advocates may be tempted to support the pending energy bill arguing that a three-year PTC is far better than no PTC just as the solar investment tax incentives, geothermal reforms, Renewable Fuels Standard, and hydropower relicensing components are important and generally positive provisions that will benefit their respective industries. Similarly, advocates of energy efficiency can point to some gains that may come from the bill if enacted as now written. However, when weighed against the lopsided provisions to advance fossil fuels and nuclear power, it is questionable whether the end result will actually move this country closer to a sustainable energy future. Moreover, the recent series of closed-door, Republican-dominated, conference meetings in which the House-Senate energy bill is being finalized, and which have largely excluded those Democrats who have championed the bill’s efficiency and renewable energy provisions, have provided nuclear and fossil fuel lobbyists an opportunity to further skew the bill the wrong way. Consequently, even if the Congress approves and the President ultimately signs an energy bill this year, the nation’s energy policy work won’t be done. The bill that is likely to emerge is one that will evade the problems of energy imports, global warming, and electric grid stability. It is also one that will fail to incorporate an adequate Renewable Portfolio Standard, auto fuel efficiency standards, aggressive appliance and industrial efficiency standards, mandatory net metering and transmission standards, and a sufficient mix of tax incentives and federally-funded R&D programs to move the nation away from its reliance on fossil fuels and nuclear power. Under the circumstances, while many weary renewable energy and energy efficiency advocates may wince at the prospect, it would likely be far better to have no energy bill than the one that seems to be nearing completion. About the Author… Ken Bossong is the coordinator of the Sustainable Energy Coalition – a coalition of 60 national and state environmental, business, consumer, and energy policy organizations founded in 1992 to promote increased use of renewable energy and energy efficient technologies. The views expressed in this article represent those of the author alone and may not necessarily reflect the views of the individual member groups of the Sustainable Energy Coalition.
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