Washington, DC, United States What went wrong? And what does inaction in the United States mean for the international renewable energy market?
Pundits blame opposition from Southeastern states and Congress’s pre-occupation with healthcare and finance, as well as the vulnerability of unwieldy energy bills because they attempt to accomplish so much simultaneously.
Bills Draw Flak
“A reasonable RPS programme would have been within their grasp. But everytime they have something they can move through, they start packing things onto the bill. It just weighs the legislation down,” said Patrick Raher, partner in law firm Hogan Lovells.
On top of that, cap-and-trade got off to the wrong start with early proposals that channelled auction revenue back to government to pay for healthcare, he said.
This gave opponents fuel to dub the bill a cap-and-tax. In contrast, programmes like the Regional Greenhouse Gas Initiative, the 10-state mandatory cap-and-trade programme in the Northeastern and Mid-Atlantic states, flows most auction money back into energy efficiency to lower emissions and consumer cost, more palatable to a tax-shy US electorate.
Failure to pass an RPS did little to help long-term prospects for a faltering US wind market, which the American Wind Energy Association says added only 700 MW in the second quarter, a drop of 57% from 2008 levels and 71% from 2009. Lack of clear US policy also gave scant comfort to a global wind market dragged down by low electricity demand and scarce project financing. The slowdown has led to a worldwide oversupply of wind turbines expected to continue into 2013, according to the Wind Turbine Price Index released in early August by Bloomberg New Energy Finance.
On the plus side for consumers, over supply translates into lower prices; for 2010 contracts average prices fell to €1.04 million/MW from a high of €1.22 million/MW in 2008, the report finds. But lower demand for turbines also means fewer new renewable energy manufacturing jobs, a cornerstone of the emerging green economy. Indeed, AWEA reported only two new US manufacturing facilities opening in the first half of 2010, compared with seven in 2008 and five in 2009. AWEA continued its push for a national RPS as a way to stabilise the market over the long term and prevent the typical US boom and bust cycle that inevitably shakes the supply chain.
Keeping Hope Alive
Denise Bode, AWEA’s CEO, was one of the few voices in early August still holding out hope that Congress might pass an RPS in 2010, a vehicle expected to foster long-term power purchase agreements between utilities and project developers.
Bode saw the possibility for the attachment of an RPS to tax legislation, or another bill, before the year is out. She pointed to a shift in Congress’s focus, with an RPS becoming ‘front and centre’ in the energy debate, now that cap-and-trade is off the table for the year. “Don’t count us out. We’re just beginning to fight,” she said.
Others are less sure. It is an election year for Congress, so lawmakers will adjourn in October to go and campaign, leaving little time for complex energy proposals.
Congress could take up the RPS during a ‘lame duck’ session following the November election, but it would be highly unusual for lawmakers to tackle the complexities of energy in the post-election session, according to Washington insiders.
States Take The Lead
Still, not all the news is bad when it comes to US energy policy. Even if Congress fails to act, the states appear to be creating a de facto national policy. Thirty states have already enacted their own RPS, while two thirds of the states either have a carbon cap-and-trade programme or are considering one.
In addition, the Clean Energy States Alliance found in a July report that over the past decade 15 states have helped fund 52,000 renewable energy projects. The states provided $1.9 billion, which leveraged $10.1 billion in additional project investment, adding 2.5 GW of clean energy to the grid.
“We have created a legislative demand for clean energy in the US. The economic incentive for the manufacturers to locate in the US, that is coming from the state level,” said Andrew Spielman, a partner in the environmental practice of Hogan Lovells.
In fact, the Presidential Climate Action Project (PCAP), a foundation-funded organisation of Natural Capitalism Solutions in Boulder, Colorado, is proposing ways the states and Obama can move forward with clean energy innovation without depending on Congress. The group has made several recommendations to the executive in preparation for November’s global climate talks in Cancún, Mexico.
“Congress’s inability to cap US carbon emissions contributed to the failure to reach a global climate treaty last year in Copenhagen,” said William Becker, PCAP executive director.
“It now appears that Congress has failed again just months before international negotiators are set to reconvene. Congress has passed the ball back to President Obama. He should run with it,” Becker then observed.
Congress did cushion renewable energy from the worst of the slowdown with $110 billion in stimulus money approved in 2009. But industry advocates say it is not enough to keep the US on top in the international race for green jobs. They argue the sector needs clear federal policy to maintain growth. But it appears the 111th Congress will offer no such direction.
Obama Loses Face
Spencer Abraham, a former Secretary of Energy under the George W. Bush administration, writing for Politico, described Obama’s inability to win congressional Democrat support for a major energy bill in the current Congress as “a stunning defeat on what was considered a cornerstone issue of his domestic agenda”.
Congressional Democrats deserted their President for reasons of electoral “self-preservation”, as the potential burden of a new regulatory regime started to raise alarm among voters, he argues.
In the run-up to the mid-term elections the New York Times has reported that even 44 Democrats who voted against cap-and-trade legislation have been attacked as supporters of a “job-killing” agenda.
Yet Abraham argues that Obama must now seek an “energy win” – perhaps with a bill coupling renewable and nuclear energy – or risk perceived weakness on energy affecting other issues, especially if Republican opponents make solid gains in the mid-term elections.
Elisa Wood is US Correspondent for Renewable Energy World
Congressional Stops & Starts Since 2009
Senator John Kerry from Massachusetts and Senator Barbara Boxer of California proposed the Clean Energy Jobs and American Power Act (S. 1733) in September 2009.
The Kerry—Boxer bill includes a cap-and-trade programme to cut emissions 20% by 2020 and 83% by 2050. The bill does not contain a renewable energy or energy-efficiency portfolio standard. But it does call for greenhouse gas emission reduction goals for the entire economy, carbon dioxide storage, efficiency standards for buildings, and climate change adaption programmes.
The bill was placed on a Senate calendar of business, but many of its provisions are now part of later energy bills, making it obsolete.
Introduced in May 2009, the American Clean Energy and Security Act of 2009 (H.R. 2454), was proposed by Representative Henry Waxman of California and Edward Markey of Massachusetts.
Waxman—Markey offers a cap-and-trade plan designed to reduce GHG emissions by 83% from 2005 levels by 2050. At the same time, it creates a combined energy efficiency and renewable portfolio standard. The standard requires that 20% of electric demand be met through renewables and efficiency by 2020. It also requires a strategic plan to improve US energy productivity by at least 2.5% per year by 2012 and maintain the rate through 2030.
The House passed the bill on 26 June, 2009 with 219 in favour, with 212 against and 3 abstentions. It awaits Senate approval but stands little chance of moving forward since many of its provisions are in later legislation.
Later Energy Bills
In May 2010, Kerry and Senator Joe Lieberman of Connecticut proposed a bill similar to Waxman—Markey. But Democrats abandoned plans to pass a broader bill until September or after the November elections.
Concern over the BP oil spill in the Gulf of Mexico led to a scaled-down bill on 27 July that included reforms in offshore drilling. Democrats hoped the less complex legislation stood a better chance of passage.
The legislation promotes electric and natural gas powered cars and allocates $4.5 billion for state and federal recreational and public lands programmes.
Included in the bill is the Electric Vehicles Act of 2010, which establishes a plan for the deployment of electric vehicles, according to the GridWise Alliance. This Act includes provisions for training, technical assistance, and research and development programmes for electric vehicles.
When it appeared that Democrats did not have the 60 votes needed to pass the bill, Senate Majority Leader Harry Reid of Nevada on 3 August delayed a possible vote until later in the year.
A Tri-Partisan Future?
By late summer 2010 a tri-partisan bill was under discussion, dubbed such because it tries to reconcile the differences between all parties. The bill focuses heavily on job creation. It does not create cap-and-trade but could include a carbon tax. Observers said the bill could attract some Republicans, but may repel some House Democrats.