Win-Win: Crunching the RES Numbers

With the thermostat climbing to a baking 97 degrees Fahrenheit, the first Saturday in August was one of those oppressive Washington, DC summer days that either send residents slugging to some mid-Atlantic beach or hold them captive inside their air-conditioned homes. The work week had ended, the month of Congress’s annual summer recess had arrived, and members of the U.S. House of Representatives were anxious to hop on planes and head back to their districts.

But there was still work to be done. A vote on a 15% renewable energy standard (RES) was supposed to have come as early as the previous Monday or Tuesday, but it kept getting delayed for one reason or another, until finally the work week drew to a close with a late-breaking procedural squabble in the House that delayed the looming vote yet again.

It was a frustrating time for renewable energy advocates pushing for the all important RES [sometimes referred to as Renewable Portfolio Standard or RPS], which would require that utilities produce 15% of their electricity by using renewable sources. But those advocates could wait another day or two; after all, they had been waiting a decade.

The wait was worth it. On Saturday August 4, in a 241-172 vote (with 22 not voting) the House passed energy legislation containing the RES, sending the bill on to conference committee, a process in which the House and Senate iron out differences in their respective pieces of legislation. (The Senate has passed an energy bill that does not include an RES.)

With the conference committee the next step on a long road, the RES is a ways from being law, but still it’s difficult to overstate the significance of the event.

“[The] vote was a landmark referendum on the direction of the nation’s energy policy,” said AWEA Senior Director for Government and Public Affairs Gregory Wetstone. “For the first time ever, the House has endorsed a long-term commitment to homegrown renewable energy.”

With Congress returning in September, the 11th-hour vote in August sets the stage for an exciting fall in Washington. In addition to the conference committee process, the legislation has other hurdles to clear: the Bush administration has indicated its intention to veto the energy policy bill in its current form. As AWEA Legislative Director Jaime Steve said, “It’s important to keep in mind that—to use a baseball analogy—we are in the third or fourth inning of what we hope will be a nine-inning game with no rainout and no extra innings.”

AWEA and other renewable energy advocates will be hard at work doing everything they can to ensure that Congress ultimately helps guide the nation down the right path. Part of that work will involve conveying the “win-win” benefits of renewable energy.

“Studies show that shifting to renewable energy like wind and solar power can save consumers money while protecting our climate and promoting our national security,” Wetstone noted after passage of the bill.

Real Savings
With the RES in play this fall, the expected benefits of implementing this policy are likely to be debated as the energy bill moves to conference committee, and a discussion of cost is certain to occur. Those who are concerned about the fiscal effects of an RES often play up the higher capital cost of renewable energy compared to conventional power sources; however, they also tend to overlook the associated financial benefit from reduced expenditures on fossil fuel. Not only is an RES a matter of invaluable environmental and societal value, it’s a matter of savings. Quite simply, an RES is a win-win choice that America has the opportunity to make.

Here’s how the financial win works. In addition to the environmental benefits of pursuing renewable energy, an RES will reduce fossil fuel consumption, thereby reducing fuel expenditures and prices. This opportunity to push down fuel prices should be a welcome benefit within the electric sector, which faces rising fuel prices across all fuels types—a trend that is one of the leading causes of recent electricity rate increases. Recent requests by electric utilities to increase their rates in order to cover their higher fuel costs to run power plants have made this impact apparent.

The wind energy industry has been pleased to publicize the fact that it is now the second-fastest growing source for electricity. The first? Natural gas. More than ever, the U.S. is relying on natural-gas fired electricity generation, and because natural gas is the cleanest-burning fossil fuel, that trend is likely to continue in a carbon-constrained world. One challenge that more heavy reliance on natural gas brings, however, is that natural gas prices have risen.

The proposed RES can help counter that. With more generation coming from renewable sources such as wind and an efficiency element included in the legislation, the RES is expected to reduce demand for natural gas, for it will help soften natural gas supply constraints and can ease upward pressure on prices.

According to a recent report from gas and power research firm Wood Mackenzie, a 15% RES would reduce gas demand by 10%, leading to a price reduction of 15% to 20% over the next 20 years.

Thus, regardless of which states actually develop renewable resources, reduced natural gas fuel prices will be enjoyed by all fuel purchasers, especially given that natural gas is used throughout the country. While the electric sector is the largest consumer of natural gas, other natural gas users, such as those needing it for home heating and industrial applications, will also receive the benefit from lower prices.

Moreover, even those parts of the country not necessarily known for their vast wind resources such as the Southeast (although many of these places have biomass and other energy source potential) stand to benefit from this effect. A particular state might not have wind farms dotting its landscape, but it’s likely that it gets some of its electricity from natural gas-fired plants.

“Locally Grown” Power
There’s more good news. Understandably, the distribution of actual development of renewable resources has raised some concerns for regions that may not be well-endowed with a vast potential in a variety of renewable resources. First of all, it’s important to keep in mind that many states already must import natural gas, coal, and uranium from other states, or even other nations—to fuel their electric generating facilities.

This current interstate flow of fuel is a critical part of powering our nation. But it also means money is flowing out of individual states that could otherwise produce electricity from renewable resources available in state. As previously mentioned, nearly all regions of the country have access to some renewable resources that are eligible under the RES, which includes solar, biomass, geothermal and wind energy.

Furthermore, these renewable energy resources are actually available in more states than any conventional fuel resource. For example, our nation’s wind energy resource is widely dispersed and is currently produced in more states than any conventional fuel source. An RES, therefore, would ease the pressure on fossil fuel prices and increase the amount of “locally grown” power.

Back to Work
Congress, meanwhile, will be returning after Labor Day to what hopefully will be a somewhat cooler Washington and will once again be taking up the all-important RES legislation. Final action on the bill is not likely until October or even later. At that point, lawmakers will have a chance to create a win-win for everyone by endorsing this critical first step toward an increasingly renewable energy future.

Elizabeth Salerno is manager of policy analysis, and Carl Levesque is the communications editor, at the American Wind Energy Association. This article first appeared in Wind Energy Monthly, and was reprinted with permission from AWEA.  

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