After spending the last three weeks looking in depth at what is going on at the state level by examining California, Oregon, and West Virginia, we can now begin to unpack the federal clean-energy standard that is being proposed in Congress.
Last year, U.S. Sen. Jeff Bingaman sent a letter to the Energy Information Administration asking for a study on his proposed federal clean-energy standard. This law is similar to existing generation performance standards seen in states we’ve discussed, because it would gradually require America’s electric generators to have a percentage of their production come from qualifying fuel sources.
For example, the “Bingaman Clean Energy Standard” would require America’s electric generators to produce 45 percent of their electricity from qualifying fuel sources by 2015. Ultimately, the end goal is for 95 percent by 2050. Additionally, the law would grant full or partial credits for generation from eligible sources. One critical distinction, however, is that the Bingaman Clean Energy Standard would allow what is described as alternative compliance payments. Basically, a utility can choose to not comply, but would pay a penalty per megawatt-hour of generation.
Under the standard, a national marketplace is created for credit trading for generation performance standards. Similar to existing state and regional markets, under the Bingaman Clean Energy Standard, credits are awarded for 1 megawatt per generation from qualifying resources. Credits can be traded, banked, or sold to other utilities. The BCES credit scheme gives 1 full credit for new and existing generation from renewable sources. Likewise, it gives nuclear and hydroelectric generation 1 full credit as well for both new and existing generation. For natural gas generation, the BCES gives 0.95 credits, and gives coal generation 0.9 credits.
According to the Energy Information Administration’s study, the BCES would have a profound effect on the mix of fuels being used to generate electricity. For example, natural gas generation of electricity will be 34 percent higher in 2025, and 53 percent higher in 2035 than it would otherwise be. Nuclear generation would see 65 gigawatts of new capacity installed by 2035. And coal-fired generation, without the BCES in place, would continue to increase by 23 percent, where under the BECS, it would decrease by 41 percent. A lot of existing coal-fired generation would be retrofitted with carbon capture and sequestration equipment, with virtually no new coal generation being created or built.
As an aside, for Oklahomans this kind of a federal policy would greatly benefit our state. Increased utilization of natural gas would have a positive impact on our economy and especially the air we breathe. As we wrap up this series on the National Clean Energy Standard next time, we’ll talk more in depth about what a national standard might mean for you and I as regular consumers of power.
Jim Roth, a former Oklahoma corporation commissioner, is an attorney with Phillips Murrah P.C. in Oklahoma City, where his practice focuses on clean, green energy for Oklahoma.