U.S. States & Regions
States and regions across the country are adopting climate policies, including the development of regional greenhouse gas reduction markets, the creation of state and local climate action and adaptation plans, and increasing renewable energy generation. Read More
On June 11, Ohio governor John Kasich signed a new energy law that establishes one of the United States’ strictest regulatory frameworks for new natural gas drilling technologies. The law, S.B. 315, also makes cogeneration an eligible option for meeting the state’s target of 12.5 percent renewable energy generation by 2025. Other measures address smart grids and electricity pricing, natural gas vehicles, alternative fuel loans, and green building standards for state-owned buildings.
New Regulations for Natural Gas Drilling
Eastern Ohio’s deep shale formations may be among the largest natural gas reservoirs in the U.S., and the new law will regulate the horizontal drilling and hydraulic fracturing (commonly known as “fracking”) necessary to explore these resources. Fracking, in particular, raises concerns for its use of industrial chemicals and potential impacts on water quality.
S.B. 315 addresses those concerns with requirements for the disclosure of chemicals and additives used in all stages of the drilling and fracking process. It also requires developers to conduct tests of water wells in the vicinity before drilling a new horizontal well or any well in an urbanized area. Developers must also identify in their permit applications all water sources that will be used for drilling.
Supported by the oil and gas industry, the law has met with criticism from environmental groups, since companies can avoid disclosing chemicals by claiming them as proprietary trade secrets. Other objections are that operators do not have to disclose chemicals until up to sixty days after the completion of drilling, and the lack of public commenting throughout the permit application process.
Cogeneration to Qualify as Renewable Energy
The new energy law reclassifies cogeneration as a renewable energy technology under Ohio’s alternative energy portfolio standard (AEPS). The portfolio standard, which governs the state’s electricity generation mix, includes separate targets of 12.5 percent each for both renewable (such as wind and solar) and advanced energy (such as clean coal or nuclear) generation by 2025. Previously, cogeneration counted toward the advanced energy target, but because the advanced energy standard lacks interim targets, electric utilities made little progress in developing new cogeneration projects.
To encourage faster development, S.B. 315 revises the AEPS to allow certain kinds of cogeneration to count toward the renewable energy standard, which does have yearly interim targets. Specifically, utilities can use electricity generated from waste energy recovery (WER) systems to fulfill either the renewable target or a separate energy efficiency standard, but not both. Under the new definition, Ohio is the only state to classify electricity generation from waste heat as a renewable energy source.
Critics worry that including WER systems under the renewable energy standard will undermine the development of renewable energy sources such as wind and solar in Ohio. Wind developers argue that the incremental targets are not ambitious enough to provide room for both renewables and WER systems, and may damage the prospects of several wind energy projects that are already underway.
Other Clean Energy Measures: Transportation, Grid, and Buildings
Finally, the new law includes several other clean energy measures, such as one supporting the wider adoption of natural gas vehicles. The Public Utilities Commission of Ohio (PUCO) and Ohio Department of Transportation (ODOT) will conduct a study on the cost-effectiveness of compressed natural gas vehicles, including the conversion of the state’s fleet to run on natural gas. The law also authorizes ODOT to work with other states on a regional study of the development of compressed natural gas infrastructure for transportation.
In addition, the law authorizes PUCO to undertake several electricity-related initiatives. The commission will periodically review any green pricing programs offered by utilities. It will also undertake a study on how increased energy efficiency, demand response, generation, transmission, and emerging technologies can increase opportunities for consumer choice. In addition, PUCO will review the electricity distribution and transmission infrastructure and evaluate the need for improvements, additions, and upgrades.
S.B. 315 also updates and expands several green-building codes for state-owned buildings. The law requires that cogeneration be considered as a potential energy source as part of the lifecycle cost analysis for state-funded facility projects with a construction cost of $50 million or more. The new law also expands the definition of energy conservation measures to include tri-generation systems (which produce electricity and both heat and cooling), renewable energy systems producing electricity for the building, and the optimization of computer servers, data storage devices, and other information technology infrastructure.
For more information:
Climate Techbook: Cogeneration / Combined Heat and Power (CHP)
Climate Techbook: Natural Gas
Ohio General Assembly: S.B. 315
Ohio.gov: Senate Bill 315 – Improving Regulatory Framework
Bricker & Eckler LLP: Ohio Senate Bill 315: A Summary of Governor Kasich’s Energy Bill
Midwest Energy News: Ohio could pit cogeneration against wind farms
U.S.’s first mandatory, market-based program to reduce greenhouse gas emissions reports 23 percent reduction
The Regional Greenhouse Gas Initiative (RGGI) is undertaking a review of its first compliance period, which ran from 2009 through 2011 and saw successful reductions in greenhouse gas emissions below its initial targets. The power sector of nine Northeast and North Atlantic states reported annual average carbon emissions of 126 million short tons during the three year-period, representing a 23 percent reduction compared to the previous three-year span of 2006 through 2008.
Overall, 206 out of the 211 power plants within RGGI's jurisdiction achieved their compliance objectives. Emission levels in the first compliance period were 33 percent below the program's annual cap of 188 million short tons.
The decline in carbon emissions was achieved without a comparable decline in the total quantity of electricity consumption, which dropped just 2.4 percent during the same timeframe. The reasons for the emission reduction include a greater use of natural gas for electricity generation instead of coal, investment in energy efficiency, and the increased use of renewable energy as part of states' renewable portfolio standards.
RGGI includes nine states of the Northeast and Mid-Atlantic and is the United States' first mandatory, market-based program to reduce carbon emissions through cap and trade. Regulated entities are required to purchase and hold one allowance, or credit, for each short ton of carbon dioxide they emit. The program limits the total amount of emissions by issuing a set number of allowances (the cap). Entities whose emissions exceed their allowances can purchase more from those that emit less (the trade), creating an incentive to reduce emissions for those that can do so cheaply. The cap can be decreased each year to reduce overall emissions.
In addition, RGGI has created many benefits for participating states, generating 16,000 job-years of work and $1.6 billion worth of economic activity over the three years, according to an Analysis Group study. Energy efficiency improvements funded through RGGI allowance auctions will also help customers save $1.3 billion on their electricity, natural gas, and heating bills over the next decade.
The second compliance period extends from 2012 through 2014, with an annual emissions cap of 165 million short tons. Starting in 2015, the cap will be reduced by 2.5 percent each year, for a total reduction of 10 percent from 2009 levels by 2018. But because the program has already outperformed this target, six out of the nine RGGI states are now considering tightening the cap for even further reductions.
For more information:
- The industrial sector directly consumed 27 percent of natural gas in the United States in 2010.
- Newly abundant and low-cost domestic sources provide economic benefits to industry using the fuel for power, heat, and as a feedstock.
- The Energy Information Agency projects total natural gas consumption for industrial heat and power to rise by 6.25 percent between 2012 and 2021 before declining to lower but steady levels through 2035, and it projects natural gas feedstock use to rise by 25 percent between 2012 and 2035.
- Boiler upgrades and replacements can offer measurable reductions in greenhouse gas emissions through efficiency improvements as well as displacing coal with gas.
- Combined heat and power systems offer the potential to efficiently use natural gas while reducing greenhouse gas emissions.
- Many industrial activities are energy- and emissions-intensive, but some uses of natural gas as a feedstock emit very few greenhouse gases.
|Figure 1: Natural Gas Use in the Industrial Sector (Industry Overall)|
|Source: EIA Manufacturing Energy Consumption Survey (MECS), 2010|
Overall, the largest direct use of energy by the industrial sector is for process heating, which is the production of heat directly from fuel sources, electricity, or steam to heat raw material inputs during manufacturing. In 2010 process heating using all fuel sources produced 315.4 million metric tons of C02e, which was 40 percent of the total emissions for the industrial sector. Natural gas is the dominant fuel used to generate heat, and process heating accounts for 42 percent of the natural gas use in the industrial sector (see Figure 1).
Industrial boilers for heat and steam are another significant user of natural gas, and, while some are fueled by coal or other fuel, the dominant fuel source is natural gas. Boilers are commonly used for a variety of purposes by chemical manufactures, food processors, pulp and paper manufactures, and the petroleum and coal derivatives industries (including chemicals, coke, and coal tar). Twenty-two percent of the natural gas used in manufacturing is consumed in boilers. As with process heating, industrial boilers are dependent on natural gas, with 83 percent of boilers running on the fuel (Figure 2).
Often, power generation and process heating can be more efficiently accomplished by coproducing heat and power from a single unit with technology commonly called combined heat and power (CHP). Additional efficiencies and emission reductions are also achieved through the generation of electricity onsite, because it avoids transmission loss. In 2010, 14 percent of natural gas used in manufacturing was consumed by CHP and other power systems. As illustrated in Figure 2, natural gas dominates the fuel used for CHP. Nationwide, the added efficiencies of CHP systems avoid the annual emission of 35 million metric tons of CO2e.
|Figure 2: Direct Consumption of Fuels in the Industrial Sector|
CHP & Other Power
|Source: EIA Manufacturing Energy Consumption Survey (MECS), 2010|
For the chemicals industry, natural gas also serves a unique function, providing a chemical feedstock in the form of methane and liquids found in the natural gas, including ethane, propane, and butane. These liquids, especially ethane, are processed and transformed to become additional intermediate and final products. Chemical companies are particularly heavy users of natural gas as a feedstock and may consume up to two-thirds of their delivered natural gas for this purpose. While U.S. companies are reliant on low-cost natural gas liquids as a feedstock, European competitors use more expensive, oil-based naphtha. In 2010, for example, domestic ethane sold at half the price of imported naphtha in Europe, and, consequently, U.S. chemical manufactures have reaped a competitive advantage in international markets for intermediate and final goods. The emissions implications of using natural gas as a feedstock are very different from its other uses because feedstock use transforms hydrocarbon molecules into other products, rather than combusting them. Consequently, when natural gas is used as a feedstock, very few greenhouse gases are emitted.
Potential for Expanded Use in the Industrial Sector
Increased availability and low prices of natural gas have significant implications for domestic manufacturing, which has historically been concerned about supply availability and price volatility. Recently, abundant supply and low prices have led to an increase in domestic manufacturing, creating new jobs and economic value. Numerous companies have cited natural gas supply and price in announcing plans to open new facilities in the chemicals, plastics, steel, and other industries in the United States. In the past few years, the number of firms disclosing the positive impact of new gas resources for facility power generation and feedstock use to the Securities and Exchange Commission has increased substantially. In 2010, exports of basic chemicals and plastics increased 28 percent from the previous year, yielding a trade surplus of $16.4 billion. If the expectation that low prices will continue is correct, these economic benefits would be significant over the long term. A study by the American Chemistry Council, for instance, estimates that a 25 percent increase in ethane supplies would yield a $32.8 billion increase in U.S. chemical production. Industry, however, needs more than just abundance and low prices to maintain use of natural gas. Price stability is necessary to encourage long-term investments in industry, and increased natural gas supplies also have the potential to stabilize prices.
|Figure 3: CHP versus Conventional Production|
|Source: EIA Manufacturing Energy Consumption Survey (MECS), 2010|
Potential for Industrial Sector Emission Reductions
If supply remains robust and prices low and stable, the U.S. industrial sector is likely to reap substantial economic benefits from the increased availability of low-cost natural gas. Even as the sector expands, there are opportunities to reduce its emission intensity. Improving the efficiency of industrial boilers is one such opportunity. Boilers tend to have a low turnover rate, and very often older units are less efficient than newer ones. The pre-1985 fleet of boilers has an efficiency rate of between 65 percent and 70 percent; while new boilers have efficiency rates of between 77 percent and 82 percent and new, super–high-efficiency units can reach efficiency rates of up to 95 percent.
A Massachusetts Institute of Technology (MIT) analysis found that replacing older natural gas boilers with high-efficiency or super-high-efficiency units would decrease CO2 emissions by 4,500 to 9,000 tons or more per year per boiler. The analysis also found a strong economic incentive to make these replacements, highlighting annualized monetary savings of 20 percent (given certain assumptions, including 2010 natural gas prices) with a payback period of 1.8 to 3.6 years for the new equipment.
|Figure 4: Projected Natural Gas Consumption (2009-2035) in…|
Projected Total Industrial Consumption of Natural Gas for Heat and Power
Projected Energy Consumption of Natural Gas for Heat and Power per Dollar of Shipments
Projected Total Industrial Consumption of Natural Gas Liquids Feedstock
Projected Energy Consumption Natural Gas Liquids Feedstock per Dollar of Shipments
Projected Total Industrial CHP Generation for All Fuels through 2035
|Source: EIA AEO 2012 Early Release, 2012|
While natural gas is the most commonly used fuel source for industrial boilers, 17 percent of boilers use coal or other fuels, as shown in Figure 2. Because of the air pollutants from these coal-fired boilers, these boilers are now subject to the Environmental Protection Agency’s (EPA) 2012 Mercury and Air Toxics Standards. MIT conducted a separate analysis to determine the results of replacing the affected coal boilers with efficient or super-high-efficiency natural gas boilers (these natural gas boilers are not regulated under the new EPA rule). This analysis found that replacement with natural gas boilers would reduce annual CO2 emissions by about 52,000 to 72,000 tons per year per boiler.
Increasing the use of CHP also has potential to reduce emissions. A 2008 Oak Ridge National Laboratory (ORNL) study analyzed the total U.S. energy system and calculated that increasing CHP’s share of total U.S. electricity generation capacity from 9 percent in 2008 to 20 percent by 2030 would lower U.S. GHG emissions by 600 million metric tons of CO2 compared to business as usual. Another study, by McKinsey & Company in 2009, sought to estimate the potential for expanding CHP by 2020 through net present value-positive investments. McKinsey estimated that the potential exists in the United States for an additional 50.4 GW of CHP capacity by 2020, which would avoid an estimated 100 million metric tons of CO2 emissions per year compared to business as usual. McKinsey found that 70 percent of the potential cost-effective incremental CHP capacity was through large-scale industrial cogeneration systems greater than 50MW.
While CHP results in few GHG emissions, barriers currently limit its application. Utilities often cite safety concerns as a barrier to deployment, particularly a fear of miscommunication between CHP operators and utilities in the event of an emergency, which utilities say could lead to dangerous situations where line workers are not certain whether lines are energized or not. Utilities may also have concerns about liability and risk associated with the interconnection between CHP operations and the grid, as utility employees may be affected by safety and technical decisions of CHP operators made independent of utilities. Like issues of safety, many utilities are concerned about the need to provide backup power to industrial facilities in case CHP systems are taken offline or are otherwise unavailable. For utilities, the ability to provide backup power to these facilities requires investments in capacity, and to pay for this capacity, utilities often charge higher, discriminatory rates and interconnection fees to CHP operators to compensate for these necessary investments.
In addition to these concerns, regulatory and corporate policies have inhibited the growth of CHP capacity. Power sector regulation in many states leads many utilities to view CHP as unprofitable and, accordingly, discourages its use. However, some innovative policy approaches can overcome this problem. One approach is decoupling, which eliminates the connection between utility sales volume and profitability. By doing so, decoupling makes CHP measures profitable to utilities, and, therefore, more likely to gain their support. Another potential policy solution is the implementation of lost-revenue adjustment policy, which compensates utilities for revenues lost because of efficiency measures. It allows utilities to collect a charge from customers to account for efficiency-related revenue losses. Lost-revenue adjustment policies also have the potential to encourage CHP. Other policy options include state incentives designed to encourage the use of CHP. State-level policies include standardizing interconnection guidelines, tax incentives, and inclusion of CHP as a compliance mechanism for clean energy standards. Some states have enacted these policies, but, as with many state-led policies, there is a diversity of approaches to, and success with, implementation.
Rooftop solar received a major boost in California with a new ruling from state regulators on May 24. The California Public Utilities Commission (CPUC) voted unanimously to reinterpret a cap on its net-metering program, more than doubling the potential amount of rooftop solar in the state.
Net metering provides a financial incentive for small businesses and homeowners to install energy generation on-site, usually solar photovoltaic panels. Any electricity in excess of customer usage is sold back to the utility at the retail rate – higher than the wholesale rate earned by traditional generators. This is credited to the customer's bill to offset consumption from the grid when the customer's electricity demand exceeds their own generation.
However, the program was approaching a cap that the utilities were allowed to set. This limited each utility’s available net-metering capacity to five percent of its "aggregated customer peak demand." Utility companies had previously interpreted this to mean their highest overall demand on one particular day. Using this definition, Pacific Gas & Electric (PG&E), the state’s largest electric utility, was expected to reach its limit in 2013, after which it would no longer accept participants. The new decision expands the cap by defining "aggregated customer peak demand" as the sum of the highest electricity demand of each utility customer. This more than doubles the potential size of the program from the current 1.2 gigawatts (GW) to 4 GW, according to Environment California. This is about six percent of California’s net summer capacity.
Utilities oppose the expansion, arguing that by paying less or no money on their bills, net-metering participants are passing on their fair share of system costs onto other customers. These costs include payments for transmission grid upgrades and maintenance, low-income customer assistance programs, and municipal electricity systems. PG&E has 65,000 net-metering customers out of a total of 5.1 million.
Clean energy supporters and the solar industry say that the program has been critical in driving development of the industry. The net-metering program has already brought in over one billion dollars of investment to California. In a statement, CPUC President Michael Peevey said, "Today’s decision ensures that the solar industry will continue to thrive for years to come, and we are fully committed to developing a long-term solution that secures the future of the industry in California."
The CPUC will commission a study analyzing the costs and benefits of solar net metering, including its impact on nonparticipants. Unless new policies are adopted, the net-metering program will be closed to new customers on January 1, 2015.
California leads the U.S. in installed solar energy capacity, whether it’s distributed rooftop installations or utility-scale solar farms. Indeed, PG&E's net-metering customers alone represent one-third of U.S. total rooftop solar capacity. In 2011, California installed 542.2 megawatts of solar photovoltaic panels, the highest amount in the nation and more than doubling its existing capacity in 2010. Much of this is due to the state’s plethora of policies, rebates, and incentives at all levels of government, from utility loans to city-level rebates to the $3.2 billion state-wide California Solar Initiative. In addition, the state is home to over 1,000 companies in the solar industry, employing more than 25,000 people.
For more information:
CPUC Press Release: CPUC takes action to support solar by clarifying net-metering cap
Wall Street Journal: California Expands Rooftop Solar-Power Program
Solar Energy Industries Association: California Solar Fact Sheet (pdf)
Clean Technica: 2011 U.S. Solar Market Report – Top 7 Findings & Charts
June 6, 2012
Contact: Rebecca Matulka, 703-516-4146, firstname.lastname@example.org
Report Highlights Climate Change Risks to Key Gulf Coast Industries
Recommends Steps to Reduce Impacts on Region’s Energy and Fishing Sectors
Climate change is already having major impacts on the Gulf Coast region and action is needed to protect its vital industries from the likely impacts of continued warming, according to a new report from the Center for Climate and Energy Solutions (C2ES).
The report, Impacts and Adaptation Options in the Gulf Coast, examines the risks that climate change poses to the region’s energy and fishing industries, and to its residents and local governments. It concludes that climate impacts are already being felt across these sectors, and outlines measures that can be taken to adapt to the growing risks, reducing the region’s vulnerability and the costs associated with future impacts.
The convergence of several geographical characteristics—an unusually flat terrain both offshore and inland, ongoing land subsidence, dwindling wetlands, and fewer barrier islands than along other coasts—make the Gulf Coast region especially vulnerable to climate change. Among the impacts and risks cited in the report:
- Over the past century, both air and water temperatures have been on the rise across the region;
- Rising ocean temperatures heighten hurricane intensity, and recent years have seen a number of large, damaging hurricanes;
- In some Gulf Coast locations, local sea level is increasing at over ten times the global rate, increasing the risk of severe flooding; and
- Saltwater intrusion from rising sea levels damages wetlands, an important line of coastal defense against storm surge and spawning grounds for commercially valuable fish and shellfish.
“Nowhere else in the U.S. do we see the same convergence of critical energy infrastructure and high vulnerability to climate change,” said C2ES President Eileen Claussen. “These risks are not borne by the Gulf Coast alone. A major energy supply disruption, for instance, would be felt nationwide. We must respond on two fronts: We have to work harder to reduce the greenhouse gas emissions causing climate change. And we must take steps, in the Gulf Coast and elsewhere, to prepare for the impacts that can’t be avoided.”
The report’s lead author is Hal Needham, a researcher at Louisiana State University’s Southern Climate Impacts Planning Program (SCIPP) and an expert on hurricane storm surges in the Gulf Coast. The co-authors are David Brown, an assistant professor in LSU’s Department of Geography and Anthropology, and Lynne Carter, associate director of SCIPP.
In their analysis of the Gulf Coast’s energy industry, which comprises about 90 percent of the region’s industrial assets, the authors found significant risks from hurricanes, sea level rise, rising temperatures and drought. The report noted the considerable damage the energy industry sustained from recent hurricanes in 2004, 2005 and 2008. Thirty percent of the nation’s refineries are located in Texas and Louisiana, and Louisiana Offshore Oil Port in Port Fourchon is the country’s only deep-water oil import facility. At its current elevation, Louisiana Highway 1, the only access to the port, is projected to be flooded 300 days a year by 2050.
For the region’s other major industry, fishing, the report details major infrastructure risks, especially relating to coastal docking and fish processing. Fish and shellfish populations are also vulnerable to climate impacts, with a combination of warmer water, ocean acidification, and excessive runoff from the Mississippi River combining to increase the risk of large-scale changes in the Gulf ecosystem.
The authors emphasize that advance planning can reduce the region’s vulnerability and the costs incurred from future climate impacts.
For the energy sector, adaptation strategies include learning from recent hurricanes to more rigorously assess vulnerabilities; strengthening design standards for drilling platforms and other infrastructure; and undertaking projects such as the planned raising of sections of Highway 1 to Port Fourchon. To reduce vulnerability in the fishing industry, options include strengthening docking facilities and other infrastructure subject to storm surges, and limiting fertilizer use upstream on the Mississippi River to reduce the incidence of hypoxia (oxygen-starved waters) in the Gulf.
“Climate change is already taking a toll on the Gulf Coast, but if we act now to become more resilient, we can reduce the risks, save billions in future costs, and preserve a way of life,” said Needham. “The Gulf Coast is one of the first regions to feel the impacts of climate change. It only makes sense to be a first mover on climate adaptation as well.”
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
Impacts and Adaptation Options in the Gulf Coast
by Hal Needman, David Brown, and Lynne Carter
The central and western U.S. Gulf Coast is increasingly vulnerable to a range of potential hazards associated with climate change. Hurricanes are high-profile hazards that threaten this region with strong winds, heavy rain, storm surge and high waves. Sea-level rise is a longer-term hazard that threatens to exacerbate storm surges, and increases the rate of coastal erosion and wetland loss. Loss of wetlands threatens to damage the fragile coastal ecosystem and accelerates the rate of coastal erosion.
These hazards threaten to inflict economic and ecological losses in this region, as well as loss of life during destructive hurricanes. In addition, they impact vital economic sectors, such as the energy and fishing industries, which are foundational to the local and regional economy. Impacts to these sectors are also realized on a national scale; Gulf oil and gas is used throughout the country to heat homes, power cars, and generate a variety of products, such as rubber and plastics, while seafood from the region is shipped to restaurants across the country.
This report reviews observed and projected changes for each of these hazards, as well as potential impacts and adaptation options. Information about the scale and relative importance of the energy and fishing industries is also provided, as well as insight into potential vulnerabilities of these industries to climate change. This report also identifies some adaptation options for those industries.
On April 14, 2012, Florida enacted H.B. 7117, the state’s first comprehensive energy law in four years. Passing with overwhelming bipartisan majorities in the House and Senate, the law includes several provisions for clean energy, including a renewal of renewable electricity production tax credits that were allowed to expire in 2010. Independent analysis suggests the law’s package of incentives will support around 3,000 jobs in all economic sectors and generate tax revenue that will match and exceed the cost of the incentives within a three year window.
Among the law’s key provisions are:
- A production tax credit of $0.01 per kilowatt-hour of renewable electricity. For fiscal year 2012-2013, up to $5 million of credits may be claimed, while $10 million of credits will be available annually from fiscal year 2013-2014 through fiscal year 2016-2017.
- An investment tax credit for capital costs, operations and maintenance, and research and development costs related to investment in the production, storage, and distribution of biodiesel, ethanol, and other renewable fuels. Up to $10 million of credits will be available annually from July 2012 to July 2016.
- Mechanisms to support residential and commercial energy efficiency improvements, rebates for renewable energy technologies, and rules for awarding the bill’s incentives.
- Rescission of a directive for the Public Service Commission to develop a Renewable Portfolio Standard of 20% renewable energy by 2020.
- The new law also removes some barriers to electric vehicle charging by defining it as a public service.
Florida Department of Agriculture and Consumer Services Commissioner, Adam H. Putnam, said, “The bill offers technology-agnostic tax credits to businesses that demonstrate investment in energy production and create jobs in Florida. Any form of renewable energy is eligible; the market will determine how investments are made.” Overall, supporters of H.B. 7117 view it as an important step for establishing a long-term energy policy in Florida and encouraging investment in renewable energy.
My C2ES colleague, Judi Greenwald, will be testifying on Thursday at a hearing of the Senate Energy and Natural Resources Committee on the Clean Energy Standard Act of 2012, a bill written by Sen. Jeff Bingaman (D-NM), the committee chairman. As mentioned in my previous blogs (The Bingaman Clean Energy Standard: Let the Conversation Begin and The Bingaman Clean Energy Standard: What is "Clean"?) and in our primer on the design of a clean energy standard (CES), we think a CES holds a lot of potential for maintaining a diverse energy mix, advancing clean energy technology and associated industries, and reducing the environmental footprint of the electric power sector—including the sector's greenhouse gas emissions, which account for about one third of the U.S. total.
As Judi will attest, we also think Sen. Bingaman's bill is a great start, and balances the multiple objectives we would have for such a measure. On Thursday, we get to hear what a few other people think.
Watch this space Thursday morning as I live blog from the hearing and post updates below.
Update May 17, 11:58 am: It’s a standing-room-only crowd at this morning’s hearing before the Senate Energy and Natural Resources Committee on Senator Jeff Bingaman’s proposal for a federal clean energy standard.
Senators in attendance: Committee chairman Sen. Bingaman (D-NM), top committee Republican Sen. Murkowski (R-AK), Barrasso (R-WY), Cantwell (D-WA), Coons (D-DE), Corker (R-TN), Franken (D-MN), Manchin (D-WV), Risch (R-ID), Shaheen (D-NH), Udall (D-CO), Wyden (D-OR)
Here are some highlights of the question-and-answer session during the hearing’s first panel, with witnesses David Sandalow, Assistant Secretary for Policy and International Affairs at the U.S. Department of Energy, and Dr. Howard Gruenspecht, Acting Administrator of the Energy Information Administration:
Sen. Bingaman pointed out that EIA projects that electricity rates would increase by 2035 under the CES, but then asked how would electricity bills will be affected. Mr. Sandalow answered that the modeling shows that the average household energy bill would actually decline by $5 a month by 2035, in large part because of the energy efficiency promoted by the bill. Dr. Gruenspecht agreed.
Sen. Murkowski asked whether the cost of renewable energy being used by federal agencies under the Energy Policy Act of 2007 is an indication of the costs that would be seen under Sen. Bingaman’s bill. Mr. Sandalow pointed out that a key difference between Sen. Bingaman’s bill and the 2007 law is that the CES would give credit not only for renewable energy, but for nuclear power, natural gas, and clean coal, which would lead to lower prices than renewable energy alone.
Sen. Barrasso asked whether the Obama administration would rescind greenhouse gas regulations promulgated under the Clean Air Act if Sen. Bingaman’s bill were enacted. Mr. Sandalow said the administration would not support such an amendment to the Clean Air Act. For the record, C2ES believes that if a CES, or any other measure, led to significant reductions in GHG emissions from a given economic sector, we should be open to using that measure rather than the existing provisions of the Clean Air Act that pertain to that sector.
Sen. Franken suggested that it might be worth setting aside a fraction of the bill’s requirement for clean energy specifically for renewable energy. In fact, while most states have renewable energy standards in place, four—Michigan, Ohio, Pennsylvania, and West Virginia—have alternative energy standards, similar to Sen. Bingaman’s clean energy standard proposal, and each of the four takes an approach that favors renewable energy sources over the other qualifying clean energy sources.
Update May 17, 1:55 pm: Here are some quick notes on the second panel of this morning’s hearing. The room is still full even though many of the Senators and journalists have left—thus missing a discussion on preemption that was arguably the most noteworthy exchange of the entire hearing.
After the opening statements, Senators Bingaman and Murkowski had an extended back-and-forth with the panelists about the overlap between the Bingaman bill and other regulatory programs. The panelists offered a range of views, with a couple supporting preemption of the Clean Air Act authority. C2ES’s Judi Greenwald expressed a more nuanced view:
The key issue is environmental results. If a CES is ambitious enough, and can achieve greater environmental benefits than we can get under existing Clean Air Act Authority, it might make sense to consider replacing some Clean Air Act provisions with a CES. However, we need to be very cautious. The Clean Air Act has very broad authority to address GHG emissions throughout the economy and the CES only applies to power plants. We would need to ensure that EPA maintains its authority to continue to make progress in other sectors, for example, as with the successful greenhouse gas standards for vehicles.
Perhaps the biggest obstacle to exploring this issue is the deep partisan divide over EPA and the Clean Air Act. With members of Congress calling for an evisceration of EPA and the Clean Air Act, there is a legitimate concern that opening up the Act for an ostensibly narrow revision would lead to a gutting of provisions having nothing to do with greenhouse gases.
On another topic, Sen. Franken discussed Minnesota’s energy efficiency resource standard, and asked whether incentives for energy efficiency could be incorporated into the Bingaman bill. Judi Greenwald pointed out that many of the bill’s features would indeed promote energy efficiency: crediting of combined heat and power, the use of revenues raised through the alternative compliance payment, and the very structure of the proposed standard—it would be set as a percentage of total electricity production; if electricity use goes down, the requirement is easier to meet.
One thing we wish we could've said:
During the first panel, Sen. Corker said carbon capture and storage (CCS) will be broadly deployed when donkeys fly. Sen. Manchin, who takes a decidedly more favorable view towards CCS, was nevertheless concerned that the bill does not promote CCS.
Here's what we would have said, had they raised those points during the second panel:
While EIA projects that CCS is not deployed under the bill, it could be. CCS could play a bigger role under this bill if we can bring down its costs. There are a number of options for doing that. For example, C2ES co-convenes the National Enhanced Oil Recovery Initiative, which is calling for a federal tax credit to capture and transport CO2 from power plants and industrial sources for use in enhanced oil recovery. In addition to driving a lot of domestic oil production, and reducing CO2 emissions, it would generate additional revenue to cover the cost of CCS. We would expect that as CCS costs come down, it would enable coal to have a bigger role. A CES could help in other ways as well. AEP put the Mountaineer project on hold and withdrew from its partnership with DOE on this project because regulators in several states could not justify the expense for a technology that is not required by law. The CES could make the case for projects like Mountaineer to go forward.
Keynote speech by Eileen Claussen, President of the Center for Climate and Energy Solutions
11th Annual Conference on Carbon Capture, Utilization and Sequestration
May 1, 2012
Thank you very much. It is a pleasure to be here in Pittsburgh. And I want to thank Exchange Monitor Publications and Forums, together with the Department of Energy and the National Energy Technology Laboratory and their partnering organizations, for convening this very timely and very important conference.
Everything is so well organized and the breakfast spread was so perfect and so tantalizing … for a moment I thought I was at an event put together by the General Services Administration.
I also congratulate you for putting added emphasis this year on the utilization of carbon emissions and for changing the title of the conference to reflect this … Now it can officially be said that this is the event that put the “you” in CCS. If only we could add an “A” word to the end and make it CCUSA, then we could add some patriotic flair to this whole endeavor.
In all seriousness, I want to talk with you today about why CCS (or any acronym we choose to employ for it) is so important … not just for the future of fossil fuels—but also for the future of this country and its efforts to get a handle on the twin challenges of energy and climate change.
And I also want to discuss one of the most promising technologies available for making large-scale CCS a reality. I am talking, of course, about CO2-enhanced oil recovery, or CO2-EOR, which is an issue that my organization has been working intently on as a co-convener of the National Enhanced Oil Recovery Initiative.
Whether you spend the bulk of your waking hours worrying about the potential dangers of climate change or not, CO2-EOR makes a huge amount of sense for a number of reasons that I intend to go over later in my remarks. But first I want to talk about why we are even having this conversation and why the United States and the world must finally get serious about taking full advantage of big opportunities CO2-EOR.
When it comes to energy and climate, the United States stands at a crossroads today. Indeed, we are standing there with the rest of the world. At this crossroads, we have a choice to make. We can continue with a business-as-usual or status quo approach to energy and climate issues. If that’s what we choose, we’ll continue to face the same questions and the same concerns not just about the environment and climate change but about energy-related risks to our national security, our economy and jobs, and more.
Or we can choose a new road to the future--that protects our economy, our security and our climate for decades to come.
The environmental case for doing this is compelling enough. According to most scenarios, global emissions of greenhouse gases need to peak by 2015 in order to have a reasonable chance of limiting global warming to no more than 2 degrees Celsius. This is the level where many scientists say we can manage the risks of climate change, but there is considerable debate even on this point and some think we will already be flirting with disaster at 2 degrees Celsius.
Whatever the case, 2015 is just three years away. Are emissions showing any signs of peaking? Not even close … After a brief downturn due to the recession, newly released figures from the EPA show that U.S. emissions resumed their upward march in 2010, rising by 3.2 percent compared to 2009. And global emissions are projected to grow 17 percent by 2020, and 37 percent by 2035. Under that scenario, we could see average global temperatures rise 3 to 4 degrees Celsius by 2100.
But, even if you are an ardent skeptic of the science of climate change or of our ability to dramatically reduce our greenhouse gas emissions, the energy case should be motivation enough for abandoning the status quo and following a new and different road to the future.
What do we care about? Reliability. Affordability. Security. Reduced environmental impact. These have to be the hallmarks of U.S. energy policy going forward, and carbon capture and storage can and must be an important component of that policy. It provides us with the means to continue using fossil fuels in a carbon–constrained future. It is especially critical for producing electricity from both coal and natural gas, while simultaneously reducing greenhouse gas emissions.
Coal, of course, has the most at stake in this discussion. Coal, in fact, is at a crossroads itself. The latest figures from the U.S. Energy Information Administration confirm that coal’s share of U.S. electricity generation is decreasing.
In 2006, coal-fired generation accounted for more than half (50.4 percent to be exact) of the total generation mix in this country. By the end of 2011, that figure had declined to 43.4 percent of the mix, a drop of 7 percentage points. The biggest factor in coal’s relative decline, of course, is dropping natural gas prices. According to EIA, natural gas prices are forecast to remain below $5 per million BTUs for the next 10 years. This is why we’re seeing so many new natural gas power plants. EIA’s latest estimates for 2011 and 2012 show around 20 gigawatts of added capacity planned for natural gas versus around 9 gigawatts for coal. Add to this the spare capacity of existing gas-fired power plants that were built to generate electricity during the daytime hours only and you can see the challenges facing coal.
New EPA rules also pose challenges for coal. The new Mercury Rule alone, which was issued last December, will affect 1,325 units at 525 power plants of all types around the United States. Some of these plants are more than 50 years old, and companies may retire older plants rather than paying to install new pollution control equipment.
In addition, there is EPA’s Cross-State Air Pollution Rule (CSAPR) and, on the industrial side, the 2011 rule imposing new emissions reductions requirements on coal-fired boilers. And most notably, of course, earlier this spring the EPA proposed the first-ever national standards for limiting greenhouse gas emissions from new power plants. In order to comply with the rules, new plants would have to install carbon capture and storage technologies. There is essentially no other way for these plants to reduce their emissions to the level required under this proposal.
After detailing all of these challenges for coal, I am inclined to ask the question, “Other than that, Mrs. Lincoln, how did you enjoy the play?”
The proposed GHG rules make it official: In order to keep coal’s share of the U.S. energy mix from declining further, we need to throw out old ways of thinking. We need to think big. This is not just about trying to compete with natural gas on price; it is about embracing new ideas and new technologies to ensure that coal can continue as a fuel of choice in a world that, whether you like it or not, will become increasingly focused on limiting and reducing carbon emissions.
Coal alone is responsible for 28 percent of U.S. greenhouse gas emissions. Worldwide, 43 percent of CO2 emissions from fuel combustion come from coal. Clearly, something has to give. In order for the world to get a handle on the climate problem, and in order for coal to hold onto its place as a major energy source in the decades to come, we need to show – and very quickly – that it is possible to achieve substantial cuts in emissions from coal-fired power generation.
In other words, we need to find a low-carbon solution for coal. And coal is not our only challenge – we need all the low-carbon and carbon-free technologies we can get. The good news about natural gas is that it generates half of the emissions of coal when used as a fuel source. But that’s also the not-so-good news about natural gas; it still generates substantial emissions, and in order to achieve the level of reductions that will reduce the risk of climate change, we need CCS for natural gas as well as for coal.
The potential for CCS to reduce emissions is undeniable. Studies show that CCS technology could reduce CO2 emissions from a coal-fueled power plant by as much as 90 percent. Modeling done by the International Energy Agency (IEA) forecasts that CCS could provide 19 percent of total global GHG emission reductions by 2050. That includes reductions from coal and natural gas-fired power plants, as well as all other sources.
But these are just studies, they are merely estimates of what could happen if CCS finally emerges from the world of drawing boards and demonstration projects to actual widespread deployment throughout this country and around the world. What we are doing right now to develop these technologies is not enough; it’s not even close to enough. We have two decades at most to deploy these technologies at the scale needed to achieve substantial reductions in emissions.
And one way to start is by taking a more serious approach to the development of CO2-Enhanced Oil Recovery in this country.
For nearly 15 years, my organization has sought to bring industry, government, NGOs and others together to explore innovative solutions to the climate and energy challenges we face in the United States and around the world. We see CO2-EOR as a very important piece of the puzzle. And this is why we worked with the Great Plains Institute to convene the National Enhanced Oil Recovery Initiative, or NEORI. NEORI is a coalition of industry, state, environmental and labor leaders who have come together to develop and present recommendations for boosting domestic oil production and reducing CO2 emissions through the expanded use of CO2-EOR.
The participants in this effort believe that EOR using captured carbon dioxide offers a safe and commercially proven method of expanding domestic oil production that can help the U.S. simultaneously address three urgent national priorities.
- The first priority is increasing our nation’s energy security by reducing dependence on foreign oil, including oil that is imported from unstable and hostile nations. CO2-EOR potential in the United States equals 26 to 61 billion barrels of oil with existing technology; with next-generation techniques the potential rises to 67 to around 140 billion barrels. U.S. proven reserves are 20 billion barrels, so we are talking about at least doubling U.S. oil potential. That’s huge.
- The second priority that CO2-EOR addresses is creating economic opportunity – if we do this right, it will create jobs, boost tax revenues, and reduce the U.S. trade deficit. We can put dollars we now spend on oil imports to work right here in the U.S. economy. How much money are we talking about? One estimate, from Advanced Resources International, projects that the reduction in oil imports associated with CO2-EOR would total $600 billion by 2030.
- And the third priority addressed by CO2-EOR? Protecting the environment. Capturing and storing CO2 from industrial facilities and power plants will reduce U.S. greenhouse gas emissions, while getting more American crude from areas already developed for oil and gas production. By fully developing American reserves that are amenable to this practice, we could reduce CO2 emissions by 10 billion to 19 billion tons, an amount equal to 10 to 20 years of emissions from personal vehicle use in this country. And the bonus is that it can help us further the commercial deployment of the CCS industry in this country — not just with coal and natural gas power plants, but with other domestic industries such as natural gas processing, ethanol and ammonia production, and steel and cement manufacturing. Driving innovation in CCS technology will allow us both to take advantage of our nation’s vast fossil fuel resources and achieve much larger CO2 emission reductions.
I have worked on the climate issue for many years now, and I assure you this is a big deal. Reducing U.S. CO2 emissions by up to 19 billion tons while also advancing CCS technology would be a major achievement.
So if CO2-EOR is so important, why aren’t we doing more of it? Well, as all of you know, the major hurdle standing in our way is that there’s just not enough readily available CO2. And this is why our organization joined with the Great Plains Institute to convene the NEORI.
The idea behind this initiative was to bring together a diverse group of stakeholders and try to come to agreement about what needs to happen to realize CO2-EOR’s potential. More specifically, we wanted to develop a set of recommendations for federal and state incentives that will stimulate the expansion of CO2-EOR using carbon dioxide from power plants and industrial facilities.
Were these conversations easy? In a word, no. This is a group that included participants ranging from major coal companies and industrial suppliers of CO2 to environmental NGOs, organized labor, and state officials. The diversity of the group meant we had some very tough discussions. But in the spirit of the saying, “Nothing that is worthwhile is easy,” the final participants in this project stuck with it, and they came up with a plan that already has attracted bipartisan interest in Congress. We released this plan earlier this year at an event on Capitol Hill, and I want to give you a quick sense of what it entails.
NEORI’s centerpiece recommendation is a competitively awarded, revenue-positive federal production tax credit for capturing and transporting CO2 to stimulate CO2-EOR expansion. This federal tax credit would more than pay for itself because it will lead to additional oil production subject to existing tax treatment. The new incentive will enable a variety of industry sectors to market new sources of CO2 to the oil industry, and to reduce their carbon footprints. It will drive innovation and cost reduction in CO2 capture and compression, and help build out a national CO2 pipeline system.
For the near term and until the broader credit is in place, NEORI also recommends specific “good government” changes to improve the workability of the existing carbon capture and storage credit known as Section 45Q.
Of course, states also have an important role to play in fostering CO2-EOR deployment. This is why NEORI identifies existing state policies that should serve as models for policymakers in other states to adopt and tailor to their particular needs.
Later this morning, you will hear more about our recommendations from a panel of NEORI participants. And I encourage you to visit the website, www.neori.org, for more on the recommendations we have made.
So let’s cut to the chase. What will happen if we adopt these measures I have described? NEORI estimates that our proposed new federal production tax credit for CO2 capture will quadruple the amount of domestic oil currently produced annually through enhanced oil recovery – to 400 million barrels a year in the outyears – while cutting CO2 emissions by 4 billion tons over the next 40 years. In addition, we will be generating new tax revenue for states and for the federal government – as I said, these incentives will more than pay for themselves. And we will be gaining vital experience and creating valuable infrastructure supporting broader deployment of carbon capture and sequestration in the future.
At a time of economic struggle, fiscal crisis and political gridlock, at C2ES we believe the NEORI proposal is an encouraging example of how we can and must make progress on the climate and energy challenges we face. As much as we would like to see comprehensive solutions to our climate and energy challenges, those solutions are not on the immediate horizon. But if we come at these issues one by one, look for opportunities where interests converge, and are open to compromise, we can arrive at practical solutions benefiting our economy, our security and the environment.
At the Capitol Hill event where NEORI announced our recommendations in February, we also were able to welcome a bipartisan group of members of Congress who were on hand to express their support. Given the political gridlock in Washington in this election year, it was reassuring to see lawmakers from both political parties step up and say they agree that this is important work.
Will we see comprehensive legislation on this issue pass the Congress this year? That’s unlikely … but we do think we have a shot at Section 45Q reform this year. Still, the NEORI recommendations have started the conversation and we feel optimistic that we can see progress on this issue in the not-too-distant future no matter who controls the Presidency and the Congress next year.
All of which brings me to the closing segment of my remarks today, in which I simply want to appeal to all of you to help us keep pushing these issues forward.
Rarely in the current political climate do Republican and Democratic lawmakers in Washington rally together in support of anything. So we need to make the most of this opportunity. Everyone who supports CO2-EOR has an obligation to educate their representatives in Washington and in state capitals around the country about the benefits this can deliver for our economy, our national security and the environment.
We also need to help the general public understand what’s at stake here … why we need to reduce emissions, why CO2 use and sequestration in depleted oil fields is an important solution, and what this can mean for the future of our country, and for the future of fossil fuels as well.
Thank you very much.
Learn about Mexico's new climate change law, how the U.S. Department of Energy’s Advanced Research Projects Agency–Energy helps move the U.S. to a low-carbon economy, the different market mechanisms for reducing greenhouse gas emissions, and more in C2ES's April 2012 newsletter.