United States

United States

Legislating for a level market, As deregulation of the electricity industry continues to sweep the US state by state, discussion of federal legislaton aimed at levelling the entire energy playing fiel

As deregulation of the electricity industry continues to sweep the US, discussion of federal legislation aimed at levelling the entire energy playing field is gaining momentum. Two bills going through the US Congress feature the "renewable portfolio standard," a policy tool long championed by the American Wind Energy Association as the best way to integrate wind and other renewables into the country's resource mix. Yet such legislation could create conflicts with current state policies, and chances for new wind projects in the US could shrink dramatically.

Hopes were high in the US at the start of the year that federal lawmakers were ready to take bold action on the thorny issue of electricity deregulation. Whether such a rush to decision making was good or bad news for wind energy was an open question. On the one hand, two bills going through the US Congress feature the "renewable portfolio standard," a policy tool long championed by the American Wind Energy Association (AWEA) as the best way to integrate wind and other renewables into the country's resource mix. Instituting the portfolio standard on a national basis makes the most sense from a public policy point of view since it would create a national market for wind and other renewable resources.

On the other hand, such federal legislation could create conflicts between policies already adopted by states to promote renewables and lead to extended legal battles over state versus federal authority. Furthermore, if the federal government mandates the full recovery of so-called "stranded costs" by utilities, the opportunities for new wind projects in the US could shrink dramatically in the near term. The insulation of ageing utility power plants from the discipline of markets -- by using public money to pay for uneconomic "stranded" investments of the past -- only blocks out newer, cleaner, and ultimately less costly electricity sources such as wind power.

two approaches

Most activity on restructuring legislation has occurred in the House of Representatives, where public hearings have been held over the course of the last several months. A bill promoted by Representative Dan Schaefer (R-Colorado), which includes a version of the portfolio standard that would require electricity generators to meet a minimum percentage of renewable power, may be voted on as soon as June. The bill, HR 655, would require generators to meet a 2% standard between 2001 and 2004. By 2005, the standard rises a percentage point; by 2010, the standard rises another point to 4%.

A second bill, S 237 by Senator Dale Bumpers (D-Arkansas), also includes the portfolio standard. It requires all electricity suppliers -- including distribution utilities -- to include a minimum amount of renewable energy in their sales to customers. Under terms of this bill, each retail electric supplier would have to provide 9% of their retail sales from renewables. This requirement would rise to 11% in 2008 and 12% by 2013.

There are other differences between these two bills. Bumpers' bill includes hydro within its definition of renewables, a feature not viewed kindly by environmentalists more concerned about encouraging other renewables. According to AWEA's Randy Swisher, the Schaefer approach is superior to Bumpers', despite Bumpers' apparently higher quotas for renewables. But by including hydro, the percentage targets contained in the Bumper bill would actually translate into a reduction in existing renewable energy consumption, says Swisher.

"New restructuring bills are being introduced every week," notes Swisher, who highlighted a recent measure by Senator James Jeffords (R-Vermont) that represents the wish list of environmentalists and renewable energy advocates. The measure would not only require 10% of electricity to be supplied by non-hydro renewables in the year 2010 (and 20% by 2020), but would institute a national surcharge on customer bills to fund energy efficiency investments and tighten air emissions standards for existing fossil fuel power plants. Swisher notes that the Jeffords bill is the best from the wind industry's perspective, but its chances of adoption in its present form may be slim.

"It is time to show our nation's commitment to a future built on renewable energy," said Jeffords when he introduced the bill early last month. "It is time to trade smokestacks for windmills, coal power for solar power and smog for blue skies."

Change of focus

Though the focus of renewable energy advocates has been on the renewable portfolio standard and surcharges to support clean power sources, one of the most promising efforts to boost wind power is to enact uniform air pollution standards. This approach is actually the heart of the Jeffords bill as it would require all combustion-based power plants greater than 15 MW to meet a common national air pollution standard.

According to Armond Cohen, executive director of the Clean Air Task Force, 800 out of the nation's 1100 fossil fuel power plants do not meet the air emissions standards a new power plant would have to meet. This is so because of quirks included in the federal Clean Air Act that allowed exemptions for older power sources, most of them fired by the most polluting of fossil fuels -- coal. If these old plants were required to meet the same standards, emissions of nitrogen oxide and sulphur dioxide would be cut by as much as 80%. Cohen estimates that historic entitlements amount to a $0.005-0.02/kWh subsidy. "That price advantage is often the difference between viability and failure for cleaner technologies," he says.

The Senate is moving much slower than the House, having only held workshops and no full blown hearings yet. Leaders in the Senate have already proclaimed that there will be no action on bills this year. Insiders predict that federal legislation will not be enacted until the end of next year.

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