US lawmakers have started down the long legislative path towards a new national Clean Air Act, sparking a debate that could either open up a series of revenue streams for wind power projects, or deprive them of much of the added value of their green power generation. The Clear Skies plan -- proposed legislation introduced by President George Bush in late July -- sets mandatory nationwide emissions caps for sulphur dioxide, nitrogen oxides and mercury in 2010, and allows companies to use emissions credit trading to meet the new requirements. Bush's aim is to implement a market based approach to reducing air pollution from power plants.
Clear Skies, however, does not allocate any emissions allowances to zero-emission generating technologies like wind turbines. "I've done a detailed analysis of that bill and it has in it very negative implications for wind energy development," says David Wooley of the American Wind Energy Association (AWEA). "Wind will loose the ability to claim it is reducing emissions of sulphur, nitrogen and mercury, and that could have a very damaging impact on emerging green marketing programs."
The problem of how to account for emissions reductions created when renewable generators like wind turbines displace fossil fuel generators on the grid has been the subject of ongoing debate. The concern is that the credits could be counted twice, once by the fossil fuel generator whose output was reduced and then by the wind power generator whose turbines created the reduction.
But if renewable generators are simply excluded from the process, argues Wooley, then the proportion of wind power in electricity supplies will effectively become the cap that dictates the amount of pollution. In other words, the more electricity is generated with wind power, the more liberty polluters have to increase their emissions.
"It is becoming well established that if you are trying to make an environmental claim on the basis of a strict cap and trade program, where you are not really affecting the total number of emissions, you are not going to be allowed to certify it that way and people will start talking about consumer fraud," Wooley told delegates at June's annual AWEA conference. "Green markets could fail if we get this wrong, and your competitors will get another unfair and perverse advantage in the market."
Furthermore, without the ability to earn emissions reduction credits, wind power developers will not be able to participate in air quality emissions trading, missing out on what could be an important revenue stream. A study by the US's Renewable Energy Policy Project found that the added value of SO2 and NOx credits to a wind project could total $2.70/MWh, a figure that would bump up to $5.70/MWh if carbon dioxide credits are thrown in. That translates to additional revenues of $360,517 a year for a 20 MW wind farm on a typical site.
"It's not enough to change the world, but as my father would say, it's better than a poke in the eye with a stick and could be part of the picture that helps the industry move forward," says Wooley. The wind industry plans to lobby the Bush administration to change its mind on this point, he adds. "We haven't given up hope that we can modify that bill going forward."
In its effort, the industry can point to what Wooley calls a "very strong" competing bill. In June, the Senate Environment and Public Works Committee narrowly passed a bill that not only sets tight emissions limits on SO2, NOx, mercury and CO2 starting in 2008, but also allows renewables to earn credits and participate in emissions trading.
While Wooley doubts either bill will make much progress in the current session of Congress, he says the Senate legislation, sponsored by Vermont Senator Jim Jeffords, lays the groundwork for the future. Jeffords is a strong renewable energy advocate. "I think that eventually, within the next one to three years, we are going to see clean air legislation and I think it is very, very good that this renewable allocation is embedded in the Senate vehicle because that gives it a lot of legs," says Wooley.
The Senate bill also opens up the debate on the issue of carbon caps, something the Bush administration has rejected and, says Wooley, is "the other big flaw" in the bill. "I think it is inevitable that we will see CO2 regulated through a cap and trade program. I still think it's possible the administration may eventually accept that reality." He also thinks the wind industry has a good chance of winning the battle for emissions allowances, mainly because renewable energy is so popular with the general public.
"If anybody is looking at the polls, they have got to ask why we would want to beat up on renewables. I don't think competing fuels have that much of a stake in beating up on renewables either," he adds. After all, a lot of the companies that are into coal and nuclear and natural gas generation are beginning to invest in wind."
AWEA supports a system that allocates emissions allowances to all generators based on their output, which means that coal and wind would get the same allowance per megawatt hour of power generated. Some jurisdictions have opted for a system that creates a separate set-aside pool of allowances for renewable energy technologies. Although better than nothing, says Wooley, the set-aside approach is more administratively complex and requires designers to guess at the size of the renewables market.