Recharging U.S. energy policy: advocating for a national renewable portfolio standard.

• Jurisdiction: United States
• Author: Lunt, Robin J.
• Date: 22 December 2006

ABSTRACT

The global economy depends on uninterrupted electricity, but electricity generators pollute more than any other industry. The United States has regulated electricity almost from its beginning. Yet, despite repeated proposals, including the Energy Policy Act of 2005, Congress has yet to pass a renewable portfolio standard (RPS). Renewable portfolio standards require an electricity market to include a minimum percentage of electricity generated from renewable sources such as solar, wind, biomass, and geothermal sources. RPS policies use market-trading mechanisms to ensure that the required renewable energy is generated in the most efficient manner possible.

Twenty-six U.S. states, Australia, and the European Union (E.U.) have implemented renewable portfolio standards or similar laws. These policies aim to reduce reliance on fossil fuels, decrease pollutants and greenhouse gas emissions, and foster technological innovation and economic growth. An analysis of these policies suggests how the United States might shape a national renewable policy.

This paper intends to provide an overview of the electricity landscape in the United States and advocates for a national RPS. The paper explores the history and sources of electricity. It then explains renewable portfolio standards, with an in-depth look into renewable energy credit trading programs, a key policy mechanism that maximizes efficiency in meeting the increased demand for renewable energy generation. Finally, the paper explores lessons that the United States can learn from the renewable policies in Texas, Australia, and the E.U.

1. INTRODUCTION II. SOURCES OF ELECTRICITY III. HISTORY OF ELECTRICITY AND ITS REGULATION IN THE U.S. IV. RENEWABLE PORTFOLIO STANDARDS: AN OVERVIEW A. Elements of a Renewable Portfolio Standard B. Renewable Energy Credits: A Key Market Trading Mechanism for RPSs C. The Lack of a National RPS V. RPSS AT THE STATE LEVEL AND TEXAS'S SUCCESS VI. WHAT THE U.S. CAN LEARN FROM AUSTRALIA AND THE EUROPEAN UNION A. Australia's Commitment to Renewable Energy B. The European Union's Harmonized Approach within its Member States VII. SENATE RPS PROPOSAL FOR THE ENERGY POLICY ACT OF 2005 A. Analysis of the RPS Amendment VIII. THE UNITED STATES NEEDS A NATIONAL RPS A. Why the U.S. Needs a National Renewable Policy B. Addressing Arguments against a National RPS C. Lessons from the States and Nations Who Have Implemented Renewable Policies D. Implementing These Lessons to Promote Renewable Energy Throughout the United States E. Weaknesses of a Federal Policy that Requires Each State to Implement an RPS F. One Direct National RPS Applicable to All Electricity Generators 1. The S[O.sub.2] Trading Program's Success Argues for a National RPS 2. Advantages of a National RPS 3. Potential Disadvantages of a National RPS 4. What Should the National RPS Contain? IX. CONCLUSION I.

INTRODUCTION

The global boom in renewable energy has been compared to the industrial revolution in its promise to transform the globe. (1) In the face of international and statewide policies to promote renewable energy, the United States has failed to adopt a renewable portfolio standard, a powerful policy tool that requires a certain amount of electricity to come from renewable sources. Considering how much Americans depend on electricity, it is time that the nation infuses the energy supply with a significant percentage of renewably-generated electricity.

On a given day I wake up to an alarm clock, flip on the bathroom light, take a hot shower, heat water on the stove for oatmeal and herbal tea, listen to the radio, blow dry my hair, check my email, type notes on my laptop, text message with my cell phone, read the news online, microwave my lunch, listen to my iPod, work some more on my computer, cook dinner, and at the end of the day turn off the lights and set that alarm clock to start over again the next day. All of these things take electricity, not to mention the vacuum, washing machine, clothes dryer, dishwasher, iron, thermostat, air conditioner, or the electricity that went into building my house, manufacturing my water bottle, sewing my clothes, and creating the carpet.

Even though I rely on electricity, I generally do not think about its source. Most Americans no longer light candles as their sole source of light or burn wood as a primary source of heat. We plug things into outlets and flip switches. American power is supplied by electricity-generating plants that are far-removed from most citizens' immediate environment and daily awareness. One thing is certain: the majority of America's electricity comes from burning fossil fuels. (2)

According to Environmental Protection Agency (EPA) data, electric utilities pollute more than any other industry in the United States. (3) Coal fired plants emit pollution (sulfur dioxide) that leads to acid rain as well as particulates, mercury, and other substances harmful to human health. (4) Fossil fuel-burning electricity generators also produce carbon dioxide and nitrous oxide, two of the primary green house gasses (GHGs) that contribute to global warming. (5) Climate change has been described as "perhaps one of the most daunting of the global threats currently facing mankind." (6)

Although climate change is scientifically certain, (7) it remains politicized. It makes sense ecologically, economically, and for national security to create policies that promote the development of new renewable energy sources. Many countries, (8) including Australia and the European Union, as well as many states within the United States, have adopted policies to promote renewable energy and support renewable electricity's growth. By contrast, the United States Congress failed to include a renewable energy portfolio standard (RPS) in the Energy Policy Act of 2005.

I advocate for a federal policy that engages the United States in support for renewable energy through a national RPS. A national policy would expand the success of state renewable portfolio standards. Moreover, a federal standard will enable the U.S. to participate in, and perhaps even lead, the twenty-first century renewable energy revolution, rather than remaining conspicuously missing from the global efforts to promote clean energy technologies and prevent global warming. This national policy will create a stable national market for renewable energy. Such a policy will diversify the U.S.'s energy supply, reduce the pollution that comes from energy generation, and enable the country to maintain its commitment to consistent and reliable energy while reducing America's dependence on fossil fuels (and the attendant geopolitical instability and pollution that accompany fossil fuel reliance), while allowing the U.S. to compete in the growing international market for renewable electricity-generating technologies.

I do not argue that renewables should be the only source of electric generation, but rather that the federal government should take its cue from the states and nations that have successfully implemented RPS policies to ensure that our renewable energy infrastructure can support a growing percentage of America's electricity needs.

Part II provides background information on sources of electricity. Part III discusses the history of electricity and the regulation of the electricity industry as a natural monopoly in the United States. Part IV introduces renewable portfolio standards and their role in promoting the generation of new renewable power. Part V discusses RPSs at the state level and discusses in detail Texas's RPS success, a success that provides a framework for a national policy. Part VI briefly examines Australia's commitment to renewable energy and their RPS. It also analyzes the European Union's approach to renewable energy, the regulatory approaches taken by the E.U. in relation to its member states and the intention to create a European standard to support renewable growth. Part VII provides an overview of the United States Senate's attempt to include an RPS in the Energy Policy Act of 2005 and analyzes the amendment's strengths and weaknesses in light of the other RPS policies. Part VIII argues that a national RPS policy is essential to promote renewable energy in the United States. While addressing critics and alternative approaches, I advocate a nationally-mandated RPS that would create a national trading market for renewable energy and provide continuity across the state systems. Part IX offers a brief conclusion.

II.

SOURCES OF ELECTRICITY

In 2005, more than half of the electricity in the United States came from coal-fired plants (51%). (9) The remaining power came from nuclear power (20%), natural gas (18%) hydroelectricity (7%), and petroleum (3%). (l0) Geothermal, biomass, solar, and wind combine to account for just over 1.5% of the net generation of electricity. (11) Although the data for 2006 only extends until September, (12) the data comparing the first nine months of 2005 to the first nine months of 2006 indicates almost a 50% drop in electricity generated from petroleum in 2006. (13) The decrease in petroleum generated electricity did not, however, indicate a shift away from fossil fuel consumption. Natural gas generation increased to absorb the decrease in petroleum generation, while the other categories of electricity generation remained relatively stable. (14)

Our number one source of electricity contributes to a variety of environmental harms. Coal-fired plants emit particulate matter (a fine dust), sulfur dioxide, nitrogen oxides, and carbon dioxide, pollutants known to cause respiratory problems, acid rain, and global warming. (15) The Clean Air Act (CAA) requires power plants to install pollution controls that limit some of the coal-fired plant's harmful pollutants, but the CAA does not regulate carbon dioxide emissions and does not apply to many of the oldest coal-fired plants in the Midwest due to a grandfathering clause in the...