Senate Democrats unveil clean energy bill

A group of U.S. Senate Democrats on Sept. 22 released a national energy bill that lays out a Democratic vision for a cleaner energy future that relies heavily on renewable energy and energy efficiency, but does have some provisions for coal and natural gas.

Earlier this year, the U.S. Department of Energy released the first installment of its Quadrennial Energy Review, which projected an 18 percent rise in the cost of electricity, a 72 percent increase in clean energy generation and the need to fill an additional 1.5 million new jobs in the energy industry within the next 15 years. This legislation seeks to get ahead of these changes with a multi-faceted approach that not only responds to today’s needs, but also rises to tomorrow’s challenges, the sponsors said.

“By tackling energy efficiency in sectors ranging from trucks and buildings to the electric grid, we are targeting our best opportunities for job growth, consumer savings and carbon dioxide reductions,” said Sen. Maria Cantwell of Washington.

“This legislation is a positive step toward modernizing our electric grid and creating opportunities for Americans to deploy their own clean energy and save money,” said Sen. Harry Reid of Nevada, Democratic Leader. “By making these investments and cleaning up our polluting energy sources, we are creating jobs, investing in a future in which our children can breathe clean air, and averting the worsening extreme weather and disasters caused by climate change.”

“While Republicans continue to keep their heads in the sand when it comes to climate change, Democrats have put together a plan to make energy cheaper for consumers and at the same time foster a clean energy future that cuts down on greenhouse gas emissions,” said Sen. Charles E. Schumer of New York. “This bill pulls the best ideas from across the Democratic Caucus and is a refreshing reprieve from the tired Republican mantra of “˜drill baby, drill.’ That’s a slogan, not an energy policy. Republicans need to wake up to the fact that climate change is one of the defining challenges of our time and action must be taken to address it.”

“The tax code plays an enormous role in energy policy, but the current system is a crazy quilt of laws that suffocates innovation,” said Sen. Ron Wyden of Oregon. “This bill is built around the proposition that the law ought to reward clean energy with incentives that spark innovation in the private economy. Our proposal makes it possible to get more clean, renewable energy for less money and I’m looking forward to working with my colleagues to get it through the Senate.”

The Democratic energy bill includes provisions to:

·      Advance policies that give consumers access to their electricity data;

·      Create a federal Energy Efficiency Resource Standard, which would save consumers $150 billion over the next 15 years, and support research and development on smart buildings;

·      Invest in energy storage, integrate clean energy onto the grid, improve the security of the grid and help manage electricity demand;

·      Implement recommendations from the Quadrennial Energy Review to improve the resilience of the U.S. electric grid, natural gas distribution system and the Strategic Petroleum Reserve;

·      Cut greenhouse gas emissions equivalent to all passenger vehicles and a third of U.S. homes and secure carbon reduction targets from other countries;

·      Triple funding for basic energy science and technology research, to maintain global leadership and to invest in the next generation of clean energy technologies that we can export internationally;

·      Double investments in cybersecurity research and develop and designate DOE as the sector-specific lead for energy; and

·      Invest in clean energy technologies and repeal subsidies for fossil fuels.

This bill would, among other things, require the Government Accountability Office to study the outcomes of capacity markets in regional electricity markets (in the Midwest, Northeast, Texas and California) on electricity prices, consumers in general, and new power generation construction.

This legislation would establish consultation and coordination protocols for the Secretary of Energy, Surface Transportation Board, and FERC to address the federal response to severe coal supply emergencies, which are defined as coal shortages reported to the Department of Energy by electric utilities.

Other provisions include:

·      A section would strengthen the Energy Information Administration’s (EIA) ability to collect data on the physical holdings of the fifty largest oil traders and on the commercial storage capacity for oil and natural gas in the United States. The bill requires EIA to work in cooperation with the Commodity Futures Trading Commission. It also formally establishes a Financial Market Analysis Office within the EIA to study and report on the financial aspects of the energy markets. The office would identify if any additional resources are needed to more fully integrate financial market information into the EIA’s analyses and forecasts.

·      A section would establish an interagency working group that would include the Secretary of Energy, the Secretary of the Treasury, the chairman of FERC, the chairman of Federal Trade Commission, the chairman of the Securities and Exchange Commission, the Chairman of Commodity Futures Trading Commission and the Energy Information Administrator. The group would be to investigate the effects of increased financial investment in energy on U.S. energy prices and security, to recommend to the president and Congress any legislation necessary to prevent excessive speculation and minimize the impacts of such speculation in energy commodity markets, and to review energy security implications of developments in international energy markets.

·      A section mandates FERC to require each regional transmission organization (RTO) to submit a report to the commission six months after the date of enactment that evaluates the characteristics, potential, barriers to deployment, and potential changes to operational requirements related to distributed energy resources and microgrid systems.

·      A section would develop a grant program at the DOE to provide financial assistance to states to incentivize cost-effective improvements in safety and environmental performance of natural gas distribution systems. $3.5 billion for fiscal years 2016 through 2019 would be authorized.

·      A section would authorize a DOE research, development, and demonstration program focused exclusively on grid-scale storage, such as the emergence of a new general purpose element of the grid that combines power electronics, advanced optimizing controls, and storage. Technical assistance to states may be provided by the Secretary of Energy for grid storage. The program is to be authorized at $500 million over 10 years.

·      A section would authorize a DOE demonstration grant program focused on integrating and managing advanced grid technology and services such as smart meters, rooftop solar, electric vehicles, grid storage, micro-grids, transactive energy, and demand response, including a focus on distribution-level components of the grid. Each project funded under the program would be required to include a cybersecurity plan.

·      A section would use any revenue from new geothermal leases to be spent on approving new geothermal capacity on federal lands and identifying sites capabale of producing geothermal power. This section would also allow the Secretary of Energy to authorize the expenditure or transfer of funds that are necessary to other cooperating federal agencies. Another section would authorize a research, development, and deployment program specifically for large scale (defined as 10 MW) space or process heating using direct heat from geothermal resources or heat pumps.

·      A section would expand the research, development, and deployment objectives of DOE’s Office of Fossil Energy by adding an explicit objective to improve the conversion, use, and storage of carbon dioxide from coal and other fossil fuels.

·      A section would authorize the federal government to enter into up to 30-year contracts for the acquisition of renewable energy or energy from cogeneration facilities.

·      A section amends Section 111(d) of the Public Utility Regulatory Policies Act (PURPA) to allow community solar projects up to 2 MW in size to be connected to their power distribution system. The bill allows the electricity produced by the community solar facility to be credited directly to each of the consumers that owns a share of the system.

There are several different incentives for the production of clean electricity, including the section 45 production tax credit and section 48 investment tax credit, along with provisions for accelerated depreciation, tax-favored bonds, and allocated credits. Said a bill summary: “This patchwork of incentives features several temporary provisions with differing rules and expirations, provides different incentive levels for technologies with similar emission profiles, and omits several new and emerging technologies.”

The bill would create a performance-based incentive that would be neutral and flexible between clean electricity technologies. Taxpayers are able to choose between an investment tax credit (ITC) and a production tax credit (PTC), which are scaled based on the carbon emissions of the electricity generated — measured as grams of carbon dioxide equivalents (CO2e) emitted per kilowatt hour (kWh) generated.

Power plants that emit at least 25 percent less carbon than the current nationwide average begin qualifying for a small incentive, which increases for power plants that are progressively cleaner. Zero emission facilities qualify for the maximum credits — a 2.3 cents per kWh hour PTC or a 30 percent ITC. The PTC is available for the 10 years after a facility is placed in service.

For combined heat and power systems (CHP), the emissions rate is calculated using both electrical and useful thermal energy. Under the proposal, the British thermal units (BTUs) of useful thermal energy in a CHP system are converted to kilowatt hours using the facility’s heat rate (the number of BTUs required to generate 1 kWh). These converted KWhs are also accounted for as production for purposes of the PTC.

Power plants placed in service before Jan. 1, 2018, that add energy storage technology or carbon capture are able to claim the maximum 30 percent ITC for those investments, which can enhance grid stability and reduce the emissions of current fossil fuel power plants. Storage technologies include hydroelectric pumped storage, thermal energy storage, fuel cells, and batteries, among others.

The chances for this bill to advance this year in the Senate seem limited, with Republicans in the majority in both the Senate and the House.

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Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy's Coal Report. He was formerly with Coal Outlook for 15 years as the publication's editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor's degree from Central Michigan University.

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