POLITICS:

Obama to focus on clean energy, daring Republicans to call it 'froufrou'

The White House is collecting options for a clean energy standard from outside groups, sharpening the president's effort to make low-carbon electricity a key piece of his re-election campaign, if not a passable piece of legislation in the current Congress.

The meetings have solicited input on some of the thorniest elements of President Obama's goal to impose national fuel requirements on electricity providers. Top among them is the policy's potential impact on different regions, some of which have fewer energy resources like wind or nuclear to comply with a national standard.

The administration has heard alternatives. One environmental group is encouraging the White House to consider using energy goals that vary by region. When combined, they would achieve Obama's target of providing 80 percent of the nation's electricity from lower emitting sources by 2035. Big-shouldered areas would carry more of the load.

Without some way to account for varying regional energy supplies, a CES could mean that clusters of coal-based utilities in some states have to buy clean energy credits -- each one worth a small amount of electricity -- from their counterparts in areas that are richer in "clean energy."

Under the program, it's likely that a utility would have to attain credits if it couldn't deliver enough clean energy to meet the standard's target. The opposite is true for utilities that specialize in clean power: They could sell their excess credits for a profit.

"How do you avoid the situation in which ... some [local distribution companies] are basically paying other LDCs right from the very beginning?" asked one participant, who believes parochial energy interests are the biggest challenge to getting a standard passed. "I don't think that strikes anybody as particularly fair."

Obama launches a 'concerted focus on energy'

The clean energy standard represents what the White House believes is a winning political formula for Obama, who is heading into re-election amid rising Republican opposition to the administration's energy policies and an unexpected military campaign in Libya.

Obama will veer into domestic issues today, when he will announce new goals to reduce the nation's dependency on foreign oil while increasing homegrown energy supplies, including cleaner electricity.

"Tomorrow's speech will mark a transition in our public communications," a senior White House official told reporters yesterday, referring to Obama's energy speech today and others. "You will see a concerted focus on energy."

The White House's role in developing the electricity standard is reassuring to supporters, some of whom criticized the president's casual effort to pass climate legislation last summer. Key experts in the administration, including economist Nat Keohane, special assistant to the president, and Dan Utech, senior adviser to Energy Secretary Steven Chu, are working on the standard, according to sources.

It's unclear how many meetings the White House has held -- the administration did not respond to requests for comment -- but the effort is, at least, weeks old. So the discussions started soon after Obama promoted the standard in the State of the Union address two months ago.

The administration had also been compiling information before Sens. Jeff Bingaman (D-N.M.) and Lisa Murkowski (R-Alaska), the top two lawmakers on the Energy and Natural Resources Committee, released a list of 42 questions last week to solicit input about the standard's design.

A pricey CES without safeguards

Some of the same difficult issues have been discussed in the White House meetings. For example, should utilities be allowed to purchase, or "bank," future credits early in the program? That could help them save money because the credits might cost less when the program's requirement for clean energy is still low. Firms might "overcomply," hoping that their credits rise in value.

But the opposite could also be true. Electricity prices might not rise. If a utility believes that power prices -- and credit value -- could decline because the emergence of new technologies reduces demand, they might want to "borrow" credits for the future. When the time comes to pay for those credits, utilities in this scenario are betting that they will be cheaper.

Another element under consideration is an alternative compliance payment, or ACP -- in effect, a cap on the cost of credits. The payment would kick in when clean energy credits rise above a certain price. Price caps in previous legislation ranged from about 2 cents per kilowatt-hour to about 5 cents per kWh.

The 20 percent renewable portfolio standard embedded in the climate bill introduced by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) provided an ACP of 2.5 cents. But one analyst believes that's too low to reach Obama's aggressive target.

"If two and a half cents is the alternative compliance payment, you're not going to get to 80 percent [clean energy by 2035]," the analyst said. "I just know that's not going to work. It's hard to achieve a 20 percent RPS with a two-and-a-half-cent compliance payment."

A clean energy standard differs from a renewable portfolio standard insofar as it permits utilities to derive electricity from more than just green fuels. Under Obama's CES, firms could meet the standard using renewable sources, nuclear power, combined cycle natural gas, and coal plants equipped to capture carbon emissions.

All of these financial elements -- banking, borrowing and alternative payments -- could provide utilities with flexible options to keep their costs down when complying with the program.

Deride renewables, and the GOP might pay at the polls

That will be important -- for both practical reasons and, more immediately, political ones.

Resources for the Future, a think tank that analyzes the economic and environmental impacts of legislation, determined last fall that these price-mufflers might be needed. The group ran economic models for a clean energy standard that fuels 65 percent of the nation's electricity with sources identical to Obama's plan.

The environmental results were impressive: The standard slashed greenhouse gas emissions 6.1 percent between 2010 and 2030. But the economic results posed a challenge. Clean energy credits were priced at about 5 cents per kWh in 2025, but by 2030, the credits bounced to 15 cents -- a price that is probably too steep for politicians.

But here is, perhaps, an important lesson for the administration: The modeling did not contain price moderating provisions, like banking, borrowing or cost caps.

The White House is not racing to conclude its coalition-building on the CES, some participants say. Some favor a patient development phase, believing that Republican antagonism and distress about nuclear energy -- a major component of the standard -- prompted by Japan's crisis could cool with time.

Some Republicans, however, see risks in their party's opposition to Obama's electricity standard. Similar plans were advocated by Republican lawmakers last year, when passage of a CES would have marked a GOP victory for their "all of the above" energy plan.

Forceful opposition to the standard now, says a former White House official under President George W. Bush, could complicate GOP energy efforts in the next Congress, when Republicans stand to control both chambers.

"Everyone is hedging that the Senate might flip. If the Senate flips, these kinds of things become squarely in the Republican [domain]," the official said. "I think the House needs to be equally engaged on this issue now. If in fact nothing does pass as a CES this cycle, if the foundation's been built and a lot of the policy's been worked out, then there's a chance that in the next Congress, under Republicans, a good energy policy can come out of the Hill."

There's another, more immediate, concern. Republicans might suffer on Election Day if they're perceived as old-fashioned politicians supporting oil and gas companies while opposing alternative energies, said Glen Bolger, a prominent Republican pollster with Public Opinion Strategies.

"I think Republicans look on alternative energy as something that is too, for a lack of a better word, froufrou -- not realistic," Bolger said. "But voters see that as the future. Running that down means that you're living in the past."

"Renewables really resonate among independent voters," he added. "Again, you can't win an election without independents."