Energy Policy:

Lawmakers, analysts discuss challenges to crafting and passing a CES

With Sens. Jeff Bingaman (D-N.M.) and Lisa Murkowski (R-Alaska) recently introducing a white paper soliciting comments on a clean energy standard, momentum is beginning to build on this piece of policy. Will the House and Senate move on a CES this year? What are the key challenges to crafting a bill? Which industries have the most to gain from a CES? During today's E&ETV Special Report, lawmakers and analysts discuss the politics and mechanics of a clean energy standard. This Special Report features interviews with: Sen. Tom Carper (D-Del.); Kevin Book of ClearView Energy Partners; Rep. John Sullivan (R-Okla.); Rep. Paul Tonko (D-N.Y.); Patrick Von Bargen of Quinn Gillespie & Associates; Jason Grumet of the Bipartisan Policy Center; Donald Santa of the Interstate Natural Gas Association of America; Former Michigan Gov. Jennifer Granholm (D); and George Frampton of Covington & Burling.

Transcript

Monica Trauzzi: As world events continue to shape Washington's energy discussion, how will a Clean Energy Standard fit into the policy mix? E&ETV takes an in-depth look at the benefits and challenges of a CES. Next.

Kevin Book: The definition of clean energy is going to be a political choice. My definition would be something that reduces the emission's or pollution's profile for the same amount of power or fuel.

Patrick Von Bargen: Clean energy is energy that does not produce greenhouse gases in the production of the fuel for the electricity.

John Sullivan: Clean energy is energy that we have already out there. Many coal and oil and gas people, they don't want to pollute. They get kind of pigeonholed that they're dirty and everything and they do all they can to make sure the land is protected, the air, the water. They're some of the best stewards of the land in this country.

Jason Grumet: To my mind, the virtue of a clean energy standard is that it focuses on the ultimate goal of reducing carbon from the energy sector and that that's a more rational way to think about that than a vague definition of renewable.

Kevin Book: The question though is what it really takes to meet the standard. One of the questions that's still outstanding is how clean does natural gas have to be to be considered clean? For that matter, how clean this coal have to be to be considered clean? It seems less rational to put an absolute prohibition on incrementally cleaner coal. But on the other hand, how many credits should it get?

The moment where we could have federalized and rationalized our energy policy probably came and went with the end of the great recession. It's not entirely over of course, but nobody is willing to pay up for clean sources; The question really is what will we do to support our industrial growth within the parameters of our environmental goals? If you leave out all the politics, you strip away all the climate this, coal that, and you ask what have we been doing in this country, the answer is cleaning up what has been cheap. Right now we have cheap options to clean up. We're going to take them with or without a clean energy standard. But when the price goes up, what will keep us clean? Only a federal law.

Patrick Von Bargen: I think any clean energy standard has to be looked at in the context of a full range of energy policy tools, one of which is transmission, siting, permitting, which is critical to make clean energy grid ready and grid significant. The other issue you have is financing. How do you provide, make sure that the private sector, in combination with the government, provides the financing to build the projects that will produce the clean energy to meet the mandates that you want?

Jason Grumet: What happens with EPA regulations on mercury from power plants, what happens to regulations that regard the development of natural gas and hydro-fracking, what happens with policies that address cooling water and disposal of whole coal ash, you know, are all going to be part of this dynamic picture.

Kevin Book: The clean energy standard is like cap and trade without the money. If you look at what you have, you have the exact same set of issues, the parochialism of resources, the entrenched industrial base in generating capacity. You have the same inflexibility of a lot of industrial assets. What you don't have is the allowance sale being refunded back to at-risk constituencies, as well as those who might help you pass it. It makes it harder in the end.

Patrick Von Bargen: The regional issues are really the hard part of this thing, right? And, you know, so when you think about a clean energy standard for the nation, one of the questions you have to confront is how do we think about the regional problem?

Do we think about modifications of the clean energy standard in certain regions? Do we allow certain opt outs for longer periods of time in certain regions than in others?

I think confronting the regional issue is just another layer of the complexity of this, but needs to be addressed.

Don Santa: I think one of the things about the CES is, depending upon how it's structured, if it gives regions flexibility in how they choose to comply with it and the options that they have got, maybe you can deal with some of those regional factors.

Monica Trauzzi: On the heels of the divisive cap-and-trade debate, does the political will exist in Congress to move a Clean Energy Standard?

John Sullivan: I think to see legislation out on a clean energy standard it will not happen this year. Now, I'm not saying it won't happen next year or in this Congress. It definitely could. There are people pushing it, but right now it's tough.

Jason Grumet: You know, there is a sense on the Hill, and I haven't -- you know, this is coming to me from friends, that they do feel a more aggressive presence from the White House on this issue than they felt during the carbon debate, that things are being written down and advocated for and I think that's encouraging.

Paul Tonko: I'm somewhat worried about the new leadership that has assembled in the House. Their mantra of hands-off, laissez faire government has no role in this process. It is exactly what the doctor has not ordered in this case.

Tom Carper: I've known Fred Upton for a long time. We used to serve together in the house when I was just a congressman and he's a very thoughtful person and he's a commonsense guy who's results oriented. And if we have the chance to work on a clean energy standard, this is something that we can come to agreement on and I very much look forward to working with him on this.

Patrick Von Bargen: I think if anything is going to begin moving down this path, it's going to originate in the Senate. I know that the White House is working very actively in developing a standard and cooperating with Senate energy people to try to get that done.

If they can come up with a proposal that they have some confidence in the works, then we'll see where it goes.

Tom Carper: I think you'll see legislation introduced-I would hope the legislation that I might be involved in developing will be ready for prime time by the summer. And is something going to be enacted this year? I don't know, but I would like for us to push hard to get something enacted in this Congress. I think this is a good opportunity. We've got a president who wants to do this, you've got senior Democrats and Republicans, very thoughtful ones, who want to do this, even a senior senator from Delaware who wants to do this. That's a pretty good combination.

Monica Trauzzi: Some lawmakers believe a C-E-S will pick winners and losers and expand government influence in the energy sector.

John Sullivan: It's a mandate though and what we're trying to get away from is mandates. We want all energies out there, I don't care what it is, to be on the table for discussion. We need everything to get to our goal of energy independence in this country, but some of them-we don't want to mandate picking winners and losers. Right now, in this Congress, we have to look at the political realities with the freshmen that have come in, in the Senate as well. They're not for these mandates. They don't want to see subsidies. They don't want to see mandates. They want these things to either sink or swim on their own.

Paul Tonko: I think there are always those who want to suggest that it's big brother syndrome and that the heavy hand of government is restricting operations out there. But, I think, the hurdles of that myth of restricting our energy supplies is really overtaken by the advocacy from private-sector types from the private-sector community saying that they want certainty. They want predictability. Give us the program, give us the policies, and we'll achieve and perform accordingly.

Jason Grumet: I think one of the key questions for a clean energy standard is how it is framed. If opponents essentially frame it as just another version of a top-down, you know, government carbon mandate, chances of passage I think diminish greatly. If, as I think the president did quite eloquently, it's seen as an effort to advance U.S. competitiveness and take logical prowess, then I think that really changes the dynamic.

Don Santa: Our view really is, quite frankly, number one, that gas is doing quite well in the marketplace right now, that it is competing well in that market on its own attributes. I think philosophically we don't like the idea of picking winners and losers and having mandates.

Monica Trauzzi: Advocates say the legislation provides some much needed assurances for industry.

Tom Carper: I think what a clean energy standard does is it provides some certainty. It provides a market signal. It's not a price on carbon, but it actually provides a market signal to-that we need to look to different forms of energy, cleaner forms of energy. And it also says that if utilities move in that direction they will be-they'll be rewarded for it. There's a reward for doing so.

John Sullivan: We need to have an all-of-the-above strategy and I'm for clean energy, green energy. I think all of it's good. But, you know, it's not viable right now for some of these to come in there and be on the baseload of our energy right now. They just aren't there yet.

Patrick Von Bargen: If we were able to pass a clean energy standard in this Congress, which is split with a Republican House and a Democratic Senate, and it did have that long-term structure in it, I think the private sector would say, okay, we now have both parties buying into a scheme that has a long-term view here and has objectives and milestones set out that go to 2012 and 2015 and 2020.

I think that would provide them the signal they need to say we can invest here and we can have a marketplace here that will work for our companies.

Don Santa: if you're looking at getting the nation on a path toward a cleaner energy system, particularly on the electric generation front, then natural gas can make a significant contribution to that to get us toward that ultimate goal.

Jason Grumet: there will not be a clean energy standard that doesn't include natural gas for two reasons. The clean energy standard that doesn't include natural gas will dramatically reduce usage of natural gas in our energy system. And I don't think that's consistent with our national interests or the interests of Congress or the White House. There's kind of a Goldilocks zone. If you don't include natural gas at all, then you really reduce its impact in the energy supply. If you include it freely and you have low-cost natural gas, you could see very little penetration of renewable energy. And so I think finding the space that balances those two imperatives will be one of the ongoing challenges.

John Sullivan: Right now in the United States we have over 100 years' reserves of natural gas due to the shale plays out there and the horizontal drilling and hydraulic fracking, which is under attack as well. We need to use it more. It's cheap right now.

Monica Trauzzi: With Japan addressing the Fukushima nuclear accident, have the prospects for nuclear in the U-S changed?

George Frampton: I think it will have some chill. I think there will be a lot of re-examination of existing plants, backup systems for power. It is astonishing that there was no redundancy here. But I don't think it's necessarily going to kill the next wave of nuclear. I think however that there may be, in addition to more attention on power systems, used fuel, containment, design, that there may be a shift to designs which are truly passive safe or designs, for example, the pebble bed, gas-cooled reactor and similar designs which don't depend on any active intervention, no matter what goes wrong.

John Sullivan: Well, I think nuclear needs to be looked at. You know, we don't need to make a rash decision right now. It was horrible what happened in Japan, but we don't need to rush to judgment right now and make a legislative case or pass legislation right now in the middle of a crisis.

Jennifer Granholm: Well, I know the president wants to see it included in a clean energy standard and, certainly, I think it will be part of the mix. What the PEW organization is pushing is a 20 percent by 2025, which does not include nuclear. But, certainly, you know, nuclear is clean. The question is what's going to happen now that Japan has -- the Japan incident? Will it slow things down? It may, it may, but that doesn't mean that we shouldn't continue to push for clean energy from nuclear. I think we should and I think you can do it in a way that's safe, you just have to be careful.

Monica Trauzzi: Another catalyst for action: oil & gas prices

Patrick Von Bargen: I think if you step back, I think properly used, the price of gasoline, the uncertainty of the price of oil, could drive people to look seriously at a comprehensive energy bill, one element of which would be the clean energy standard.

But because, remember, a clean energy standard is mostly about electricity produced in the United States and remember that only 2 percent of our electricity is produced by oil, it's not a direct connect to the Mideast.

Kevin Book: One of the things that we've been pointing out is that the problem with high oil prices is it makes the debate even harder. The fuel fight between fuels competing for federal dollars gets more intense when governments have less money to spend. And some of the sources that would be principal players in the clean electricity standard, natural gas, are also produced by companies that may start to make more money without meaning to as a result. And there's nothing worse than a deep pocket at a time when state and federal governments are running deeper sessions.

Monica Trauzzi: Senators Bingaman and Murkowski recently introduced a white paper soliciting comments on a CES. Proposed legislation coming out of both Houses is expected in the summer. For E&ETV, I'm Monica Trauzzi.