2019 has been a banner year for states setting 100-percent clean electricity targets. Legislatures in Nevada, New Mexico, New York, and Washington approved bills, while governors in Connecticut, Virginia, and Wisconsin signed executive orders to make their states “carbon-free” before mid-century. And, other states are on the cusp of making pronouncements.
This is welcome news. Many studies have shown that we need to completely decarbonize the U.S. and global economies and achieve carbon neutrality by 2050 to avoid the worst effects of climate change. While it’s not the entire solution, greater electrification in all sectors (e.g., electric vehicles in transportation, electric heat pumps for buildings and industry) is a key pathway to deep decarbonization. And, as we shift to greater electrification of end uses, the importance of having cleaner electricity really comes into focus. A less-polluting and expanded power sector is essential.
A recent report by C2ES, Clean Energy Standards: State and Federal Policy Options and Considerations outlines a promising policy that could help accelerate the power sector cleanup. In addition to improving climate and the environment, the report also underscores the public health and economic benefits of transitioning to cleaner electricity.
Policy is required
One of the report’s key insights is that current policies and market forces alone won’t deliver the level of clean electricity we know is necessary by mid-century. Stronger national or sector-wide policies like a clean energy standard (CES) will be required. And, while a range of policies can be implemented to clean up power sector emissions, a CES has a few distinct advantages.
A CES defines clean electricity more broadly than a renewable portfolio standard (RPS), and would likely include nuclear power, large-scale hydropower, fossil fuel-fired generation with carbon capture, and other yet-to-be-imagined zero-emitting technologies. Because it allows for compliance via a broader set of technologies, a CES is likely to be less costly to achieve the same level of emission reductions than an RPS. Furthermore, it provides greater flexibility for a utility and allows more ambitious clean electricity targets to be achieved sooner.
For example, if a state RPS requires power companies to get 50 percent of its generation from wind, solar and small hydro by 2030, and if it converted to a CES that allowed existing nuclear generation to qualify, the state could achieve 80 percent or more clean electricity by the same date. Indeed, a CES can also help support existing zero-emitting nuclear power stations, many of which are struggling to compete with lower cost natural gas generation. Existing nuclear provides more than 19 percent of the electricity consumed nationally, but significantly more in some states. New York and New Jersey, for example, get 30 and 40 percent of their electricity from nuclear power, respectively.
Additionally, certain states and regions have lower renewable potential or less ideal conditions for wind, solar or hydro than others either because those areas are less windy, less sunny, don’t have the water or topography for hydro, densely populated, or their lands are otherwise protected. Allowing fossil fuel-fired generation with carbon capture technology or nuclear power to qualify for a CES likely increases the participation of states that have been laggards in the clean electricity policy space, as it can increase political appeal.
Even greater flexibility
Credit trading further increases the flexibility of an electricity portfolio standard (e.g., a CES) making it easier to achieve and less costly.
Under a CES, a state utility might have an obligation to supply 50 percent of its electricity from qualified clean sources. If the utility sells 1 million MWh of electricity each year, then it must obtain and surrender 500,000 clean energy credits (each credit is equal to 1 MWh of certified clean electricity) to an administering authority. A utility earns clean energy credits by generating electricity with its own clean sources, contracting for delivery of clean electricity, or by purchasing credits. Allowing market-based credit trading across states, regions or nationally, creates an effective price on carbon and facilitates lower-cost compliance; if one utility generates more clean electricity than it needs to comply with the standard, it can sell its excess credits to other participants.
Beyond the power sector
Historically, a CES has covered only the power sector, which is responsible for a third of U.S. energy-related carbon pollution, leaving a significant amount of emissions from other sectors unaddressed. Due to the serious and time-sensitive nature of climate change, we don’t have the luxury of focusing on the emission reduction challenge in each sector serially. We must find a way to address sectoral emission reductions simultaneously to maximize and expedite the potential for reductions economywide.
As discussed in the CES report and on a recent webinar, linking emission reductions programs across sectors and jurisdictions is feasible. This has been done in Alberta, Canada, and between programs in California and Quebec, Canada. A key focus is developing a mechanism or accounting system, which would connect a ton of emission reductions from a power sector CES program with a ton of emission reductions from a program in another sector. Additionally, a process to demonstrate compliance in a transparent and consistent fashion to avoid double counting would be required, as well as an independent, institutional oversight authority to monitor the programs and processes.
Prospects for action
In addition to state-level activity in 2019, there is action at the federal level too. Last May, Sen. Tina Smith (D-Minn.) and U.S. Rep. Ben Ray Luján (D-N.M.) introduced a power-sector only federal CES bill. Also, U.S. Rep. Diana DeGette (D-Colo.) has issued a discussion draft on a version of a national CES bill. And, we may even see a multi-sector CES bill introduced later this Congress.
As a concept, a CES builds on the successful experience of the majority of states and the District of Columbia that have implemented renewable and alternative energy portfolio standards. Adding credit trading further increases the flexibility of a CES. Linking a power sector CES with emission reduction programs in other sectors increases the coverage and creates opportunities for faster and lower-cost carbon pollution mitigation. Given the imperative of transitioning to cleaner electricity, the adoption of a CES warrants serious consideration.