The proposed Clean Energy Standard is getting a lot of attention right now with conflicting reports about whether or not Democrats will attempt to include it in the budget reconciliation side of their infrastructure push.
The proposal’s specifics have not been revealed, but it would incentivize electric utilities to transition toward cleaner power sources, primarily wind and solar, rewarding those who meet or exceed the thresholds and penalizing those who fall short. Reportedly, utilities’ current power mix would be accounted for so that states like West Virginia and Wyoming that still generate a substantial portion of their power from coal wouldn’t be penalized compared to utilities that have already retired coal generation, like California.
“Clean energy targets set under federal standards should be considered the floor or minimum that utilities must meet to avoid conflict with states’ existing renewable energy standards.”
Furthermore, a CES would discourage additional investment in gas generation and other associated infrastructure because of the increasing likelihood that they would just become stranded assets once demand for gas starts to decline. As it is, the growth of gas generation is slowing down while the growth of wind and solar continues to increase. Renewable wind and solar are expected to make up the vast majority of new capacity this year and for the foreseeable future. That is because the cost of wind and solar continues to decline while gas prices remain volatile. Wind and solar facilities also have minimal operational and maintenance costs.
While a CES would require utilities to generate an increasing percentage of their electricity from zero-carbon sources, it wouldn’t automatically advance distributed or customer-sited renewable resources like rooftop solar, for instance. As a result, retail advocates want policymakers to include a carve-out that would require a certain percentage of qualifying generation to come from distributed generation.
For the reason mentioned above, clean energy targets set under federal standards should be considered the floor or minimum that utilities must meet to avoid conflict with states’ existing renewable energy standards. That will also ensure that polluting states do not bear most of the costs of compliance.
One big unknown is how a CES will affect nuclear power. Nuclear plants have been retiring in recent years, but there’s a concerted effort to extend the operating life of others. All new nuclear plants under construction in recent years have been canceled except for the Vogtle plant in Georgia, which continues to suffer delays and cost overruns at ratepayers’ expense. However, plans for the first small modular reactors are also beginning to take off. A clean energy standard could extend the life of existing nuclear plants that are at risk of closing, as well.
As for other emerging clean energy technologies like geothermal and green hydrogen, their commercialization could accelerate under a federal clean energy standard. Hydrogen could displace oil and gas as a fuel source in several sectors - from shipping and freight transportation to power generation. Meanwhile, power generated from geothermal is also dispatchable and could increase under a CES.
Another question is how a CES might accelerate the electrification of other economic sectors, like transportation and heating. Some cities have already banned gas infrastructure in new construction to encourage residential and commercial buildings to go all-electric. That has sparked a political backlash in many Republican-led states, with legislatures adopting measures prohibiting cities from implementing similar bans.
Opponents of a CES argue that it’s cumbersome and would add additional layers of regulation to an already complicated and challenging sector. They represent the carbon tax side of the decarbonization debate and see an economy-wide tax as a more transparent approach that is easier to implement. Unlike a CES, which issues credits for clean electricity generation to incentivize new investment, a carbon tax applies a surcharge on carbon-emitting electricity. Proponents of a carbon tax argue it does a better job of encouraging energy efficiency and conservation than a CES.
There also remains a lot of opportunities to improve energy efficiency throughout the economy and far greater utilization of the customer-sited resources. Distributed energy resources (DERs) are only now beginning to be used to their full potential to balance load, as well as generate electricity.
The combination of consumer-owned generating assets, like roof-top solar and storage systems, and the digitization of real-time supply and demand information is driving an entirely new way of looking at grid management – one that is more flexible and more sophisticated than the old way of building a massive power plant on the edge of town and running wires to every household and business.
With the advances in technology over the last decade, various generation and energy management systems – including heat pumps, smart thermostats, water heaters, battery systems, efficiency, and distributed generation – can be tied together into a virtual power plant, reducing the need to invest in large and expensive centralized generation and transmission infrastructure. Consumers are no longer just the end-users of power generation, now they are the generators.
The role of consumer generation and behind-the-meter demand management is adding flexibility to the grid that promises a more efficient, less expensive, and cleaner way to address periods of peak demand and concerns about resiliency.
But while we have the technology, we need smart market structures and regulations to incentivize investment to ensure these advanced systems become the norm. A federal CES with a DERs carve-out, would send a clear signal to private investors and accelerate the transition to zero-carbon electricity to help meet our national climate goals as well as international agreements like the Paris Agreement.