Tuesday, March 31, 2009

The House Energy/Climate bill

The first major energy/climate legislation has begun to take shape, and it is worth looking to see what the House seems to think is the way forward. Of the elements in the new bill (pdf), the ‘‘American Clean Energy and Security Act of 2009.” Given that it is 648 pages long, it is difficult to condense into a short post, but the key points can be summarized. The bill sets a target for the amount of renewable energy that is integrated into the national mix.

Percentage of electricity required to come from renewable sources, by date.

Federal renewable energy credits would be established at $50 apiece (each being equivalent to 1 MWh of electricity generated from a renewable source) and applicable utilities would be those that generate 1 million MWh or more per year. So for every MWh a utility fell below that annual target percentage it would have to pay $50, or 200% of the cost of the credit the year before the payment is required (whichever is the lesser). The program is also targeted to encourage distributed generation facilities cost competitive with other forms of renewable energy generation. The credits are tradeable between utilities.

The bill will set up a registry for identifying and permitting carbon dioxide sequestration sites around the country. Regulations will also be written to protect against any re-release of the CO2 one injected to ensure it does not escape. (This includes specifically EOR using CO2 injection. ) Regulations governing CO2 injection wells are to be promulgated a year after the bill goes into effect. The use of pipelines to carry the CO2 to the sequestration site will be examined to find out what the barriers are to that use. The bill calls for identification of market risks, and what the Administration will have to do to reduce that market risk in the use of pipelines to move the C02.

The Carbon Storage Research Corporation is posited as an affiliate of the Electric Power Research Institute and it is suggested that this will collect assessments from the industry over the next ten years, at a level of:

Assessment for CCS Research
This will be used to fund demonstration projects, at commercial scale, of CCS technology, and it is estimated that this should generate about $1 billion a year for the research.

EPA is called upon to provide regulations for funding in CCS commercial deployment applicable to plants larger than 250 MW., those that are more than 50% fed by coal or petroleum coke, or any entity that emits more than 250,000 tons of CO2 equivalent a year. Interesting funding will not be provided to entities that generate transportation fuels that contain more than 10 kg of fossil-based carbon per million Btu’s.

Standards are set for new coal-fired power plants (EGU – Electricity Generating Units) where units which get more than 30% power from coal and petroleum coke are covered. These EGU’s are not permitted to emit more than 1,100 pounds of CO2 per MWh. (falling to 800 lb after 2020), providing there are at least 2.5 GW of plant operating, either in the US or the world, that are collectively capturing 5million tons of carbon dioxide in the US, or 10 million tons world-wide.
Credits will be authorized for transportation fuels and used in encouraging the transition to electric powered vehicles (with the electricity generated from a source other than on the vehicle). Provisions are provided to establish electricity refueling stations for plug-in hybrids, and possibly integrating them into Smart Grids.

SEED (State Energy and Environment Development) funds are defined and these will be the conduit for money in the designated areas to flow from Washington to the States, primarily for “primarily for clean energy, energy efficiency, or climate change purposes”.

Money will also be directed toward the use of Smart Grids (for electricity generation). The first question to be answered being as to whether the installation makes sense. One of the objectives is to reduce peak demand for any load-serving entity that produces more than 250 MW. It is anticipated that these reductions will be through improved energy efficiency of generation and use. The Energy Star program will be used.

Target goals are set for improving the efficiency of building energy use, with 305 reduction being a quoted number and 50% after 2015. Building code standard changes in things like roof materials are included. Incentive funding will be provided to the States to encourage their adoption of the changes. And there is money to train those who will implement these new codes. A retrofitting program for old buildings is also established. This can include paying up to $500 for an energy audit of the building. Depending on the results of that audit between $1,000 and $2,000 might be provided to implement recommendations that reduce energy consumption by 10 or 20%.

It is interesting that the program also contains incentives ($600) for measures to reduce water demand by 35%. $20 more can be added per additional percentage point gained to a maximum grant of $1,200. And there is $2,000 for installation of new renewable energy items. Commercial programs are also described, with basically larger incentives.

The bill then goes into issues that address global warming, including targets for greenhouse gas emission reductions over the years. These caps are defined. Reports are called for on such items as who is polluting with what, how the global temperature is changing, and how the sea level is rising.

It establishes a registry of those that generate more than 25,000 tons of CO2 a year (including those that do it through a vehicular fleet). Emission allowances are then defined as relating to each individual ton of CO2 generated in a year. An offset credit can be used to compensate for a compliance obligation at the rate of 1.25 credits per ton of CO2 or emission allowance. The offset credit program is then established, with the opportunities of trading the credits.

I could not find a recommended price for these credits.

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