The effects of a national RPS on the Southeast

I’m becoming increasingly concerned about the Union for Concerned Scientists. Its gone from simply raising awareness about global warming to strongly advocating very strong policy responses. I came across a UCS briefing the other day which typifies the lack of rigor and questionable logic that has come to define far too much of the organizations work in the past year.

The brief (PDF) is on the impact that a national RPS would have on the southeastern United States . It’s widely feared that the southeast has a lot to loose from an RPS because it does not have very much renewable energy to supply. Yet here are the UCS’s findings:

A national renewable electricity standard can help the Southeast:
• Reduce the billions of dollars spent every year importing fuels from other states and countries by developing local renewable energy resources;
• Create thousands of manufacturing jobs and increase global export opportunities;
• Reduce natural gas costs and reduce or stabilize electricity costs; and
• Purchase the least-expensive renewable energy available, anywhere in the country.

I don’t have time right now to go in to all the problems I have with this report, but I’ll give you some of the highlights. They’re also useful for thinking about RPS policies in general.

The authors are correct to point out that the southeast imports a lot of coal, and that it would import less coal under an RPS. However, this would not translate directly into saving “billions of dollars” as many, if not all, of those dollars would still go out of state and they would still be spent on energy. The only difference is that they would go to purchase renewable energy credits (RECs) as well as coal. The report goes on to say that the southeast has plenty of renewable resources to bring online to meet an RPS, yet I haven’t seen any evidence to support this. Power simply isn’t a major concern on the hydro front, and this will be even more true going forward given the recent water shortages. Wind and geothermal are essentially non-existent, much of the region is actually too hot for viable solar, and wive and tidal technologies are not even close to market fruition. That leaves biomass, which will most likely be dominated by fuel rather than electricity interests.

More generally the report claims that an RPS will reduce electricity prices. I simply don’t see how this is possible. As a general rule of thumb, an RPS will increase prices nationally. In deregulated regions, it’s possible that prices won’t increase, as an RPS essentially works as a transfer from inframarginal producers (like coal) to marginal renewable producers. In regulated regions, prices are equal to the average marginal cost of all producers (for the most part). It’s possible that a regulated state could see a decline in electricity prices under a national RPS, but only if it has a lot of renewable energy, in which it exports RECS and the revenue subsidizes in state prices. Since the southeast is entirely regulated, and is comparatively inefficient at generating electricity from renewables, it’s electricity prices will go up. End of story. (Or think of it this way: as the brief points out the southeast uses a lot of fossil fuels to generate electricity. Under an RPS, it’s still gonna use a lot of fossil fuels, only now its also gonna have to buy RECs to go along with all that coal).

As for the jobs findings they’re expectedly ill-explained. See previous comments for skepticism (here and here).

Some good news on renewables

1. A recent study by two Stanford professors found that up to 1/3 of wind capacity can be used to supply baseload electricity once a large enough number of wind turbines are linked together. To date, wind’s market penetration has been hindered by its perceived intermittence.  If the authors’ findings are correct, they might suggest that government should focus on subsidizing inter-turbine transmission, not turbine production.  Read the press release and download the paper here. H/T The Energy Blog.

2. Today’s NYTimes has an article on Nanosolar’s new thin film PV panels.  The Google backed company plans to start selling photovoltaic systems for as low as $2 a watt. Assuming a ten year life and a very conservative 8 hours of sunlight a day, that’s less than 7 cents a kilowatt hour.

More evidence that we may not even need an RPS. H/T Thom.

Are you sitting down? I’m going to defend W.

Today on NYTimes’ The Board, the editorial board derides President Bush’s opposition to a 15% Renewable Portfolio Standard (RPS) as flip flopping. This is because as Governor of Texas, Bush implemented a very forward looking and successful statewide RPS. Therefore, clearly his opposition to a national RPS can only be the result of Cheney, Rove, and industry “getting to him”. However, while it is certainly possible that some undesirable influence got to Bush, the premise that what’s right for Texas’ electricity market is necessarily right for the country as a whole is far from true. Texas is unique for two important reasons. The first received only cursory mention from the Board, while the second was ignored entirely.

Sell me a wind turbine. Do it.

When I was in Russia a few years ago a friend told me a corny, but somehow interesting joke. She told me that the Russian word for a breeze or a draft in a room is pronounced “dooit” (literally, “it blows”). So if you speak both Russian and English, you sometimes say to people, “Close the window. Do it.”, and laugh.

That was a very tangential segue to my second skeptical RPS post of the day. Yesterday I was at a renewables meeting with Peter Bierden, Director of Global Wind Projects at GE Energy. He was going along talking about how great wind energy is when suddenly he dropped this little tidbit of information on the group: GE, by far and away the largest turbine manufacturer in the US, is so backed up that you can’t even place an order for delivery prior to 2010.  Every electricity model out there, RFF’s included, predicts meeting the overwhelming majority of renewable generation requirements with wind energy in the short to medium term. Now Peter didn’t discuss exactly how many turbines were set to be delivered, but the fact that they’re booked solid prior to Congress passing an energy bill does not bode well.

Ironically, Congress’s ridiculous, discontinuous approach the the federal production tax credit (PTC) is probably the main source of GE’s current supply constraints. When a Republican congress allowed the PTC to lapse last, in 2003, GE was left holding the bag on its contracts in progress with suppliers. Now we’re going through this charade all over again, as Congress debates whether or not to extend the PTC. Yet, even if they do decide to extend it another year, according to Bierden’s comments, that won‘t affect wind installation at all, as turbine purchasers today would be concerned with a PTC in 2011.

Brown thinking green?

Gordon Brown unveiled a new British energy plan in the Queen’s Speech today, as he laid out his first full governmental program. The Bill will supposedly enforce emissions reductions of 60% by 2050 and 26-32% (which I assume can be taken to mean 26%) by 2020. Crucially, the new plan includes international aviation and shipping (what will I post about now?). The bill also calls for an expanded renewables standard and facilitation of private investment in carbon capture and storage. The standard is okay; in the context of binding targets, I think a wisely designed RPS could be an effective complementary policy. The CCS incentive is good. Although we run into the problem of government trying to pick winners, CCS holds enormous potential and faces huge initial capital and risk thresholds.

This is momentous, as it makes Britain the first country to introduce domestic legally binding emissions limits. How binding is “binding”? Only time will tell.

Note: I would love to get some feedback on this from people more familiar with proposed U.S. climate legislation. (Hint, hint, Daniel)

RECs ‘n Effects

Much of the global warming debate in DC of late has focussed on taxing or capping carbon. Yet, in addition to this, it’s become increasingly clear that Washington is going to take an even more active role in greening up our nation’s energy mix by ennacting some sort Renewable Portfolio Standard (RPS). An RPS encourages clean energy by forcing utilities to generate a certain percentage of their electricity from renewable sources. All of the leading Democratic presidential candidates have proposed RPS’s, of either 20% by 2020 or 25% by 2025. The current House version of the energy bill has a fairly timid RPS of 15% by 2020 with lots of rural exemptions and loopholes. The Republicans successfully blocked an RPS from being included in the Senate energy bill.

So far all of the action on the RPS front has occurred at the state level. For a really good overview of RPS in general and of the states’ RPS experience to date, see this paper from the folks at EIA, published in the May 2007 issue of The Electricity Journal.