Response to Electric Utility Industry Claims

Response to Electric Utility Industry Claims:
The Renewable Electricity Standard is Clean, Feasible and Affordable

The electric utility industry has voiced its opposition to a modest national Renewable Portfolio Standard (RPS) to provide 10% of US electricity from wind, solar, geothermal, and bioenergy by 2020—a policy that 53 Senators called “an essential component” of comprehensive energy legislation.

Many of the industry’s claims, however, are false, unsubstantiated, or misleading. The following dispels the most erroneous of these claims, telling the truth about the Renewable Portfolio Standard: that it is clean, feasible, and affordable.

Claim: The RPS Would Be Costly to Consumers.

Fact: A renewable electricity standard will have virtually no impact on electricity prices. Several studies conducted by the federal government’s own Energy Information Administration (EIA) show that a national 10% by 2020 RPS would not significantly impact electricity prices and could save consumers money on their energy bills. In fact, last year EIA found that the 10% RPS would have no impact on electricity prices. That’s why the Consumer Federation of America and the National Consumers Union have endorsed a Renewable Portfolio Standard.
Fact: The RPS can reduce natural gas prices and total consumer energy bills. EIA’s national RPS studies show that increased renewable energy use creates new competitors to traditional power plants, reducing the demand for natural gas, and helping to lower its price. According to EIA, reaching 10% renewable electricity could reduce consumer natural gas prices by as much as 6% ($0.26 per million Btu) in 2020 compared to business as usual. Lower natural gas prices for electricity generators and other consumers offset the slightly higher cost of renewable electricity technologies. Even using high estimates of renewable energy technology costs and low natural gas price projections, EIA last year found that a 10% RPS can reduce both natural gas and electricity bills, saving energy consumers $13.2 billion between 2002 and 2020 (net present value).
Fact: The RPS would benefit the U.S. economy. The RPS would create new high-tech jobs through the manufacturing, construction, operation, and maintenance of renewable energy technologies. It would help America regain its leadership in manufacturing renewable energy technologies, with significant export potential. It would also provide an important source of jobs and income for farmers and rural economies. A recent UCS analysis found that by 2020, a 10% RPS would produce $41.5 billion in new capital investment, $2.8 billion in revenues to rural communities, and $755 million in lease payments to farmers and rural landowners from wind power development.

Claim: The RPS is really just an energy tax on traditional energy resources.

Fact: There are no taxes applied in the RPS to any source of energy. The RPS creates a minimum commitment to renewable energy sources that gradually increases over time. It also creates a separate marketplace for tradable renewable energy credits that utilities use for compliance with the target. This credit market provides the mechanism by which renewable energy generators receive the revenues they need to meet their costs. Furthermore, assistance for emerging renewable energy sources is dwarfed by the billions of taxpayer dollars spent on mature, established fossil fuel and nuclear industries.

Claim: Renewable sources are intermittent and their costs will be an “add-on” to providing reliable, around the clock power to consumers.

Fact: The RPS Amendment creates competition and demand for both intermittent and continuously available renewable energy sources. The US electric system is designed to handle unexpected swings in energy supply and demand. Several important renewable energy sources, such as geothermal, bioenergy, and landfill gas systems can operate around the clock. Solar energy is also generally most plentiful when it is most needed—during periods of peak electricity demand. Renewable energy can increase the reliability of the overall system, by diversifying our resource base and using supplies that are not vulnerable to periodic fuel shortages or other supply interruptions. There are several areas in Europe where wind power alone already supplies over 20% of the electricity with no adverse effects on the reliability of the system.
Fact: The cost of integrating wind power into the electricity system is small. Several recent studies by electric utilities and the national energy labs have shown that fairly large amounts of wind power can be integrated into regional electricity systems at modest costs. For example, PacifiCorp estimated additional costs of 0.5-0.6 cents per kilowatt-hour for integrating 2,000 MW of wind power, or about 20% of its total system capacity. Continued advances in wind forecasting and spreading wind facilities across a broad geographic area will result in lower costs.

Claim: RPS costs will be imposed concurrently with massive environmental costs.

Fact: The RPS can help reduce the cost of new power plant environmental regulations. Renewable energy technologies produce electricity with little or no pollution. In fact, a 20% RPS would reduce power plant carbon emissions by 15% (434 million metric tons) by 2020. In order to reduce emissions of dangerous pollutants such as nitrogen oxides, sulfur dioxide, mercury, and carbon dioxide, most analysts project that electric utilities will switch from polluting coal power plants to cleaner natural gas facilities, increasing the demand for gas supplies and driving up gas prices. However, the increased use of clean renewable energy resources can help to alleviate the demand for natural gas in meeting stricter standards to reduce air pollution and the threat of climate change and drive down the overall cost of compliance. For example, a 2001 EIA study found that implementing a national RPS of 20% by 2020 coupled with new clean air controls would significantly lower the cost to consumers compared to implementing the new clean air controls alone. In 2010, total consumer energy bills would be $4.5 billion lower with the RPS, and by 2020, total annual consumer energy bill savings would increase to $31 billion.

Claim: The RPS amendment penalizes innovative companies that have already invested significant financial resources into renewable energy generation.

Fact: The RPS allows existing renewable energy generation to be used to meet the requirements. The RPS explicitly allows electricity providers to use generation from existing renewable facilities as a means of compliance. The RPS amendment also allows incremental generation from existing facilities to receive tradable renewable energy credits (RECs) as well as banking of RECs for up to three years. Further, companies that already have invested significant financial resources in renewable technologies have the option to use their competitive advantage to generate electricity from renewable energy above and beyond their own requirement, and then sell their excess credits to others under the REC trading program. Therefore, the RPS actually treats innovative companies that have already invested in renewables fairly, and creates a market that will stimulate competition and the development of new innovative companies.

Claim: The RPS fails to count important sources of renewable energy, including municipal solid waste.

Fact: The RPS includes a wide variety of eligible resources. Senator Bingaman’s amendment includes wind, solar, bioenergy, geothermal, ocean, landfill gas, and incremental hydropower as eligible resources for meeting the standard. In addition, the RPS allows generation from both hydropower and municipal solid waste to be deducted from an electric utilities’ base amount of electricity, which serves to lower the annual renewable energy requirements for those companies.

Claim: A Federal RPS Ignores States

Fact: The federal renewable electricity standard sets a national minimum standard without taking away states’ rights to establish their own programs. States can develop their own plans to meet the national minimum standard and are free to establish policies that exceed the national minimum if they choose. State-based policies to increase the use of renewable energy can help reduce the cost of meeting the national standard.
Fact: The Renewable Electricity Standard provides great flexibility for states in various regions to meet the annual targets. The RPS contains several provisions designed to help address the specific need of individual states in meeting the RPS requirements. For example, the REC trading program allows companies to comply by generating or obtaining credits from anywhere in the United States. There is also an alternative compliance mechanism that allows companies to purchase RECs directly from the federal government, at a cost that cannot exceed 1.5 cents per kilowatt-hour. Revenues collected from the sale of these credits are placed into a state renewable energy account program to support the development of new renewable technologies, with priority given to states with fewer renewable energy resources. In addition, existing renewable energy generation counts toward compliance; the annual renewable energy targets ramp-up gradually over time, with the first year that an RPS target has to be met not until 2008; double credits are issued for renewable energy generation on Indian lands, and triple credits are issued for small-scale (< 1 MW) distributed generation; and RECs can be banked for up to three years.
Fact: Every state has significant renewable energy potential. The United States is blessed with a rich and diverse pool of renewable energy resources that can be developed in every region of the country. Each of the 48 contiguous states have enough technical potential of wind, solar, bioenergy, geothermal, and landfill gas resources to meet more than one-quarter of their current electricity needs. Thirty states have the technical potential to meet more than all of their current electricity needs with renewable energy.
Fact: Current state policies and voluntary incentives are vitally important, but not enough to achieve a sustainable energy system for the entire nation. To date, 20 states and the District of Columbia have taken a clean energy leadership role by adopting renewable electricity standards or dedicated renewable electricity funds, and others have instituted voluntary incentives to support renewable energy. Yet, even with these state commitments and voluntary programs, EIA projects that non-hydro renewable energy will only account for about 3% of the US electricity mix in 2025. A recent National Renewable Energy Laboratory (NREL) study also found that voluntary programs may only add enough renewable generation to provide 0.1 percent of total U.S. electricity sales in 2010. Furthermore, a majority of states have failed to commit to the development of a sustainable energy system. Renewable energy provides environmental, fuel diversity, national security, and economic development benefits to everyone, not just to those states that support its development. Surveys show that a large majority of Americans believe that everyone should share in the costs of increasing renewable energy. A national RPS is a fair, cost-effective means to significantly increase our use of clean, sustainable energy sources.

Claim: The RPS Amendment is Unrealistic

Fact: The RPS Amendment is technologically and economically feasible. Analyses by EIA and the Union of Concerned Scientists (UCS) consistently show that we can technically and affordably achieve a 10% by 2020 RPS. The United States has more than enough renewable energy resources to achieve a 10% RPS. In fact, (according to the EIA?) wind, solar, bioenergy, geothermal, and landfill gas resources alone have the technical potential to supply the country’s current energy needs more than five times over. To add even more flexibility, municipally owned utilities and coops are exempt, municipal solid waste is excluded from the baseline and existing generation is allowed to count for compliance.
Claim: The RPS amendment is Not the Answer to the Natural Gas Crisis
Fact: Renewable energy can play an important role in alleviating the natural gas crisis. Implementing effective energy efficiency and conservation measures is clearly the fastest and most cost-effective approach to balancing natural gas demand and supply. Measures for increasing natural gas supply are also needed for addressing shortages. However, efficiency and supply increases are not the only solutions. Renewable energy resources can also play a critical mid-term to long-term role in reducing the demand for and price of natural gas. EIA and UCS analyses show that by 2020, a 10% RPS would reduce natural gas demand by as much as 1.4 trillion cubic feet (TCF) and lower consumer natural gas prices by as much as 6% compared to business as usual, All sectors of the economy would see significant gas savings from increased renewable energy use. EIA found that a 10% by 2020 RPS would result in $4.9 billion cumulative present value savings for industrial gas consumers, $1.8 billion for commercial customers, and $2.4 billion for residential customers.

Factsheet courtesy of Union of Concerned Scientists