S. HRG. 112–466 CLEAN ENERGY HEARING BEFORE THE COMMITTEE ON ENERGY AND NATURAL RESOURCES UNITED STATES SENATE ONE HUNDRED TWELFTH CONGRESS SECOND SESSION TO RECEIVE TESTIMONY ON S. 2146, THE CLEAN ENERGY STANDARD ACT OF 2012 MAY 17, 2012 ( Printed for the use of the Committee on Energy and Natural Resources U.S. GOVERNMENT PRINTING OFFICE 74–903 PDF WASHINGTON : 2012 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 COMMITTEE ON ENERGY AND NATURAL RESOURCES JEFF BINGAMAN, New Mexico, Chairman RON WYDEN, Oregon LISA MURKOWSKI, Alaska TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming MARY L. LANDRIEU, Louisiana JAMES E. RISCH, Idaho MARIA CANTWELL, Washington MIKE LEE, Utah BERNARD SANDERS, Vermont RAND PAUL, Kentucky DEBBIE STABENOW, Michigan DANIEL COATS, Indiana MARK UDALL, Colorado ROB PORTMAN, Ohio JEANNE SHAHEEN, New Hampshire JOHN HOEVEN, North Dakota AL FRANKEN, Minnesota DEAN HELLER, Nevada JOE MANCHIN, III, West Virginia BOB CORKER, Tennessee CHRISTOPHER A. COONS, Delaware ROBERT M. SIMON, Staff Director SAM E. FOWLER, Chief Counsel MCKIE CAMPBELL, Republican Staff Director KAREN K. BILLUPS, Republican Chief Counsel (II) C O N T E N T S STATEMENTS Page Bingaman, Hon. Jeff, U.S. Senator From New Mexico ........................................ 1 Dickenson, James A., Managing Director and Chief Executive Officer of JEA .. 60 Gibson, Thomas J., President and CEO, American Iron and Steel Institute ..... 52 Greenwald, Judi, Vice President, Technology and Innovation, Center For Cli- mate and Energy Solutions, Arlington, VA ........................................................ 39 Gruenspecht, Howard, Acting Administrator, U.S. Energy Information Admin- istration, Department of Energy, ........................................................................ 9 Murkowski, Hon. Lisa U.S. Senator From Alaska ................................................ 3 O’Mara, Collin, Secretary, Delaware Department of Natural Resources and Environmental Control, Dover, DE .................................................................... 47 Palmer, Karen, Research Director and Senior Fellow, Resources for the fu- ture ........................................................................................................................ 33 Sandalow, David B., Acting Under Secretary of Energy and Assistant Sec- retary for Policy & International Affairs, Department of Energy .................... 4 Trent, Keith, Group Executive and President, Duke Energy Commercial Busi- nesses .................................................................................................................... 57 APPENDIXES APPENDIX I Responses to additional questions .......................................................................... 77 APPENDIX II Additional material submitted for the record ........................................................ 95 (III) CLEAN ENERGY THURSDAY, MAY 17, 2012 U.S. SENATE, COMMITTEE ON ENERGY AND NATURAL RESOURCES, Washington, DC. The committee met, pursuant to notice, at 9:33 a.m. in room SD– 366, Dirksen Senate Office Building, Hon. Jeff Bingaman, chair- man presiding. OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW MEXICO The CHAIRMAN. OK, why don’t we get started? Thank you all for coming. Today our hearing is on S. 2146, the Clean Energy Standard Act of 2012. This is a bill I introduced with a number of our colleagues. I think there are 11 of us on the bill. Its co-sponsors: Senators Wyden, Sanders, Mark Udall, Franken, Coons. Several who are not on our committee are also co-sponsoring the bill, Senators Kerry, Whitehouse, Tom Udall and Senators Feinstein and Merkley. So the purpose of the Clean Energy Standard is to establish a national standard for electricity that would make sure that we le- verage the clean resources that we have today and would also pro- vide a continuing incentive to develop cheaper and cleaner energy technologies in the future. By design it would drive continued di- versity in our sources of energy. It would also allow each region to deploy clean energy using resources appropriate to that region. The Clean Energy Standard does this in a way that is intended to sup- port homegrown innovation and manufacturing and keep America competitive in the global clean energy economy. This is not the first Clean Energy Standard to be proposed. It’s certainly not intended as a partisan proposal. In the last Congress during the discussion of a renewable electricity standard, in fact we had a lot of discussion about that in this committee, several mem- bers on the Republican side publicly voiced their support for a more inclusive standard, not just focused on renewable energy, but on other types of energy as well including nuclear power and hydro power and a variety of other options. At the beginning of this Congress President Obama moved in that direction by calling for a Clean Energy Standard in his 2011 State of the Union speech. He also addressed the proposal again and urged Congress to move ahead on something of this type in his 2012 State of the Union speech. As part of the development process for the legislation we received input from hundreds of stakeholder groups and citizens. The En- (1) 2 ergy Information Administration conducted a comprehensive set of policy analyses. The Clean Energy Standard design was the topic of several academic workshops and industry meetings. We tried to take all of that feedback and incorporate it in what we have proposed. The Clean Energy Standard will take all electricity generating technologies that exceed the carbon efficiency of the current state- of-the-art, super critical coal generation and award them credits scaled to their relative improvement in carbon intensity over that baseline. Zero carbon sources such as nuclear and renewables will get a full credit per kilowatt hour produced. Advanced coal technologies such as oxy fuel combustion will get partial credit. Natural gas will get about a half a credit and so on. Utilities that sell electricity at retail will acquire and turn those credits in to meet a standard that overall will start off being fairly easy to meet. The standard though, will become cleaner and more stringent over time. The result is intended to be a realistic and a predictable market pull on advanced energy technologies. By hav- ing a long term, predictable market for advanced electricity genera- tion the legislation is intended to provide innovators with con- fidence and the ability to make their best case to investors and project financiers. This proposal is only 25 pages in length. It is, we believe, simple and straight forward. We think it would also, though, have a trans- formative effect in the power sector. The Energy Information Administration projects that adopting the CES would drive substantial amounts of clean energy produc- tion across a diverse set of sources including wind, solar, nuclear, biomass and natural gas. It would also drive enhanced energy effi- ciency in particular in the industrial sector. EIA projects that it would reduce emissions from the power sec- tor by 20 percent below their reference case in 2025 and by 44 per- cent in 2035. This mix of benefits has led to support for the legislation from a diverse group of stakeholders. We will hear from some of those today. The discussion that we’re having today on this policy proposal is an important one to have. Even though we are in a difficult polit- ical environment the challenges that the Clean Energy Standard seeks to address and the ambitious goals that it is intended to achieve are important ones for the country. If we really want en- ergy innovation to flourish here at home we really need more pre- dictable, long term policy signals. If there are better ideas for how we should do that then what we’ve proposed in this Clean Energy Standard, I hope we can hear something about those today at the hearing. Before I introduce the witnesses, let me call on Senator Mur- kowski for any opening remarks she’d like to make. 3 STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA Senator MURKOWSKI. Thank you, Mr. Chairman. Appreciate you scheduling the hearing, your focus on this as an issue. Welcome to the witnesses. Thank you for being here. I think one of the good things about this committee is the quality of feedback that we receive here, the role that it plays in informing our decisionmaking. Some of the issues that we consider are, of course, pretty complicated. They require considerable thought. A Clean Energy Standard, the subject of this morning, is certainly one of those. You’ve noted that the President’s role in proposed a CES when he mentioned this in his State of the Union address back in Janu- ary 2011. At that time I joined the Chairman in releasing a White Paper, asking for feedback on it. I was really, very impressed and appreciative with the responses we received. How adept the stakeholders were at exploring the very specific challenges and opportunities associated with what was a pretty general proposal. From threshold questions of what resources should count as clean to who should be regulated under a CES. We received a great deal of information. I truly thank those who par- ticipated in that effort and the information that they provided to us. There was a lot of inquiry, work and patience. I think that the Chairman has clearly benefited from that in getting to this point with a bill now written, introduced, analyzed. While some are fully convinced a Federal CES is the way to go, there are quite a few others that disagree with that approach. To me, the biggest question and the one that I hope we’ll have an opportunity to talk about this morning is whether the American people really want a CES. Whether it’s appropriate in light of what States are already doing. Now Mr. Chairman, you’ve mentioned that there have been those that in the past have suggested that incorporating a Clean Energy Standard, one that expands beyond the renewable energy is some- thing that others on both sides of the aisle have mentioned and have encouraged.