It was the worst of times for the economy and the best of times of the next installment of the Obama transformation. Known as the American Clean Energy and Security Act of 2009 (PDF) or The Waxman-Markey bill, the goal is to reduce energy consumption and with it carbon emissions, according to the E.P.A.’s review which accompanies the release of the draft bill.
The bill was announced this week in a coordinated one-two punch by Congressional Democrats and the Obama Administration. The bill’s proposed cap-and-trade mechanism assumes that carbon prices would range from $13 to $17 a ton in 2015, and rise by about 5 percent a year. By 2020, carbon costs would reach $17 to $22 a ton. That is approximately what participants in a European Union cap-and-trade program are currently paying according to the EPA. The bill also seeks to reduce carbon emissions by increasing the market share of renewable energy like wind and solar to 26 percent of the nation’s energy mix by 2030, and 46 percent by 2050. Without it, E.P.A. estimated renewables would remain at about 14 percent of power generation resources. Republicans said this bill amounted to a declaration of war by the West Coast and East Coast on the Midwest and South and that cap-and-trade amounts to a hidden energy tax.
Will this Bill really work?
This is the first draft of the bill and you can expect a tremendous amount of sizzle and froth as proponents and opponents vent over the features. But we do know a few things both by logic and intuition that likely will shape the American public’s view of the right balancing of interests in this matter.
1. The European Experience is a Failure. The bill purports to learn from the EU emissions trading scheme, as it is so appropriately called, where a cap and trade system is in place seeking to change behaviors about emissions by imposing a carbon tax on releases. The problem in Europe is the politicians granted so many “allowances” (think indulgences in the Eurocentric mindset and earmarks in the American political scheme of things) that nothing much changed. Emissions reduction results have been modest. Yes, they are trying to fix it, but for all the criticism of the Bush Administration after rejecting Kyoto, US performance under a voluntary approach was on par with or better than the Europeans.
2. Renewable Generation is now Mainstream, but Transmission is limiting it. Renewable energy production in the US has exploded. Wind is expected to capture more than 75% of the total market share for renewable options. The problem is the transmission grid was not designed to support small scale, intermittent resources. While the production tax credits Congress has periodically renewed are the mother’s milk of renewable market share growth, the basic infrastructure to fully integrate renewables into the grid is insufficient. Don’t believe me—look at West McCamey, Texas, where wind resources flourish but the fragmented transmission grid that once protected Texas from the rest of America now imprisons its best resources. The same is true of wind potential in Wyoming and Iowa and other places far removed from load centers. In short, if we want renewable energy to grow to the levels the Obama team dream of we must spend as much or more on transmission as we do on the renewable generation itself. Utilities will buy more renewable energy because state regulators tell them to do so and reward them by allowing the incremental cost to be passed through in rates. Congress has never met a subsidy it did not like and so the production tax credits will continue in fits and starts propelling renewable market share upward. The real question is whether the Government, Utilities and Investors will pump enough new capital into the transmission grid to make it work effectively to create a scalable market for renewables—and a profit without being on the government dole?
3. Too Much of a Good Thing. Because the commitment to renewable energy is largely politically driven, manufacturers of wind turbines and other OEM equipment have been content to max-out their production capability and make profits rather than following the lead of the ethanol crowd, overbuilt and exposed to unintended consequences. Achieving the Administration’s renewable energy goals will be daunting because there probably is not sufficient production capacity to deliver the equipment needed in the time frames politicians want. And even if you could do so you still have the transmission delivery problem in # 2 above.
4. Backup for Intermittent Renewable Energy Resources is Natural Gas. Because the wind blows only when it the atmospheric conditions are right—not when politicians and utilities want it, every megawatt of wind generation must be backed up by a megawatt of “dispatchable” energy which almost always is natural gas combined cycle generation these days. The same type of power plants we have been building for the last generation of resource additions are going to be built again under the ruse of backing up renewables.
5. Coal and Nuclear Generation are NOT going away. The installed based of coal fired generation is still the backbone of America’s resource mix and a stabilizing influence on energy prices given the long term nature of coal contracts. Nuclear power has proven to be a reliable, low operating cost resource and the NRC seems willing to keep extending the useful life of the existing fleet of power plants. These resources are not going away. Dreams of building the next generation of baseload nuclear or clean coal technology power plants face the challenge that neither can match the cost effectiveness of combined cycle natural gas.
6. Carbon Taxes will Increase Energy Prices and Raise Tax Revenue. The bottom line for most Americans is that the cap and trade legislation proposed will raise their energy costs and generate vast additional revenues for the government but the underlying strategy, generating resources and emissions results will continue on their same slow and steady improvement trajectory. The analysis by most credible consultants suggests that a carbon tax of at least $40 per ton or more will be needed to really change the economics of emission reduction investment. The Waxman-Markey bill will not come close to those carbon tax levels and thus should be called out for what it really is —a tax increase not a policy change to believe in.
The California Energy Commission has proposed energy efficiency standards for new televisions to be sold beginning in 2011 in an effort to reduce a substantial increase in electric demand from those big flat panel televisions.
Before you roll your eyes and grumble, “California is at it again!” consider this. According to the CEC, televisions and the peripherals that plug into them now consume 10 percent of a typical home’s electricity use and that share of demand is growing along with their market penetration.
Put that statistic in context, a 42 inch plasma flat panel TV consumes about 400 kWh/year compared to about 100 kWh/year for a traditional (and smaller) TV while efficiency gains from other appliances have been going the other way.
For example, from 1972 to 2003 the efficiency of refrigerators sold in the US increased 298%, central A/C unit efficiency increased 68%, and washer efficiency increased 113% according to the US DOE.
Holy Channel Surfing, Homer!
The law of unintended consequences is biting us big time. Put it this way: The increase in energy demand from flat panel TVs in recent years has erased ALL the efficiency gain from refrigerators, central A/C, and clothes washers since 1977.
TV manufacturers recognize the need to address this issue and newer models such as LED technology are increasingly available. In fact, more than 400 television models already meet the 2011 CEC-proposed standard and 100 models meet the 2013 standard. The CEC published such a list of models that already meet these proposed standards which can be found at http://www.energy.ca.gov/appliances/List_of_TVs.PDF .
While some trade groups and manufacturers opposed this new regulation, the chorus of those in favor is growing and includes Vizio, the second largest maker of flat screen TVs in the nation; TV component producers 3M and Agoura Technologies; the LCD Television Association; the Natural Resources Defense Council (NRDC), and all three major California electric utility companies, Pacific Gas and Electric, San Diego Gas & Electric, and Southern California Edison. Retailers signing on as well include Wal-Mart, Costco, Sam’s Club, and Fry’s who said they will promote TVs according to energy efficiency.
Under the proposed regulations, the first standard (Tier 1) takes January 1, 2011, and is expected to reduce TV energy consumption by about 33%. The Tier 2 standards kick-in in 2013 and are expected to result in overall average energy consumption of 49 percent.
Maintaining California’s Energy Efficiency Leadership
The goal of this new regulation is to continue to grow California’s economy while building energy efficiency into the products we buy and use daily.
As consumers we are offered a range of products and we buy the one that best balances performance, quality and price. If a popular product like flat panel TVs continues to expand market penetration with each incremental unit sold increasing energy use by 4 times the TV it replaces soon California will need additional power plants to meet that demand.
California’s per capita electricity consumption, about 7,000 kilowatt-hours (kWh), has been flat for the past 30 years despite the state’s substantial growth in population, the number and average size of homes built and more appliances consuming power because of the state’s energy efficiency standards for buildings and appliances.
By comparison, the rest of the U.S. has increased energy consumption per capita by 40 percent (to roughly 12,000 kWh per person). See www.energyalmanac.ca.gov/electricity/us_per_capita_electricity_2005.html
Will this make any difference?
The CEC estimates that given the current replacement rate for TV these new efficiency standards will save a total of 6,515 GWh of electric energy demand or enough energy to power 864,000 single-family homes for an entire year.
A gigawatt hour is equivalent to having 40,000 televisions on for five hours a day for an entire year.
A final Energy Commission vote is on these produced regulations is expected by summer 2009 following public comment. You can download the CEC draft standard proposed at: 2008 Appliance Efficiency Rulemaking: Draft Efficiency Standards for Televisions, Phase I, Part C – DRAFT STAFF REPORT, publication # CEC-400-2008-028-SD. (PDF file, 26 pages, 620 kb)
Now turn that TV off and go outside and play!