Impacts of a Clean Energy Standard

The Energy Information Administration (EIA) was requested by Science, Space, and Technology Committee Chairman Ralph Hall to analyze a “clean energy” standard (CES) based on the targets proposed by the White House. That standard requires 80 percent of electricity sales in 2035 to come from qualifying clean sources of energy.[i] Eligible sources include natural gas combined cycle plants, nuclear plants, renewable plants (hydroelectric, wind, solar, biomass, geothermal), and fossil plants with carbon capture and sequestration technology. Fossil fuel plants receive only partial credit towards meeting the target because they still emit some carbon dioxide emissions.

The EIA found that under the CES:

• Average electricity generation costs would increase by 16 percent in 2025 and 29 percent in 2035.
• Household electricity bills would increase by $115 in 2025 and by $211 in 2035 (in 2009 dollars).
• Expenditures on electricity would increase by $41 billion in 2025 and by $77 billion in 2035 (in 2009 dollars).
• Gross Domestic Product would be reduced by $127 billion in 2025 and $74 billion in 2035 (in 2005 dollars).
• Manufacturing employment would decline by 1 million jobs in 2025.
• Average natural gas prices would be 9.3 percent higher in 2025 and 5.4 percent in 2035. Natural gas accounts for much of the compliance with the CES in the early part of the projection period, resulting in the increase in price. As other compliance options become available, the price impact is lessened.
• Electricity prices in 2035 would increase by at least 40 percent in seven market regions: Texas (42 percent), Oklahoma (46 percent), Tennessee/Kentucky (47 percent), Colorado (48 percent), Eastern PA and New Jersey (50 percent), Long Island (51 percent) and Southern Illinois/Eastern Missouri (61 percent). Regions that are more dependent on generation fuels that are not CES-eligible, primarily coal, have a higher price impact.
• Coal-fired generation, which grows by nearly 23 percent between 2009 and 2035 in the Reference case, decreases by 46 percent between 2009 and 2035 under the CES. Coal is primarily displaced by increased natural gas generation, which is 38 percent greater in 2025 and 30 percent greater in 2035 under the CES. Generation from nuclear and renewable sources is also higher under the CES with nuclear generation increasing primarily after 2025. Nuclear generation is 30 percent higher in 2035 under the CES.
• Wind and biomass would be the renewable generating sources that have the largest generation increases under the CES. Wind generation almost doubles by 2035. Additional biomass generation is met primarily through increased co-firing in existing coal plants, but it decreases in the latter part of the projection period as new nuclear generation capacity comes online and existing coal capacity is retired.
• Electricity sector carbon dioxide emissions would be lower by 35 percent in 2025 and 60 percent in 2035.

Conclusion

It seems that the Obama Administration is pursuing energy policies that limit energy consumption or production, and increase energy prices. According to Chairman Ralph Hall, “This report—prepared by independent government experts—makes clear that the CES amounts to an expensive new electricity tax on the American people. With an anemic economy and unemployment stuck above nine percent, it is very troubling that the President continues to pursue an energy policy that would add billions to Americans’ energy bills.”[ii]