The Climate Bill: Ready, Fire, Aim

Hot from the successful passage of the historic climate legislation, the Obama administration has kept at its plug and chug motif, working hard to revise the initial house legislation to bring America back into the climate change race. And while the speed and intensity from the congressional factory is both admirable and necessary, the ready-fire-aim underpinnings of the American Clean Energy and Security Act (ACESA) will lop off a few key players in our transition to a clean, renewable future. One early and unintended casualty comes to mind: the voluntary renewable energy market.

Yep, that's right, as it's now written ACESA will actually kill the voluntary renewable energy market!

But let's just be clear up front -- just the mere fact that the Congress and the White House are working on passing an historic piece of climate legislation is indeed a sea change in how Washington has viewed global climate change. It's refreshing to see real US leadership on what is perhaps the single biggest issue facing the world today.

Yet, for all our excitement about having a climate bill -- let's not simply push for any climate bill. To be sure, left unchecked, we could wind up with a bill that, however well intentioned, could actually do more harm to the clean energy industry here in the US than good.

I'm speaking specifically of the voluntary renewable energy market. The voluntary renewable energy market is here and thriving. It's responsible for over 18 million megawatt hours generated and has a market value estimation between $85 and $125 million. It goes without saying that green power purchases are a huge piece of the renewable energy pie.

Remember that energy independence and global security the Obama administration keeps promising? The voluntary renewable energy market is a key example of that future fully realized. Not only do voluntary purchases maximize how much renewable energy is on the grid, but they serve as a viable carbon-neutral option for businesses and homeowners looking to impact the grid positively.

Yet, such a market is caught in the crosshairs of legislative no-mans land. As the language of ACESA 2009 stands, the establishment of a federal Renewable Electricity Standard (RES) and the cap-and-trade titles in the bill chop off a huge chunk of revenue generated from voluntary renewable purchases. As they say, the devil is in the details. And that's the case here too.

Let's get into the details here. Bear with me -- it gets a bit arcane. But this is important.

A federal Renewable Energy Standard (RES), created under the bill, hopes to build on the success made by states that already have their own state RES, further reducing carbon emissions and spurring job creation. This federal RES is accompanied by a federal REC, a renewable energy credit. Think of RECs as your proof of purchase. Every REC equals one megawatt hour of renewable energy generation and is given a unique ID tag for tracking and trading purposes. The renewable energy generated is sold as a REC, channeled into the grid, and presto - you have a green purchase on the voluntary market. Keeping track of such purchases through RECs is akin to asking for a receipt when you purchase a retail item -- you need proof of purchase to better keep track of your finances. The same concept applies to energy.

Under ACESA, the difference between a federal REC and state REC is unclear at best, and duplicative at worst. The biggest problem with this oversight is an issue called double counting. Under the clean energy titles of the bill, a dual REC is created, whereby a renewable energy supplier could sell a state REC to a voluntary market and a federal REC for compliance under the mandatory federal RES. If this happens, customers will no longer be willing to pay for something they would get anyway as a result of the mandate, taking away the incentive consumers have to make a difference with their purchases.

Retiring allowances are another key piece of the renewable energy puzzle. Why are retiring allowances such a big deal for the voluntary market? Under the cap and trade titles of ACESA 2009, there is no allowance retirement similar to how the Northeast's Regional Greenhouse Gas Initiative (RGGI) is written. If allowances cannot be retired as a way of demonstrating the carbon reduction that automatically happens when clean energy enters the grid and replaces otherwise necessary fossil generated electricity, fossil fuel generators will continue to emit at the level of the emissions cap - despite the reduction in emissions accrued from the renewable energy generation. Thus, there is no credit for those additional renewable purchases toward the net level of reductions and the generators or pollution emitters are essentially getting an extra and unnecessary allowance.

If consumers and buyers cannot recognize the impact that their purchases have made, market appeal of voluntary renewable energy offerings will drop significantly, squeezing the voluntary market out of competitive existence. In essence, voluntary renewable purchases become the energy sector's unplugged microphones -- capable of impact but silenced by oversight. Green power purchases have been a major boon for individuals, businesses, and institutions to support renewable energy development. Without the necessary language that protects allowance retirement, the voluntary market will be unwittingly cut off at the knees.

This is a big little problem. Congress is not intending to do irreparable damage to the green power market, given its viability in the renewable energy sector and its salience in the Obama administration's plan for a clean energy future. But when the dust settles after the August recess, the major gates protecting voluntary renewable energy purchases will be undoubtedly unhinged.

While voluntary renewable energy purchases serve as an essential piece in generic market value terms, they support another area often ignored: encouraging progressive consumer choice. Businesses and consumers alike have been investing in green power options. The likes of Pepsico and Intel, just to name a couple big ones--have been turning to the voluntary market for renewable energy purchases. Utilities have been offering green option plans for consumers looking to go the extra mile with their electricity offerings.

If ACESA is not revised to bolster the voluntary renewable market, such players will no longer earn credit for their purchases and these private sector dollars that currently help us all pay for more renewable energy development will go away. Right now, the voluntary market is responsible for half the renewable energy generation in this country; all paid for by someone other than you and me. As written, this ACESA language would simply have renewable energy paid for by you and me alone and no other voluntary partner.

This completely defeats the purpose of the voluntary renewable energy market. Incredible as it may sound, the passage of ACESA as it's currently written will effectively kill the voluntary renewable energy market. Is this really what the Congress and the President want?

Can you imagine being a Democratic Member of Congress and going home to announce that your vote is killing the voluntary renewable energy market? Or imagine being the President and running for reelection on your record of killing the renewable marketplace?

All we need is a simple fix in language and ACESA will actually become the vehicle to drive the clean energy market -- not kill it. Let's fix it and get this bill done right!