This report responds to a request from Senator Jeff Bingaman, Chairman of the U.S. Senate Committee on Energy and Natural Resources, for an analysis of a national Clean Energy Standard (CES). The request, as outlined in the letter included in Appendix A, sets out specific policy assumptions for the study.

This report responds to a request from Senator Jeff Bingaman, Chairman of the U.S. Senate Committee on Energy and Natural Resources, for an analysis of a national Clean Energy Standard (CES). The request, as outlined in the letter included in Appendix A, sets out specific policy assumptions for the study.

Background

A CES is a policy that requires covered electricity retailers to supply a specified share of their electricity sales from qualifying clean energy resources. Under a CES, electric generators would be granted clean energy credits for every megawatthour (MWh) of electricity they produce using qualifying clean energy sources. Utilities that serve retail customers would use some combination of credits granted to their own generation or credits acquired in trade from other generators to meet their CES obligations. Generators without retail customers or utilities that generated more clean energy credits than needed to meet their own obligations could sell CES credits to other companies.

The design details of a CES can significantly affect its projected impacts. Chairman Bingaman's request sets out a base CES specification and several variants. The base CES specification, henceforth referred to as the Bingaman CES (BCES) case, has various provisions describing the definition of clean energy, the allocation of credits, and the dates when target milestones become binding, as described below:

• All generation from existing and new wind, solar, geothermal, biomass, municipal solid waste, and landfill gas plants earns full BCES credits.

• Incremental hydroelectric and nuclear generation from capacity uprates at existing plants and from new plants earns full BCES credits.

• Generation from existing nuclear and hydroelectric capacity does not receive any BCES credits. However, the total generation from these two sources counts towards the overall clean energy sales goal of the policy. Generation from these sources is reflected in the policy through a reduced requirement for holding BCES credits.

• Partial BCES credits are earned for generation using specific technologies fueled by natural gas or coal, based on a calculated crediting factor that reflects the carbon intensity of each technology relative to that of a new supercritical coal plant. These technologies include coal plants which capture and sequester their carbon dioxide emissions (0.9 BCES credits), natural gas plants that also sequester their carbon dioxide emissions (0.95 BCES credits), existing natural gas combined-cycle units (0.48 BCES credits), new gas combined-cycle units (0.59 BCES credits), existing gas combustion turbines (0.16 BCES credits), new gas combustion turbines (0.45 BCES credits), and integrated gasification combined-cycle (IGCC) coal plants without carbon capture (0.15 BCES credits).

• The BCES target for the share of retail electricity sales from clean energy sources starts at 45 percent in 2015 and ultimately reaches 95 percent in 2050. However, as noted above, the requirement to hold BCES credits is generally reduced by generation from existing nuclear and hydroelectric capacity, which counts toward the clean energy targets but does not earn BCES credits.
  
  Table 1 (click here) shows both the overall BCES case clean energy targets and the estimated requirement for covering sales with BCES credits given projected generation from existing nuclear and hydroelectric capacity. For example, in the Reference case1 projection for 2035, these generation sources account for about 24 percent of sales, so the 80-percent clean energy goal requires that 56 percent (80 percent minus 24 percent) of sales be covered by BCES credits.

• BCES clean energy goals increase linearly between the milestones shown in Table 1, with a 2-percentage point annual increase between 2020 and 2035 and a 1-percentage point annual increase in the first 5 years of the BCES and between 2035 and 2050.

• There is no sunset date for the requirements, so the 95-percent clean energy goal remains in effect beyond 2050.

• All electricity providers are covered by the requirement, regardless of ownership type or size.

• BCES credits can be banked for use in a subsequent year. There is no limit on how many credits may be held or for how long they may be held.

• The BCES operates independently of any State-level policies. The same underlying generation can be used to simultaneously comply with the BCES and any State generation requirements, if otherwise allowed for by both Federal and State law.

Like other EIA analyses of energy and environmental policy proposals, this report focuses on the impacts of those proposals on energy choices in all sectors and the implications of those decisions for emissions and the economy. This focus is consistent with EIA's statutory mission and expertise. The study does not account for any possible health or environmental benefits that might be associated with the BCES policy.