Senate Dems outline sweeping package promoting clean energy

Source: Geof Koss and Hannah Northey, E&E reporters • Posted: Wednesday, September 23, 2015

Senate Democrats today laid out a comprehensive package of clean energy provisions that will serve as their caucus’ starting point in negotiations with Republicans on a range of issues in the coming months.

The “American Energy Innovation Act” is intended to send “a clear signal that a top priority for Senate Democrats is to invest in our clean energy future,” Minority Leader Harry Reid (D-Nev.) said during a news conference this morning.

The bill, assembled by Senate Energy ranking member Maria Cantwell (D-Wash.) with the help of Democrats on the Finance and Environment and Public Works committees, contains a smorgasbord of provisions to curb carbon emissions and boost clean energy sources.

The measure sets U.S. climate policy as reducing carbon emissions by 2 percent annually through 2025, while simultaneously pressing major foreign emitters to cut their own carbon emissions.

In a nod to current political realities, the bill does not establish a price on carbon but is intended to set complementary policies for achieving the goals. “Our approach is to set concrete targets” that will be met through innovation, Cantwell said.

Pressed on the omission of a carbon price, Cantwell noted that the bill would be different if Democrats were in the majority but said she’s focused on making incremental progress on curbing emissions where possible in the meantime.

The 437-page bill contains provisions from across the caucus, with a major emphasis on overhauling the tax code.

It would create a “performance-based incentive that would be neutral and flexible between clean electricity technologies,” according to a summary. Finance ranking member Ron Wyden (D-Ore.), a former Energy Committee chairman, has long called for such an incentive, which would allow developers to choose between a production tax credit and an investment tax credit scaled to the amount of carbon dioxide emitted per kilowatt-hour.

“Power plants that emit at least 25 percent less carbon than the current nationwide average begin qualifying for a small incentive, which increases for power plants that are progressively cleaner,” states the summary. “Zero emission facilities qualify for the maximum credits — a 2.3 cents per KWh hour PTC or a 30 percent ITC. The PTC is available for the 10 years after a facility is placed in service.”

The bill would also allow power plants operating before Jan. 1, 2018, to claim the full 30 percent of the ITC for adding energy storage or carbon capture technology. Sen. Martin Heinrich (D-N.M.) said the tax treatment for energy storage in the bill could support widespread change on the U.S. electric grid, allowing for a more distributed system that supports consumer choice.

“I think we’re going to see what happened with silicon-based photovoltaics in terms of precipitous drops in cost, we’re going to see those same incremental but significant changes in both the energy density of storage and the costs of storage,” he said. “When that happens, that’s a game changer for how you manage the grid as a whole.”

Heinrich is part of a larger group of senators on the left who included language in the bill to support the research and deployment of energy storage, increase energy efficiency, remove barriers for distributed generation, and increase federal authority to protect the grid from cyberthreats.

The Senate Democratic measure, for example, includes a proposal Heinrich floated to allow residents tapping into communal solar projects to offset power from traditional power plants and more easily connect to the grid. That language never made it into the bipartisan bill that passed the Senate Energy and Natural Resources Committee.

Another focus is a proposal from Sen. Al Franken (D-Minn.) to create a federal standard for energy efficiency, which authors of the legislation touted as a way to save consumers $150 billion during the next 15 years. That provision would require utilities to achieve 20 percent energy savings by 2030, at which point the Department of Energy would revise the standard.

The bill also includes language Vermont Sen. Bernie Sanders (I) floated to boost support for solar projects in low-income communities. Sanders, who is running for the 2016 Democratic presidential nomination, wants the government to provide $200 million in Energy Department loans and grants to help low-income families pay for rooftop solar projects (Greenwire, July 7).

Other sections mirror the interests of New York Sen. Charles Schumer, the incoming Democratic Senate leader after Reid retires, to probe the link between electricity prices and capacity markets in regional electricity markets in the Midwest, Northeast, Texas and California. Schumer has for years complained about the effects of market constructs on the East Coast and threatened to tie regulators’ hands (E&E Daily, Nov. 13, 2014).

The measure additionally would provide “transition relief” by extending the renewable PTC and ITC through 2017, with the Section 48C advanced energy manufacturing credit reauthorized with a $5 billion allocation.

The bill also would create a similar technology-neutral, 10-year incentive for renewable transportation fuels that is based on the life-cycle carbon emissions of a fuel.

But at least one Democrat — Sen. Joe Manchin from coal-heavy West Virginia — is opposed to the legislation, and Heinrich acknowledged the bill faces tough odds in a Republican-controlled Congress.

“While [the bill] is going to have a tough row to hoe with this leadership, the American people are waking up to what kind of energy future they want to see,” Heinrich said. “And ideas that are currently tough to get a majority for are going to gain traction.”

The legislation also would cancel a host of tax breaks for the largest oil and gas companies, while allowing the incentives to continue “based on the size and level of integration of oil and gas companies.”

That’s a political nonstarter in a GOP Congress but provides Democrats with ammunition to bludgeon Republicans in an election year. “This is going to be a huge issue in the election,” said Schumer, noting concern among younger voters about climate change.

The bill contains other provisions that Republicans will strongly oppose, including the repeal of offshore drilling royalty relief, “use it or lose it” provisions for offshore lease holders, and the cancellation of state offshore royalty sharing authorized under a 2006 law.

The Democrats’ bill, in the works for months, comes as Republicans have set their sights on repealing the long-standing federal ban on crude oil exports. It also follows the Senate Energy Committee’s July passage of a bipartisan energy package negotiated by Cantwell and Energy Chairwoman Lisa Murkowski (R-Alaska).

Key lawmakers from both parties, including Reid, have said they’re willing to discuss a deal to allow crude exports if help for cleaner sources is part of the mix (E&E Daily, Sept. 18).

Cantwell sidestepped a question about such a deal but signaled that Democrats will be looking for opportunities to advance their energy preferences in the days ahead.

“We passed a bipartisan bill out of the committee, and we always expected when that bill came to the Senate floor there would be a whole lot of other ideas on both sides of the aisle that would be considered,” she said. “So these are our ideas. We’d love to get them implemented, and if we don’t get them implemented now, we’ll look to the future. But clearly that will be part of the discussion.”