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Growing Focus on a National Clean Energy Standard: Comparison of Existing Legislative Proposals

Both Congress and the administration are ramping up their focus on a national clean energy standard. A CES is a sectoral approach to decarbonizing the power sector that requires increasing amounts of qualifying clean energy sources over a certain time period. By creating a market for clean energy credits, a CES drives the transition towards cleaner sources of electricity.

On April 21, 2021, the United States government set its “nationally determined contribution” (or NDC) under the Paris Agreement. The NDC establishes an economy-wide target of reducing U.S. net greenhouse gas emissions by 50-52 percent below 2005 levels in 2030. In developing the NDC, the United States considered sector-by-sector emissions reduction pathways and has set a goal to reach 100 percent carbon pollution-free electricity by 2035. A national CES is a key policy mechanism to achieve electricity emissions reductions.

Although the concept of a national CES is built upon similar policies successfully implemented at the state level, there are a set of key policy design decisions that must be made when developing a federal CES. There have been several legislative proposals introduced in the 116th and 117th Congresses that have included a CES, and the table below compares select design choices in these bills.

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CES Legislative Proposals

Issue Pallone CES
CLEAN Future Act of 2021
DeGette CES
Clean Energy Innovation and Deployment Act of 2020
Smith/Lujan CES
Clean Energy Standard of Act of 2019
McKinley/Schrader CES
Clean Energy Future Through Innovation Act of 2020
What is the target of the CES? 80% clean energy required in 2030 and 100% in 2035 100% clean energy by 2050 100% clean energy by 2050 (based on rate of increase so all electricity suppliers may not reach 100% by 2050) 80% reduction in annual power sector carbon dioxide emissions, below the level of enactment, by 2050
What is the credit submission requirement between 2023 and 2030? Requires every Retail Electricity Supplier (RES) to submit enough Zero-Emission Electricity Credits (ZEC) in 2023 to account for a baseline of clean energy generation -- the baseline being the average of the RES's levels of clean energy generation in 2017-2019. Each year from 2024 to 2030 will require an increase of 1/7th of the difference between 80% and the 2023 baseline. In 2030, each RES will be required to submit enough ZECs to cover 80% of its electricity sales. Requires every RES to submit enough ZECs in 2023 and 2024 to account for the same 2023 baseline as Pallone. Each year from 2025 to 2030 will require an increase of 1/26th of the difference between 100% and the 2023 baseline. Note that the DeGette bill will also fund 40% of the replacement cost for any generator replacing all emitting generation technologies with non-emitting technologies by 2030 (30% if by 2035) through either a DOE grant or a tax credit, available as direct pay. Utility compliance will begin second full calendar year after date of enactment. The necessary rate of increase in a retail electricity supplier's clean energy mix is 2.75% when the utility's proportion of clean energy sales (+ behind-the-meter consumption) is less than 60%. The necessary rate of increase in a retail electricity supplier's clean energy mix is 1.75% when the utility's proportion of clean energy sales (+ behind-the-meter consumption) is greater than 60%. Requires the linear reduction of power sector carbon dioxide emissions to 80% by 2050. This requires the Secretary of Energy to convert the required percent of emissions reduction to a required percent of clean energy for the power sector. The % of required clean electricity generation will be uniform for each electric utility. Compliance begins approximately 10 years after enactment so there may be no credit submission requirement through 2030.
Could the CES achieve a 100% zero-emission power sector earlier than its target, if the technology is available? Requires every RES to submit enough ZECs by 2035 to account for 100% of electricity sales, or to pay the Alternative Compliance Payment (ACP). Defers the increases, beginning in 2031, for any RES that submits an ACP for more than 10 percent of its compliance obligation for two consecutive calendar years, up to a maximum of five years' deferral. Advances the date of 100% to as soon as 2035 only if the technology is available to do so, as indicated by the price of ZECs remaining low year-after-year from the 2023. There is no compliance obligation to reach 100% zero emission power sector earlier than the target year if the technology is available. There is no compliance obligation to reach an 80% reduction in annual power sector carbon dioxide emissions earlier than the target year if the technology is available.
How does the CES address the possibility that the technology may not arrive as late as 2050? Companies not achieving 100% by 2035 will have to pay ACPs each year from at least 2035 on. If the industry is unable to achieve more than 80% zero-emission electricity (given current technology), the ACP will likely be paid from 2030 on. Companies will have to pay an ACP. Modeling indicates that this will not occur until the early to mid-2040's. Companies will have to pay an ACP. Companies will have to pay an ACP.
Does the CES give credit for natural gas? From 2023 - 2030, fossil units are credited as a function of (a) the extent to which their direct carbon emissions are lower than that of an uncontrolled coal unit, for example, through the use of an uncontrolled gas unit or CCS, and (b) the methane waste associated with the extraction, processing and transportation of the fossil fuel. From 2030-2035, credit for gas units declines steadily, until from 2035 on gas units receive no credit without CCS. Same as the Pallone treatment from 2023 - 2030, except that this continues indefinitely, with no phase down or elimination of credit for uncontrolled gas. (Note that the rising prices of ZECs will reduce the value of gas-powered generation, eliminating it at whatever point between 2035 and 2050 that the technology has become available to eliminate the industry's emissions.) For qualified natural gas (coal mine methane, but not landfill methane or biogas), the carbon intensity is adjusted to account for methane leakage rates, which will alter how the generator is credited. Emissions benchmark of 0.40 metric tons of CO2e/MWh effectively excludes natural gas from earning credits. The emissions benchmark of 0.825 metric tons/MWh would allow natural gas to receive a partial credit.
What are the Alternative Compliance Payment levels? Starts at $40/MWh in 2023 and increases by 3% annually plus inflation.

2023: $40
2035: $57
2050: $89
Starts at $20/MWh in 2022 and increases $1.50 annually plus inflation.

2023: $22
2035: $40
2050: $62
Start at $30/MWh and increases by 3% plus inflation annually through 2029 and 5% plus inflation annually starting in 2030. Assuming for comparison that compliance begins in 2023, the ACP levels would be:

2023: $30
2035: $48
2050: $100
Start at $30/MWh for the first year of compliance (which is approx. 10 years from enactment) and increases by 5% annually. Assuming compliance begins in 2031, the ACP levels would be:

2023: N/A
2035: $37
2050: $76
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