GHG

This summer marked a pivotal moment for the energy industry. In June, the U.S. House of Representatives approved the American Clean Energy and Security Act (ACES), a.k.a., the Waxman-Markey bill, which among other things would require the U.S. economy to cut its greenhouse-gas (GHG) emissions 83 percent by 2050.

American utility consumers face a compelling generational challenge: satisfy the need for a reliable power supply, at a reasonable price, while also reducing greenhouse-gas emissions and building a sustainable energy industry. How the government structures green-energy mandates will determine how long existing power plants remain viable.

The U.S. utility landscape is more dynamic and uncertain than it’s been since Thomas Edison and George Westinghouse waged their infamous war over alternating current—and the results might be just as fundamental to the industry’s future.

Carbon-reduction policies are being designed and implemented across the country. One common feature of these regulatory programs is a carbon cap-and-trade system—i.e., a carbon emissions market.

Energy efficiency holds the key to meeting lofty greenhouse-gas (GHG) reduction goals. Rate design can help—specifically residential inclining block rates should be considered as part of the industry’s efforts to comply with forthcoming GHG targets.

Supporters of renewable energy are seeking to socialize the cost of a new interstate highway system for transporting green power. But utilities and transmission owners will build or finance new transmission systems to serve economic demands. Policy makers shouldn’t pre-ordain the direction of industry progress.

So far, states have taken the lead in carbon-control strategies. These state actions, however, could lead to constitutional conflicts—as recent court battles demonstrate. Only the U.S. Congress can regulate interstate trade, so states must step carefully in controlling carbon leakage.

In 2006, the California legislature and governor positioned energy conservation and efficiency as the cornerstone of the state’s Global Warming Solutions Act. The Act mandates a 2020 statewide limit on greenhouse gas (GHG) emissions to 1990 levels. Compliance will be nothing short of Herculean: California will have to reduce per capita energy usage in a manner that accommodates continued brisk population growth and protects the state’s economy from economic dislocations and recessionary pressures.

Various approaches to distributing emissions allowances spark a heated debate over costs and fairness, but the allocation methodology doesn’t determine whether a regulatory scheme will reduce emissions. Auctioning allowances and distributing them for free both offer advantages and challenges for a successful cap-and-trade system.

They call the United States the “Saudi Arabia of Wind.” That’s due in large part to the huge potential of the Great Plains. But there’s a hole in the metaphor. Wind power development in some parts of the prairie is falling short of expectations.