Climate Law Update: Climate Change & Sustainable Energy News : Thelen Reid Law Firm : Renewable Energy, Construction, Project Finance Lawyers & Attorneys

This saving the planet stuff just isn't complicated enough, it seems.

Underscoring the importance of the finer points involved in establishing a market-based approach to controlling greenhouse gas emissions, a new report (accessible here) sponsored by a fascinating collection of interests shows how huge sums are at stake depending on how such a program is structured.

The most intriguing part of the document examines one of the most controversial parts of a cap-and-trade scenario: the distribution of emissions credits or "allowances" that will determine how many tons of heat-trapping gases that, say, a power plant can emit over a year. It looks at the differences in formulas contemplated by two bills now before Congress, the Lieberman-Warner Climate Security Act and the Bingaman-Specter Low Carbon Economy Act. The document also adds another twist, such as examining what would happen if credits were allocated based on each company's electricity output, versus its share of emissions.

The report generally seems to side with Lieberman-Warner. That bill would require selling more of the credits initially and it would also allocate some credits for sale to benefit the public.

The document also finds that some utilities, such as those with relatively cleaner technologies, would fare vastly better under a system in which credits were distributed on the basis of power output. However, both bills so far propose to allocate the allowances to electric providers based on their historic carbon dioxide emissions. 

The bills are named for their sponsors, Sens. Joe Lieberman, I-Conn., John Warner, R-Va., Jeff Bingaman, D-New Mexico, and Arlen Specter, R-Pa.

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The Federal Energy Regulatory Commission has partially approved Pacific Gas and Electric Company's request that allows the company to recover from customers at least some of the costs related to a 1,000-mile transmission project intended to deliver power from renewable sources.

In the words of a statement from the federal agency, it gave partial approval to the Northern California utility's "petition for a declaratory order for recovery of prudently incurred pre-commercial and abandonment costs" related to the effort (see text of statement here; see full text of decision here). The $3.2 billion project would deliver up to 3,000 megawatts of new renewable power to California from Canada's British Columbia and from states in the Pacific Northwest.

The project will also be designed to take advantage of the fact that demands in the region peak at different times of the year, according to a statement from one of the commissioners. 

The Energy Policy Act of 2005 gave the commission authority to encourage greater investment in the power grid, including granting incentives allowing the recovery through rates of the costs associated with the projects. Barbara Connors, a spokeswoman for the commission, declined to put a dollar figure on the items so far approved by the panel.

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Governors in Vermont and Utah have become the latest to sign legislation intended to curtail greenhouse gas emissions, boost renewable energy generation, or both.

Of the two, Vermont’s was the more comprehensive (see text of bill). Senate Bill 209, signed by Gov. Jim Douglas, establishes an efficiency program he said was intended to help homeowners and businesses reduce fuel consumption and save money (see press release). At least part of the money would come from the state’s participation in the Regional Greenhouse Gas Initiative’s cap-and-trade program.The first auction under that fast-developing program is scheduled for this fall (see press release).

One key provision in the bill appears to encourage cooperative efforts among the population to develop local renewable energy projects. 

Utah Gov. Jon Huntsman put his name to a measure that establishes a renewable portfolio standard for the state. Senate Bill 202 (see text) sets a goal for Utah utilities, both municipal and privately owned, that would mean 20 percent of their “adjusted” electric sales would come from renewable sources by 2025. That’s somewhat more modest than standards set in other states, including California, which has established a 20 percent renewable goal by 2010 and is considering efforts to increase that proportion.

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Despite all the talk about greenhouse gas reductions and the means to achieve them, including establishing new trading schemes for carbon, a pair of new studies suggests the nation has a ways to go.

One of the documents, in which a former U.S. Environmental Protection Agency official has parsed the latest government data, shows that carbon dioxide emissions from power plants appear to be back on the rise (see press release and report and appendices). That follows on the heels of government study released only this month showing overall carbon emissions, including those from power generation, had fallen just a year earlier (see study and Climate Law Update article).

In addition, a Department of Energy study of Western utilities suggested that some of them are including fairly optimistic estimates about the impact of trading mechanisms on carbon prices. The study (which can be seen here) appeared to gently urge them to boost those figures. At the same time, it found that the utilities are aggressively planning to increase efficiency and add new renewable generation to their portfolios.

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Utility and power plant regulators in California this week agreed on basic approaches, including implementing a cap-and-trade system, for reducing the state’s greenhouse gas emissions. But they left some critical decisions until later in the year.

In separate unanimous votes Wednesday and Thursday the California Energy Commission and the California Public Utilities Commission approved a joint set of recommendations for how the state’s electricity and natural gas industries should meet the demands of the groundbreaking 2006 law, AB 32 (see CPUC press release here). The CPUC regulates privately owned utilities in the state, while the energy commission carries out a number of forecasting and planning duties, as well as licensing large generating plants. 

The document now goes to the California Air Resources Board, the primary agency charged with implementing the California Global Warming Solutions Act. The law aims to reduce California’s greenhouse gas emissions to 1990 levels by 2020, approximately a 25 percent cut. Electric power generation accounts for more than one-fifth of the state’s greenhouse gases, according to the energy commission.

The recommendation approved this week endorses a mix of methods for achieving the reductions, and it reflected proposals put forward by Michael R. Peevey, president of the state utilities commission, last month. They include prodding electricity providers, regardless of ownership, to exceed the state’s current goal of having 20 percent of their power come from renewable sources; backing the establishment of a cap and trade program for the electricity sector and designating the companies that deliver power to the state’s grid as the entities directly responsible for complying with AB 32’s requirements under such a program.

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Northern California utility Pacific Gas and Electric Company on Tuesday (Feb. 26) announced it had entered into a large carbon offset deal amounting to 214,000 metric tons of greenhouse gas emissions. A Wall Street Journal Web site reported the company was spending more than $2 million on the initiative, or about $10 per ton. The action was praised by officials as a needed example of a verifiable offset.

The announcement came on the same day as some groups called for greater accountability for offset programs, warning that bad press about them could harm legitimate reduction efforts. "Without credibility, it becomes a shell game," Janet Peace, senior economist of the nonprofit Pew Center on Global Climate Change, told a gathering at a conference in San Francisco. The conference, Carbon Forum America, drew more than 1,000 people from businesses, government and non-governmental organizations to discuss issues surrounding the burgeoning emissions trading market.

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A new contract between Calpine Corp. and Pacific Gas and Electric Co. will help allow the Northern California utility to meet the state's renewable portfolio standard. The deal, according to a report in Friday's (Feb. 15) San Francisco Chronicle, makes PG&E the first utility to reach that goal.

In an announcement, PG&E said it would seek approval from the California Public Utilities Commission for a 175-megawatt geothermal purchase agreement with Calpine. The deal consolidates six existing agreements, and adds 57 megawatts of renewable power to PG&E's supply, the utility reported. PG&E noted the agreement would deliver enough new energy from Calpine's Geysers field north of Calistoga (pictured at left; courtesy of Calpine) to supply 45,000 homes. PG&E said that with the agreement, 20 percent of the utility's contracts for future energy delivery would meet California's renewable energy standard. That attains the figure set by the state under a 2006 law that expanded on earlier legislation requiring utilities to meet renewable energy goals.

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California's top utility regulator has endorsed a cap-and-trade program to reduce greenhouse gas emissions from electrical generation but he's advising a go-slower approach when it comes to natural gas providers. California Public Utilities Commission President Michael R. Peevey in a joint proposal with the California Energy Commission on Feb. 8 also recommended that some portion of the emission allowances be auctioned -- and that a part of the proceeds be used to benefit the state's ratepayers. The 126-page document recommended that a cap-and-trade system work in conjunction with "direct mandatory/regulatory requirements."

Peevey (pictured above) also weighed in on an issue that has caused no little debate among insiders watching the proceedings when he recommended that the state designate "deliverers of electricity to the California grid" as the entities responsible for meeting the requirements of California's groundbreaking AB 32.  

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