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

Under intense lobbying that has involved not only the renewables industry but also environmental groups and big energy companies and other businesses, both the Senate and the House have approved their own versions of extensions (see Climate Law Update stories here, here, here and here). So far, however, no final action has been taken and the future of the incentives remains cloudy.

The tax credit has lapsed three times previously, the wind association noted, and each time installations have dropped by as much as 93 percent from the year before.

That's not to say there isn't some skepticism about the need for the incentives. The Wall Street Journal's Environmental Capital blog recently noted the boom in installations and paired that with the industry's call for continued subsidies, suggesting it was a tough sell (see full posting here):

"But when consumers are already being battered by higher prices for gasoline (and electricity), and your industry is thriving, how easy is it to keep pleading for more help?"

The wind association's report showed that some of the biggest new projects continued to be built in Texas, where more than half the new capacity was installed, including a 209-megawatt installation developed by E.On Climate & Renewables, with turbines built by Mitsubishi. Large numbers of turbines were built for other projects by GE Energy , Vestas and Suzlon and located in states including California, Iowa, Kansas, Missouri, Montana and Oregon.

Overall, the association counted about 25,000 turbines operating in the country, with a capacity of 18,303 megawatts.

In addition, the association's press statement said that new wind power facilities made up nearly 35 percent of the entire new generating capacity in the United States last year. It also found that by the end of 2008, about half of the components going into new U.S. projects would be domestically produced, another point it attributed to the existence of the federal incentives:

"Prior to 2005, AWEA estimates that less than a third of components were manufactured domestically. But the relatively stable availability of the PTC since August 2005 has allowed U.S.-based supply chain providers to begin establishing a much stronger foundation of domestic manufacturing for turbine components, which range from towers and blades to gearboxes, bearings, and electrical and electronic components."

(Photo: Wind farm in Kansas, courtesy U.S. Department of Energy)

Bush, however, on Tuesday ripped the bill for not doing enough to cut subsidies for wealthy farmers:

"The bill Congress is now considering would fail to eliminate subsidy payments to multi-millionaire farmers. America's farm economy is thriving, the value of farmland is skyrocketing, and this is the right time to reform our nation's farm policies by reducing unnecessary subsidies. It's not the time to ask American families who are already paying more in the check-out line to pay more in subsidies for wealthy farmers. Congress can reform our farm programs, and should, by passing a fiscally responsible bill that treats our farmers fairly, and does not impose new burdens on American taxpayers." 

Whether Bush's remarks were enough to derail the bill was a matter of some debate. Mary Kay Thatcher, a lobbyist for the American Farm Bureau Federation told Bloomberg she believed the chances of a presidential veto were about 30 percent (see story here).    

Meanwhile, some critics of subsidies for corn-based ethanol weren't persuaded by the bill's cut in subsidies.

"I guess you could say [it] is a step in the right direction but it certainly does not go far enough," Scott Openshaw, communications director for the Grocery Manufacturers Association, told Climate Law Update Tuesday.  The trade group represents the food, beverage and consumer products industries and has pushed for an elimination of corn-to-ethanol subsidies, believing they contribute to higher commodity prices.

"We kind of feel like it's bad to take your lunch and put it in your car," Openshaw said. However, he praised the legislation's support for cellulosic ethanol, which is made from non-food plant material.

A spokesman for the Renewable Fuels Association, representing the ethanol industry, could not be reached for comment Tuesday. The organization has vocally defended ethanol, including that made from corn, from charges it is contributing to skyrocketing food prices and other global ills(see recent RFA background statement here; see Climate Law Update story here).

(White House photo: President Bush at April 29 news conference)

Such developments may come none too soon to help the planet weather the ever-increasing amount of heat-trapping gases in its atmosphere. The Chinese plans come to light shortly after a U.S. government agency, the National Oceanic and Atmospheric Administration, reported that carbon dioxide continued a steady rise in its concentration in the atmosphere in 2007. 

On April 23, the agency's press statement (see text here) noted:

"Last year alone global levels of atmospheric carbon dioxide, the primary driver of global climate change, increased by 0.6 percent, or 19 billion tons. Additionally methane rose by 27 million tons after nearly a decade with little or no increase. NOAA scientists released these and other preliminary findings today as part of an annual update to the agency’s greenhouse gas index (see text here), which tracks data from 60 sites around the world."

According to NOAA, the rate of increase in carbon dioxide concentrations accelerated over recent decades along with fossil fuel emissions. The recent data showed about a 2.4 part per million increase. Since 2000, annual increases of two parts per million or  more have been common, compared with 1.5 ppm per year in the 1980s and less than one ppm per year during the 1960s.

The data follows by a few weeks the release of a report prepared by the U.S. Environmental Protection Agency that showed some domestic declines in greenhouse gas emissions, including carbon dioxide, between 2005 and 2006 (see Climate Law Update story here; access report here). That report also showed an increase in methane releases to the atmosphere. 

Separately, NOAA recently announced it would soon install the final nine of 114 stations as part of a new  high-tech climate monitoring network. The stations track national average changes in temperature and precipitation trends. The U.S. Climate Reference Network (CRN) is on schedule to activate these final stations by the end of the summer, the agency said (see press statement here). 

(Photo: Wind farm in China, Wikipedia)

Environmental groups have previously noted that reports on the economic footprint of efforts to combat global warming have failed to take into account the cost of not acting. Nathaniel Keohane, director of economic policy for Environmental Defense, reiterated that point in the group’s statement:

“It’s important to keep in mind that these forecasting models compare climate policy to a business-as-usual case that doesn’t take the costs of climate change into account. If we fail to take action on global warming, the future will be anything but business as usual. The most expensive policy by far is to do nothing at all.”

Elsewhere, the statistical arm of the U.S. Department of Energy has released data showing that federal subsidies and support to all forms of energy hit $16.6 billion in 2007, more than double the comparable figure from 1999. The document, from the Energy Information Administration, analyzed money going into direct federal spending,  tax incentives, research and development and such programs as the Tennessee Valley Authority and the Bonneville Power Administration.

It found that the percentage of the subsidies and support going to renewable energy rose from 17 percent of the total to 29 percent in 2007, as assistance for natural gas and petroleum declined. About 41 percent of all the subsidies were related to electricity production. The report also noted that despite the increased subsidies energy production in the United States stayed virtually unchanged (access report documents here).

Additionally, the report also found some major differences in the power produced per dollar spent on subsidies. For instance, it showed that by far the highest per-megawatt-hour subsidies went to coal-based synthetic fuels, wind and solar. Synfuels received nearly $30 per MW hour, while solar topped $24 and wind got more than $23. On the other end of the scale, coal, natural gas, biofuels, geothermal and hydroelectric all came in at under $1 per MW hour, while nuclear was at $1.59. The report noted that wholesale electricity costs averaged about $53 a MW hour in 2006.

The report noted, however, that the apparent disparities are driven by the amount of electricity generation across the fuel types. Baseload generation technologies such as coal and nuclear produce nearly 70 percent of the power, a fact that tended to reduce their subsidies and support per unit of electricity. The document also cautioned that it was only a snapshot of a particular time:

“Some electricity sources, such as nuclear, coal, oil, and natural gas, have received varying levels of subsidies and support in the past which may have aided them in reaching their current role in electricity production. The impacts of prior subsidies, some of which may no longer be in effect, are not measured in the current analysis.”

Meanwhile, an industry analysis showed energy efficiency improvements could cut the need for some, but not all, new generation over the next two decades. The study, released by the Electric Power Research Institute and the Edison Electric Institute, reported that electricity demand was expected to rise 30 percent by 2030 (see press statement here).

"This is an early stage request," she told Climate Law Update. She also noted that the action does not approve the project's construction. Some aspects of the law relating to the federal government's authority to address the location of transmission projects have been controversial (see Climate Law Update story here). 

Commissioner Marc Spitzer said the approval of incentives for the PG&E project and a separate effort in the Mid-Atlantic region show the commission is willing to exercise the authority granted to it under the 2005 law.

"Our policies are making a difference – major backbone transmission projects are being proposed and built throughout our nation,” Spitzer said in the commission's statement. 

The commission rejected as premature the utility's request for "construction-work-in-progress" and "return on equity" incentives. Instead, the regulators suggested that PG&E re-submit its request for any additional incentives once it completes studies to determine if it meets FERC standards for infrastructure incentives. Under a prior order approved by the commission, applicants seeking the incentives must show that the proposed facilities either ensure reliability or reduce the cost of delivered power by reducing congestion.

In a separate statement, Commissioner Philip D. Moeller applauded the company for "taking a bold step in leading the effort" to develop the proposed project. He added that "broad regional cooperation is also contemplated" as PG&E proposes to design the project to take advantage of the seasonal demands in the region, where California's demand peaks in the summer, whereas demands in Canada and the Northwest peak in the winter (see text of statement here).

(Transmission lines with Oregon's Mount Hood in background; U.S. Department of Energy photo)

In an e-mail to Climate Law Update, EPA spokeswoman Roxanne Smith said that between the issuance of the draft and final reports, "recalculations were made to incorporate additional revised data." When that new information is incorporated, errors are addressed or "improved methodologies are adopted," she said. Those can then lead to changes for all years in the inventory, which spans 1990 to 2006, Smith added.

The inventory includes estimates of carbon dioxide, methane, nitrous oxide, hydroflourocarbons, perflourocarbons and sulfur hexafluoride. It also calculates emissions removed from the atmosphere by so-called sinks, such as forests, vegetation and soils.

According to the latest report, carbon dioxide emissions from fossil fuel combustion declined about 1.6 percent between the two years, compared to the draft document’s estimated 1.9 percent drop. Overall estimates of carbon dioxide emissions in 2006 remained unchanged in both reports, while the revised version showed a slightly lower estimate for 2005.

In addition, the newest report, which is submitted to the Secretariat of the United Nations Framework Convention on Climate Change, estimated that overall emissions of the six main greenhouse gases have grown by 14.7 percent from 1990 to 2006. The earlier report had that figure at 14.1 percent. The United Nations body monitors the Kyoto Protocol.

One of the largest tonnage differences between the draft and final reports this year appeared to be a drop in the estimate of nitrous oxide. The earlier report estimated emissions of that gas at more than 530 million tons for each of the years, while the latest document estimated the amount at 370.1 million tons in 2005 and less than 367 million tons in 2006. A portion of the report charting annual changes to the calculations noted that revisions, including incorporating state-by-state data for nitrogen fertilizer use, had produced about a 27 percent annual decrease in the estimates for nitrous oxide emissions from soil management on farms.

(Pictured: General Electric advanced gas turbine, U.S. Department of Energy photo)

She noted that other questions arise when considering the placement of wind farms and solar power facilities, some in remote and environmentally sensitive areas, such as California’s desert lands:

“Surely there are good places to build these things and bad places to build these things. What’s the right process and what’s the right way to engage people who care about the desert and don’t just see it as deadland to put things on. None of us sees deserts that way any more.”

In her presentation to the conference, which was sponsored by the school’s California Center for Environmental Law and Policy, Carlson also highlighted transmission issues. She focused on the ambitious plans of the Los Angeles Department of Water and Power, the nation’s largest municipally owned utility, to aggressively increase its generation from renewable sources. Goals include boosting to 20 percent the proportion of the utility’s electricity coming from renewables by 2010 – more than doubling the current proportion -- and hitting 35 percent by 2025, she said. California has established its own renewable portfolio standards, which generally apply to private utilities, that are similar (see background here). 

Among the consequences of the Los Angeles utility's action, Carlson noted, was the need to build a lengthy transmission project from the proposed site of some of that new generation (see project description here). That is being opposed by a number of groups, including residents and local officials in areas where the lines will run who will not benefit directly from the power (see opposition group site here). Carlson said the utility also faces other pressures. Those include demands from its own unionized workers that the utility itself own much of the renewable generation. Additionally, the facilities must comply with an array of state and federal environmental laws, legal requirements that themselves provide ample opportunity for lawsuits filed by opponents. The challenges aren't unique to Los Angeles, she said: 

“So the sort of localized environmental clashes or values battles is a problem that is really international in scope and also is really long-term, as opposed to short-term. It raises real problems for not just again LADWP but for any utility that is seeking to shit its energy sources away from conventional sources to renewable sources.”

For another example of the kind of fights that can occur and their potential consequences, the Washington Post recently looked at opposition in the “green” state of Wisconsin over new wind farms planned for offshore waters in the Great Lakes (see story here).

Of course, that might not be the full extent of the societal conflicts that could occur as restrictions on greenhouse gases tighten up. In California and other states, there are movements already underway to reduce the amount of vehicle miles people travel (see Climate Law Update stories here and here). That's an issue that might produce some real backlash in a state that has never meaningfully connected land use and transportation policy, warned  William Fulton, a land-use expert who runs the Solimar Research Group. Fulton predicted that once people realize that reducing “VMT” means driving less, they could respond politically, even launching a new recall campgain similar to the 2003 recall of Gov. Gray Davis. That led to Gov. Arnold Schwarzenegger, the politician perhaps most closely identified with California’s climate change-fighting efforts, getting into office in the first place.

(Photo of Ann Carlson via UCLA School of Law)

However, Ciaran Clayton, a spokeswoman for Cantwell, told Climate Law Update that the senators felt it was more important to move ahead with the legislation quickly. She said efforts were continuing with the Bush administration and lawmakers in the House to find ways to pay for it.

“If companies don’t have some assurance that these incentives are going to be extended they are going to be dropping projects in the next quarter or two,” Clayton said.  

Ensign, in a written statement (see full text), stressed the perceived urgency of the matter: "We only have a small window of time to provide the certainty needed to continue investing in, producing and developing renewable energy.”

In her own statement, Cantwell said the legislation could provide up to $500 in tax savings for consumers who install energy efficient products in their residences and support the deployment of enough solar energy in the next few years to power more than a million homes (see full text). She also touted the economic benefits of the credits, saying they not only provide some certainty to the renewable energy industry but also create “high-paying, long-term jobs to help Americans get through these tough economic times.”

The Senate action also drew praise from environmentalists. A Sierra Club official, Melinda Pierce, issued a statement (see full text) saying the vote “recognizes the urgency of the situation.” She warned that failure to extend the incentives immediately would “deal a crippling blow to the rapidly growing clean energy economy.”

(Photo of Sen. John Ensign courtesy of his office)

Unlike the House bill, a spokeswoman for Cantwell said the Senate legislation contains no reduction in tax breaks for petroleum production to pay for the renewable incentives, a provision that some had predicted would doom the lower chamber’s bill (see Climate Law Update story). However, that leaves it unclear how the estimated $6 billion in tax incentives would be funded.

“We're looking at a lot of different options about how to get it paid for," Ciaran Clayton, communications director for Cantwell, told Climate Law Update. She declined to be more specific. 

Renewable energy proponents have been pushing hard for an extension of the tax inducements, which expire at the end of this year, arguing a lapse could jeopardize tens of thousands of megawatts of new projects, billions of dollars in investments and more than 100,000 jobs (see Climate Law Update story). The number of years to extend the credits has been an issue, with Cantwell herself previously advocating that the renewable production tax credit be extended to 2013.

The Senate bill would extend for one year an income tax credit for the production of electricity from renewable sources such as wind, geothermal, biomass and hydro. That would allow the credit to apply to facilities placed in production through 2009. The House-passed measure would extend that deadline to 2011. Both bills also would stretch the 30 percent business investment tax credit for solar and fuel cell projects through 2016.

The Senate bill also extends other incentives, including tax credits for residential solar and energy efficiency improvements, and a program under which public utilities can issue bonds for renewable energy projects.

A coalition of renewable energy groups and large and small businesses and environmental organizations also sent a letter to senators Thursday urging passage "as soon as possible" of legislation extending tax credits for "energy efficiency and renewable energy technologies and consumer purchases of energy efficient products." The remarkably eclectic list of signers included such names as the Natural Resources Defense Council, the Dow Chemical Company, Duke Energy, Edison Electric Institute, American Council on Renewable Energy, The Home Depot Inc. and the Coalition on the Environment and Jewish Life (see text of letter). 

Despite such diverse support, efforts to keep the credits on track have narrowly failed. In early February, the Senate fell one vote short of defeating a filibuster blocking an amendment to an economic stimulus bill that included an extension of renewable incentives.

"We're just looking for that one last vote," said Clayton, Cantwell's spokeswoman. She said backers were hoping to move the bill "quickly, and also gain momentum and support for it." 

Ensign, in an apparent reference to the decision to leave the oil industry untouched, stressed the need to move forward (see full statement):

“We have an opportunity to break the stalemate in the Senate. Especially at a time when our economy is struggling, we should not be increasing taxes to pay for incentives. These incentives are necessary for our energy security and to help jumpstart our economy.”

An advocate for the solar industry immediately backed the new legislation. Rhone Resch, president of the Solar Energy Industries Association, called the bill “a much-needed shot in the arm for our ailing national economy” and he pledged to work with the lawmakers for a long-term extension of the investment tax credit (see full statement).

 (Photograph of U.S. Sen. Maria Cantwell, D-Washington, via Wikipedia)

Utah’s new law also places the 20 percent against a base of retail sales reduced by the amount of power generated by a nuclear plant or a coal plant using carbon sequestration. Additionally, it would only impose the requirement if it were “cost effective.” It also does not set interim targets. All of those qualifications drew skepticism from some observers.

“This bill is so fuzzy in terms of who it is really protecting,” Tim Wagner of the Utah Chapter of the Sierra Club told Climate Law Update. Wagner, who has followed the legislation closely,  said it accomplished little more than codifying what major Utah utilities, including Rocky Mountain Power had already planned to do. The club did not oppose the measure, although it supported a rival bill that would have established interim goals. Wagner noted, however, that the utility was not opposed to renewables, and that the state currently has neither a nuclear plant nor a coal plant using carbon sequestration.

Neither state Sen. Curt Bramble, the legislation's Republican sponsor, nor a spokesman for the utility could be reached for comment. Bramble, however, according to a least one Salt Lake Tribune report, has said he believes that mandatory goals are not necessary.

The Vermont legislation also nods toward boosting renewable energy by stating a a state goal of producing 25 percent of the energy consumed within its borders by 2025, “particularly from Vermont’s farms and forests.” Along those lines, the bill expands the concept of “net metering,” in which customers earn credit for electricity sent back onto the grid, for systems of up to 250 kilowatts. That’s an increase over the previous limit of 15 kilowatts. Only renewable systems or small “micro-combined heat and power systems” that meet air quality standards can qualify.

Provisions in that part of the bill allow customers who are within the service area of an individual electric company to combine into a “group net metering system.” That would include farms and various buildings owned by municipalities, including water districts, fire districts, school districts and towns. In addition, scattered or “noncontiguous” groups of customers, could be bundled together if that was found to “promote the general good.” A report on the legislation distributed by the U.S. Department of Energy’s division of energy efficiency and renewable energy said the bill would allow even individuals, including residents of apartment buildings or subdivisions, to be treated as a group.

“Such group net metering could encourage people to band together to install a large renewable energy system that will serve them all,” said the energy department account.

Among other provisions, the bill establishes a energy efficiency fund that Douglas pegged at $4 million, including $2.4 million from the state’s participation in RGGI. Money from the fund will be used to provide “energy efficiency services to Vermont heating and process fuel consumers,” according to the bill, as well as carrying out “cost-effective efficiency measures and reductions in greenhouse gas emissions from those sectors.”

Funding for such programs had been a sticking point for previous versions of the legislation and had led to a veto, according to news reports, including this dispatch from the Bennington Banner. In his public statement, Douglas did not directly address his earlier rejection of similar legislation but he noted it was important to protect the state’s taxpayers. He added:

“I am very proud of the fact that Vermont is the nation’s greenest state. Because we have made responsible decisions in recent years regarding our energy development and the preservation of our green space, Vermont absorbs more carbon than we produce. This puts us in a strong position to capitalize on our RGGI relationship to obtain new revenues to make sustainable [investments] in this energy efficiency and affordability.”

(Photo: Gov. Jim Douglas, courtesy Vermont governor's office)

The Law

California has in place a long-standing moratorium on construction of new nuclear power plants. The moratorium can only be lifted when there is a demonstrated method for the “permanent and terminal disposition” of high-level nuclear waste. (Public Resources Code section 25524.2.) Since under the law the state will not even consider granting permits for the construction of new nuclear plants until there is a permanent waste storage solution, at present there is little incentive for anyone to put much money or energy into developing a proposal for a new nuclear plant in California.  

Presumably the moratorium could end if the proposed Yucca Mountain nuclear storage facility becomes functional, but the future of Yucca Mountain is also uncertain. The other possibility is repeal of the moratorium statute. All legislative attempts to repeal it have been unsuccessful, and last year backers of an initiative that would have repealed the moratorium pulled it off the ballot when poll numbers showed it unlikely to pass. In short, the legal climate for building a new nuclear plant in California is decidedly chilly.

Water and Earthquakes

Nuclear plants need tremendous amounts of water for cooling, and given the time needed to recover the plants’ high capital cost, the sources of water need to be reliable for quite a while. If there is a commodity in California that is scarcer and more politically fraught than electricity, it is water. Nevertheless, there is water in California, mostly in rivers and the ocean.

Rivers in California, however, are increasingly impractical and unavailable for nuclear power. In addition to environmental pressure to restore salmon runs and preserve rivers in their wild state, there is continued demand for fresh water from agriculture, industry, and residential development. In the southern US, recent droughts have resulted in nuclear reactors being shut down due to low water levels and high water temperatures in rivers and lakes. The bulk of California’s rivers are fed by Sierra snowmelt, which means that drought and global warming (combined with the other demands for water), tend to make river water an unreliable long-term source, particularly in the quantities needed by nuclear plants.

The Pacific Ocean provides the water for California’s two operating nuclear power plants, Diablo Canyon (on the Central Coast) and San Onofre (between Los Angeles and San Diego), and there is certainly plenty of it. One problem in siting new nuclear plants on the coast becomes apparent upon looking at seismic hazard maps – the coastal region of California is also largely an area of significant seismic risk. Even the staunchest advocates of nuclear plants should hesitate to locate a reactor in an earthquake-prone area.

In short, siting a nuclear plant in California presents a dilemma – if you site it where there is plenty of water, you are increasing your earthquake risk. The backers of the one nuclear plant that has been proposed for California are planning to site it in Fresno, an area with little seismic risk, and propose to use municipal waste water for cooling. This is a fairly elegant solution to this particular dilemma, but given the increasing pressure on California’s water supplies, it is not clear how long such water will continue to be considered otherwise unusable “trash” water.

Hybrid Electricity Market

California currently has a “hybrid” electricity market, with electric generation being provided by both utilities and independent power producers.

On one hand, it would seem like the large investor-owned utilities would be the most likely to build a nuclear plant; they can get rate recovery of costs, they don’t have to find a buyer for the energy, and they also currently own and operate successful nuclear plants. Nevertheless, California’s investor-owned utilities appear unlikely to seek to build new nuclear power plants. 

First, the California Public Utilities Commission (CPUC) is likely to require a reasonableness review of any nuclear power plant built by the utilities under its regulation. It would be difficult for the CPUC to abdicate such a post-hoc review, given the high costs involved and the rather embarrassing history of nuclear development in California, which includes the infamous “mirror-image error,” where the plans for Diablo Canyon got flipped, and the “hole in the head,” the abortive attempt to build a reactor on Bodega Head north of San Francisco (and directly on the San Andreas Fault).

By itself this type of regulatory oversight would not appear to be much of a barrier, as after-the-fact reasonableness reviews are a traditional utility regulatory tool. In recent years, however, California’s investor-owned utilities have been extremely reluctant to submit themselves to reasonableness reviews. In the wake of California’s 1996 industry restructuring, the utilities refused to sign long-term electric supply contracts unless the CPUC exempted those contracts from reasonableness reviews. When the CPUC maintained its right to after-the-fact reasonableness reviews, the utilities chose to purchase electricity only on the spot market, with now well-known consequences. Given the utilities’ reluctance to subject themselves to reasonableness reviews for relatively uncontroversial and inexpensive contracts, it seems unlikely they would want to take on the risk of a reasonableness review for a politically contentious and extremely expensive nuclear power plant.

If the investor-owned utilities will not build new nuclear plants, the other possibilities are the municipally-owned utilities and independent generators. The Sacramento Municipal Utility District, which shut down its Rancho Seco nuclear plant in 1989 due to high costs and chronically poor performance, is unlikely to want to go down that road again. 

The Los Angeles Department of Water and Power, which is probably the only other muni in California big enough to build a nuclear plant, might be thinking about it, as its heavily coal-based supply portfolio is looking problematic in a carbon-constrained future. Given its currently somewhat strained relationship with Los Angeles city government, including questions regarding maintenance of its infrastructure, building a new nuclear plant may be a bigger bite than LADWP wants to try to chew in the near term. 

While the moratorium only bars new nuclear plants within the state, AB 32 constrains carbon from both in-state and out-of-state plants whose power is consumed within the state. So if LADWP’s carbon costs associated with its out-of-state coal-burning sources become too high, perhaps it would seek to replace those sources with nuclear plants. But since LADWP could improve its compliance with AB 32 by purchasing electricity from out-of-state nuclear plants, it would more likely invest in an out-of-state plant than attempt to build one in California.

That leaves the independent developers. In fact, the facility proposed for Fresno is by a local group, not a utility. The risks, though, may be higher than investors may want. The cost of a new nuclear plant is high, and the construction process is lengthy and much less standardized and much more complicated than building a gas-fired plant. It will take a long time (and a lot of money) until the plant is up and running and generating electricity and revenue. Since nuclear plants are largely non-dispatchable, the developer will need to find a buyer (presumably under a long-term contract) for significant amounts of baseload power, although the possible return of direct access, currently under consideration by the CPUC, could make this easier. These factors, combined with tightening credit markets and California’s shifting regulatory framework, may make it difficult to find investors who want to put their money into a California nuclear plant. 

Better Alternatives

Compared to many other states, California is rich in potential for development of renewable generation. Wind in the Tehachapis, geothermal in the Imperial Valley, solar in the Mojave, tidal and wave power along the coast – all of these are relatively untapped resources. The California Independent System Operator (ISO) currently has interconnection requests for over 42,000 megawatts of renewable energy (albeit not all of it viable). In short, there are a lot of energy resources in California other than nuclear.

Context is everything – in the southern US, a region with few earthquakes, plenty of water, lots of coal plants and fewer renewable resources, a carbon-constrained future starts making nuclear plants look fairly attractive, especially when compared with a coal plant. But in California, we have other and better choices. Nuclear power plants are simply not the best option for California. And besides, it is the law.

(Photographs, L-R: Peter V. Allen, Richard M. Shapiro)

The first report, issued by the nonprofit Environmental Integrity Project, discovered in the EPA data a nearly 3 percent increase in carbon dioxide emissions. It said that was the biggest one-year increase in nearly a decade. It also found that California, often viewed as a leader in greenhouse emissions-cutting efforts, was one of the ten states with the largest increases between 2006 and 2007. The others were Texas, Georgia, Arizona, Pennsylvania, Michigan, Iowa, Illinois, Virginia and North Carolina. However, the report noted that California generates significantly less carbon dioxide per megawatt of electricity than the national average. The report largely was based on the EPA’s “Clean Air Markets” database and it also cited information from the energy department.

It contrasted with the earlier government report, which included figures up to the year 2006. That report, which considered emissions from a wide variety of human sources, showed an overall reduction of about 1.5 percent in greenhouse gas emissions between 2005 and 2006. Among other information, it showed about a 2 percent drop in carbon dioxide emissions from fossil fuel combustion to generate electricity, and a slightly lower reduction from such emissions from all fossil fuel burning. The report attributed the figures, which came against a history of generally rising emissions since 1990, to a variety of reasons related to the weather, the economy and increased uses of natural gas and renewable sources for power generation. It was not immediately known whether the two reports’ estimates of power plant emissions were directly comparable.

Eric Schaeffer, the founder and director of the Environmental Integrity Project, in the organization’s statement announcing its report described its findings in cautionary terms:

“The current debate over global warming policy tends to focus on long-term goals, like how to reduce greenhouse gas emissions by 80 percent over the next 50 years. But while we debate, carbon dioxide emissions from power plants keep rising, making an already dire situation worse. Because carbon dioxide has an atmospheric lifetime of between 50 and 200 years, today’s emissions could cause global warming for up to two centuries to come.”

The report said the data "make clear why national environmental groups have expended so much effort trying to stop the construction of a new batch of conventional coal-firec power plants, which would make a bad situation worse."

Until 2002, Schaeffer directed the EPA’s office of regulatory enforcement. He left the agency in a dispute over what he considered the Bush administration’s laxity in enforcing air pollution laws.

The energy department report, originating from the Lawrence Berkeley National Laboratory, examined the plans made by 15 private and public utilities in the West for how they might deal with a new era of carbon regulations and costs. It discovered wide variances in their assessments but it concluded that they might have too rosy a picture of carbon prices under such mechanisms as a cap-and-trade system. Such programs are widely believed to be on their way as individual states go forward with greenhouse gas reduction plans and regional entities, such as the Western Climate Initiative develop their own strategies, including a market. Congress is also exploring legislation to establish a national market.

“Most utilities’ base-case carbon price assumptions are near the low end of the spectrum” compared to those developed by the energy department’s Energy Information Administration, the report said. It said most of the utilities analyzed their prospective portfolios’ costs in light of future carbon regulations. But it seemed to warn that they might be taking too narrow a view, and it also explicitly noted that planners were often ignoring indirect impacts that could flow from carbon regulations such as changes in wholesale electricity market prices, coal plant retirements and capital costs of generation. The report recommended that utilities take a close look at what the future might hold:

“Given the potentially far-reaching financial consequences, utilities shold consider the potential cost sof future carbon regulations – and the uncertainty of that cost – when developing their long-term resources strategies. The starting point in this process is to develop specific assumptions about the nature and timing of future carbon regulations that might realistically be implemented, at either the state or federal level, over the lifetime of the investments considered in the plan.”

It recommended that utilities evaluate their portfolios “across a broad range of carbon emission price projections” and that they consider evaluating “a diverse set of low-carbon” resources and look at portfolios “that include the maximum achievable energy efficiency potential.” In fact, the report discovered that utilities may already be moving in that direction, reporting:

“Energy efficiency and renewable generation are the dominant low-carbon resources being pursued by utilities in the West. All utilities selected preferred portfolios that include an expansion to utility-funded energy efficiency programs and new renewables, and half of the utilities selected portfolios in which energy efficiency and renewables together provide 50 percent or more of all incremental resource needs.”

The report also found only limited interest in nuclear power and carbon sequestration. But it found that most had included natural gas.

(Wikipedia photo: Castle Gate Power Plant, Utah)

The new law directs the Washington Department of Ecology to come up with plans for reaching the targets by Dec. 1. It also sets specific benchmarks for reducing vehicle miles traveled in the state, with an ultimate goal of cutting the figure in half by 2050. Additionally, it directs the state to try to develop 25,000 green sector jobs through a variety of means, including new or expanded incentives. The legislation also tells state officials to work with the Western Climate Initiative, a multi-state effort, to reduce emissions across the West. The initiative is currently working on a design for a market mechanism, such as a cap-and-trade system, to be in place by late this summer.  

Gregoire, in her statement at the time she signed the bill, touted what she viewed as its economic potential:

“This is another example of Washington leading the way on climate change by being clean, green and competitive. Because we are acting now, we will capitalize on unique and exciting economic opportunities and increase our competitive edge in the world economy.”

Oregon’s new legislation, signed by Gov. Ted Kulongoski, allows tax credits of up to $40 million, and it also seeks to expand the state’s green economy. It includes provisions that would force officials to reduce or eliminate tax incentives under certain circumstances, including a determination that a business was&