Innovation to Win the Clean Energy Race


As was discussed in an earlier post, President Barack Obama's 2011 State of the Union Address emphasized the need for the United States to aggressively pursue new clean energy technologies. The President has called the race to produce clean energy as a source of economic competitiveness and innovation this generation's "Sputnik moment." In response to Soviet successes in space, President John F. Kennedy responded by launching a space race that challenged Americans to reach the moon within the decade. The United States met the challenge in eight years and in the process built an aerospace industry that continues to foster innovation and job creation to this day. President Obama hopes his challenge to America to pursue a clean energy revolution will produce a similar result. At the core of Obama's challenge was a call for the United States to adopt a "clean energy standard" to produce 80 percent of the nation's electricity from cleaner energy sources by 2035.

Following on the heels of President Obama's State of the Union Address the Center For American Progress ("CAP"), a public policy think tank with ties to the White House, has circulated a brief offering principles to guide the creation of the "clean energy standard" and milestones to put the principles into practice. Firstly, CAP emphasized that in order to build a strong domestic market for clean energy technologies and foster the growth of the US clean-tech industry a specific internal renewable energy target should be set. Accordingly CAP recommends that the 80 percent clean energy standard include a goal that by 2035, 35 percent of America's energy needs be met by truly renewable energy such as wind, solar, sustainable biomass, incremental hydroelectric power, and geothermal energy, as well as by reducing energy demand through energy efficiency.

The five core principles advocated by CAP for any legislated clean energy standard are:

  • the standard must generate new, long-lasting jobs and grow the economy
  • the standard must effectively spur development and deployment of renewable energy and energy efficiency technologies
  • the standard must account for regional diversity in resources and electricity markets
  • the standard must be simple and transparent, and minimize costs
  • the standard must provide a floor not a ceiling for clean energy

To put the core principles into practice, CAP also offered more detailed criteria or "milestones" to illustrate how the design principles could be put into practice. Some of these milestones included:

1. Encourage early investment through near-term targets

Incremental near-term targets would have the effect of ensuring that the US remains on track to meet its 80% goal in 2035. Short term goals create an immediate market for clean energy technology and provide certainty for investors. However, interim targets must not be so high as to penalize projects that may take years to develop. A balance must be struck between near term certainty and the ability to plan for stronger targets over time in order to help consumers, businesses, and governments properly plan for the future.

2. Remain technology neutral

Any legislation should promote simplicity and to the greatest extent possible allow investors and other market participants to decide which renewable or clean energy sources to utilize. Allowing utilities the flexibility to choose from a broad mix of technologies that are most appropriate for particular circumstances is preferable to legislating exactly which renewable or low-carbon sources must be used to meet the 2035 or short term targets.

3. Minimize complexity and promote transparency in implementation

Once clean energy standards are in place, the trading of renewable energy certificates will reduce costs and bring much needed new sources of capital investment to finance further projects. However, a trading system will also requires strict government oversight to avoid any possibility of market manipulation or speculation. A successful system will be one where trading is sufficient to meet the policy's goals at a low cost, but controlled enough to limit market manipulation by speculators.

The full list of all nine milestones can be found here.

The Obama administration appears committed to promoting and developing clean energy resources in the United States. In Canada, the Harper government has tended to work to harmonize US and Canadian environmental legislation. Given President Obama's push for a clean energy standard and statements from the Canadian Environment Minister that new federal environmental regulations are expected to be unveiled later this year, Canadians may see some form of clean energy standard introduced North of the border in the near future.

Stay tuned.

Jennifer Cleall and Chris Jones, Student-at-Law

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