Political ‘Odd Couple’ Provides Bipartisan Hope for Canadian Clean Energy

By Jon Sohn

Senator Lisa Murkowski (R-Alaska)                                                    Senator Bernie Sanders (D-Vermont)

On May 17^th, the Senate Energy & Natural Resources Committee held a hearing on Chairman Bingaman’s proposed Clean Energy Standard (CES) legislation. The objectives of the legislation are to:

1. Promote a diverse set of sources of low- and zero-carbon electricity generation in the U.S.,
2. Drive clean energy innovation and American ingenuity, and
3. Do so simply, transparently, predictably, and cost-effectively with a long-term market signal.

The CES proposal sets a standard for a percentage of energy that must be from clean sources for the largest utilities in the United States. It follows the goal for a national clean energy standard stated by President Obama in the 2012 State of the Union speech. By 2035, 84% of power from large utilities in the U.S. would come from clean energy under the legislation. All generators of clean energy would receive tradable credits for their clean energy based on a baseline of carbon emissions per unit of electricity. This “all of the above” approach provides credits for solar, wind, nuclear, natural gas and coal with carbon capture and storage. While the legislation is not likely to pass this Congressional session, it is viewed as setting part of the table for post-election national energy policy debates.

One key issue that needs to be resolved is the question of Canadian Hydro. Some states such as Vermont and Wisconsin rely on hydro from our neighbors to the north to meet a substantial portion of their electricity needs, keeping costs to consumers low, reducing greenhouse gas emissions and meeting state-level Renewable Energy Portfolio targets. However, the CES, in its current form, would disqualify Canadian Hydropower, excluding it from the definition of  “clean” for purposes of compliance. Some U.S. utilities that would otherwise support the legislation are balking, noting that this exclusion will have a perverse incentive of increased use of more greenhouse gas intensive energy sources at a higher cost to their customers.

Bipartisan concern for this aspect of the legislation is emerging however. Both Senator Sanders (D-Vermont) and Senator Murkowski (R-Alaska) entered questions for the record asking Obama Administration officials who testified during the hearing to recommend fixes to account for this important Canadian-U.S. relationship and to consider whether excluding this energy source might violate U.S. obligations under the North American Free Trade Agreement (NAFTA).

Answers to the Committee on this important issue will be provided in the coming weeks.