The newly-introduced “Clean Energy Standard” (HB 368) defines coal as clean
Not coal with carbon capture and storage. Just coal.
House Bill 368 was introduced yesterday as an alternative to the Renewable Portfolio Standard bill that was introduced last year and has been stalled in the senate. I opened it up expecting to find a bill that tried to drive clean energy development with carrots rather than sticks, and was prepared to debate the relative merits of those two strategies. Instead I found a jumbled mess.
It takes a fair amount of work to puzzle out what it would do. Or why. Did someone let Usibelli coal mine write themselves into a clean energy bill? Or did they throw it together at the last minute without really reading what they wrote?
Before the bill’s first hearing tomorrow, I thought it was important to call this out. Defining coal as clean is the most egregious thing in this bill. As far as the rest goes, the incentives in it are probably too small to be meaningful, and strangely limited to exclude projects by independent power producers. It also appears to direct the RCA to come up with an entire Railbelt transmission plan, insists that Copper Valley be connected to the Railbelt, and sets the RCA to create a new net metering rate that may entirely replace the current system
Clean Energy Definitions
Here’s what “clean energy” means, according to HB 368.
“Sec. 42.05.935. Definitions. In AS 42.05.900 - 42.05.935,
(1) "clean energy" means electrical energy that
(A) when generated by a load-serving entity, does not release carbon dioxide or releases carbon dioxide in an amount that is offset by the amount of carbon dioxide the load-serving entity absorbs or removes from the atmosphere;
(B) is generated from coal with a sulfur content of one percent or less by weight;
(C) is generated from renewable energy resources; or
(D) is generated from nuclear energy; “
This list defines coal as clean. It produces the nonsensical result that energy produced by low-sulfur coal is considered clean by default, even without carbon capture, while natural gas power (which produces vastly lower sulfur dioxide pollution and lower CO2 pollution by default) is not. I can’t see how that makes sense to anyone.
The only coal mine in Alaska is Usibelli, which produces coal with less than 1% sulfur by default -- therefore all coal counts as clean.
What else is in the bill?
Targets:
The bill sets “targets” for clean energy of 35% by end 2036, and 60% by end 2051. While there’s a whole lot of text about what counts for compliance with and exceptions from these targets, their only real effect is to set eligibility for the bill’s tax credits. (Actually, I can’t find anything that says a utility that fails to meet the targets is ineligible, only that one that has a waiver or has opted out of them is ineligible).
Also, while the targets have years attached, they’re actually pinned to completion of an undefined transmission upgrade plan that the RCA has to create.
“The commission shall adopt a minimum standard for electric power transmission lines sufficient to ensure seamless end-to-end electrical energy transmission.”
That sounds more like the RCA creating a transmission plan rather than a transmission standard, and is referred to as “the upgrade” thereafter.
Regardless of the year listed in the bill, the first ‘target’ comes into effect 10 years after “the upgrade” is completed. And while there’s nothing much defined about that upgrade plan, it must be assuming that the plan includes extension of the transmission system to Copper Valley, because of this part: “60 percent of sales must be from clean energy within 25 years after the upgrade is complete, or when electric power transmission lines connect the interconnected electric energy transmission network in the Railbelt to the service area of the Copper Valley Electric Association, whichever is later.” This despite the fact that Copper Valley isn’t currently part of the Railbelt, so its connection can’t possibly be required to “ensure seamless end-to-end electrical energy transmission.” Apparently, the RCA is also going to define those ends, and someone wants to make sure they include Copper Valley.
Clean Energy Tax Credits:
Depending on that vague transmission plan, the “targets” may or may not ever be triggered to potentially render a utility ineligible for the credits. Certainly all utilities would be eligible for them between now and 2036. What would the credits do?
Credits are a 0.2 cents/kWh tax credit for the first 10 years of newly-built “clean energy” projects. That amount is the same as the proposed RPS penalties I discussed in the last post -- quite tiny compared to utilities’ overall costs. So even if they do incentivize coal power, they don’t incentivize anything very much.
The federal production tax credit gives between 2.75 and 3.35 cents/kWh (though not for coal power!). So, more than ten times as much (and inflation-adjusted, unlike the proposed credits in this Alaska bill).
One of the facility qualifications is “is owned by the load-serving entity.” So none of the large renewable projects being discussed by Railbelt utilities right now would qualify (all are being built by independent power producers).
These tax credits can’t be paid as cash, but only against tax liability. Utilities on the Railbelt are co-ops, but they do pay a Gross Revenue Tax of 1/2 mill per kWh, which is paid out to boroughs and cities where the power is sold. The yearly total of these taxes is around $2 million across the whole Railbelt, which utilities could entirely offset by producing 1/4 of their power in a credit-eligible way.
Net Metering:
The bill instructs the RCA to come up with a new buyback rate for net metering systems. Currently, exported power is credited at the retail rate up to the user’s consumption within a given month, and at the calculated “small facility purchase power rate” (generally similar to the cost-of-power-adjustment, around 5-10 cents per kWh depending on the utility and quarterly power costs) for excess production. It’s unclear to me whether the new rate would only replace that excess production purchase rate, or whether it would replace net metering entirely.
That depends on whether “electric energy supplied to a load-serving entity” counts everything that hits the meter or not. I’d tend to read it as replacing net metering entirely.
“The commission shall by regulation establish a method to determine annually the amount of a reasonable seasonal and time variant export credit rate for electric energy supplied to a load-serving entity by a customer's distributed energy system. In determining the export credit rate, the commission may consider any relevant factors, including avoided costs of load-serving entities.”
PCE:
The bill changes PCE rules to exempt sales of recovered heat from the PCE calculations. I don’t know enough to say whether this is a good thing. Seems like it might be, but also seems like it’s easily missed hidden in this bill, so I wanted to mention it.
What next?
If someone writes a clean energy standard bill to define clean energy in a sensible way and attempt to drive it forward with meaningful incentives, it would be interesting to have that conversation. In the meantime, I’m stuck talking about how much of a mess things are.