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A New Twist on Obama’s Clean Energy Goal

by Michael Levi
January 26, 2011

Last night, I posted some preliminary analysis on the new Obama goal of 80% clean electricity by 2035. Like most other observers, I assumed, based on the President’s rhetoric and the language in the available White House fact sheets, that the target included renewables, nuclear, and natural gas.

I hear a very credible rumor that the administration did not intend to fully count natural gas toward this target. Gas would, instead, be credited on a carbon basis.

[UPDATE: Rumor confirmed. Here’s the administration’s fact sheet on the clean energy standard. It’s circulating by email but does not appear to have been posted online yet.]

By my estimation, what that means is that a kilowatt-hour of electricity from gas would be counted (roughly) as half a kilowatt-hour of “dirty” electricity and half a kilowatt-hour of “clean” electricity. This means that my numbers (but not my bottom lines) need to be revised. (It also means that environmentalists and gas industry representatives might need to revise their reactions to last night’s speech.)

What does that do to my numbers? By this modified measure, the United States today gets 40% of its electricity from clean sources. By 2035, it is expected to get 55%. The new goal would be to raise that to 80%.

How does this compare to what would have happened under the Kerry-Graham-Lieberman (KGL) cap-and-trade bill? I still conclude that the new goal is more stringent than the standard KGL simulation. KGL was projected to lead to 74% clean electricity by 2035. (The fact that this number is the same as in my last post is a fluke: the number has gone down because of my gas correction, but up because I’ve accounted properly for CCS, which I didn’t before.) The newly proposed target is more aggressive.

The new target is actually closer to what was projected to happen to electricity under KGL without any international offsets (which increases demands on the domestic energy system). The EIA projected that 84% of U.S. electricity would have come from clean energy by 2035 in that scenario.

These two bounding cases also give us a bit of insight into what the effective carbon price might be if the 80% clean electricity target were pursued through a straightforward clean electricity standard. Basically, the effective carbon price should be somewhere in between the prices realized in the EIA’s basic and no-offset cases for KGL, i.e. between $60 and $120 by 2035. Something around $90 is probably a decent guess. From an environmental standpoint, that’s not too shabby.

Post a Comment 2 Comments

  • Posted by Brad Johnson

    In a world where what the president proposes becomes law….

    Really, what one should be comparing this against is Obama’s proposed climate plan in 2009 (cap+trade plus RES, etc.)

    The other issue is that we’re talking about 80% and 74% of two different numbers — EIA’s reference scenario has higher demand than the basic policy scenario.

    [ML: I would expect that if policies were put in place to reach this goal, they would cut demand in similar ways to KGL. The only way to avoid that is through *massive* subsidies (not happening).]

  • Posted by Michael Wara

    Nice couple of posts – but I wonder which of the EIA cases you are using for your analyses?

    It strikes me that if you are right, and it seems as if you must be, then the WH is engaging in negotiating tactics similar to those it employed for KGL (see nuclear and offshore drilling).

    [ML: Thanks. I’m using the “Basic” and “No International” cases. Also worth noting that the EIA analysis uses last year’s version of NEMS. I would expect more natural gas using the new version.]

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