A Clear Policy Signal for Renewable Energy

01/16/2009 05:12 am ET | Updated May 25, 2011

President-elect Barack Obama speaks of the vast potential of renewable energy to provide energy cost relief, create millions of new "green collar" jobs, end our dependence on foreign oil, and reduce greenhouse gas emissions with zero-carbon energy sources. Exactly how we get there from here remains an open question.

The U.S. does have scientists, engineers and entrepreneurs capable of innovating around renewable energy. And after 30+ years of R&D, the technologies are ready, people are being trained and research studies have been completed. So what is the problem?

A key problem has been U.S. energy policies. Our European counterparts have more favorable long-term development polices. While the U.S. has short-term incentives leading to boom and bust cycles -tax credits that come and go in 2-3 year cycles, or temporary subsidies, for zero-carbon energy sources.

To create jobs, U.S. development policies must change. It's not enough to install wind turbines and solar panels. We also need to manufacture them here. To stabilize runaway energy prices, we must shift away from price-volatile fuels--such as oil, natural gas, coal and uranium--to sources such as wind and solar that are not owned and sold by resource concentrated governments or private enterprises. For national security reasons, we must shift to domestic sources of energy. And to prevent climate change, we must shift to energy sources that produce no carbon-dioxide.

This tall order can be realized by a single policy that can be enacted right now by the Federal Government under the Environmental Protection Agency's new authority to regulate carbon dioxide. Here is it: By 2012, all new electricity generation shall be from zero-carbon emitting energy sources.

To be more precise, rules should specify that power facilities must emit no more than 50 grams of carbon dioxide per-kilowatt-hour-produced, including manufacturing and the complete fuel cycle. Wind, solar, geothermal, energy efficiency and smart grid technologies clearly qualify. Existing coal technology, at 1,000 grams per kilowatt hour, clearly would not. Some others, such as biomass, clean coal and nuclear, are on track to qualify for this standard if we continue to invest in the R&D needed to make them cleaner than they are today. Such a policy would send a clear message that after a four-year transition, 100% of new generating power plants will come from low-carbon sources.

This is a not a dream but a reality that has begun. For example, Duke, Dominion and other electric companies are asking regulators to raise rates by 9-18% for their new coal and natural gas power plants. At the same time, Xcel Energy has testified in front of the Federal Energy Regulatory Commission that for windy locations, wind is cheaper than its coal power plants. And solar - which is typically more expensive when evaluated in cents-per-kilowatt-hour - is increasingly competitive when a cost analysis takes into consideration solar's advantages of being available where and when electricity is most needed - on rooftops.

There's more. When the cost analysis includes health care and environmental benefits, renewable energy sources are clearly less expensive. Add to that analysis completed by UC Berkeley that indicates that non-renewable energy sources produce less than one-third of the jobs, there is no rationale for continuing to investment in them.

Which brings us back to the question: Can this really be done? The answer is "yes."

Already, more than 30% of new electric generators are zero-emissions, growing at compounded rate of 35% a year. Every wind turbine and solar manufacturer in the world is running multiple shifts and building new manufacturing plants closer to their customer markets. And an increasing number of governors and State Supreme Courts are denying permits for individual coal plants or announcing that they will not permit new ones. The trends are leading us to 100% carbon-free new power by 2012 without any law. Do we need a new regulation?

Such a law would send a clear signal to the companies that produce and install power generation -- in the 21st century there are new rules. It is time to retool and stop clinging to the past. It is time for senior management and regulators, who learned the ropes 40 years ago, to listen to their rising technical and financial stars. Today, there are millions of people manufacturing and installing zero-emission technologies. Let's not tell them they are out of work every time fossil fuel prices dip down temporarily.

For utility executives and regulators who cannot figure out how to achieve this goal, they can explain the maximum they can achieve in their waiver application to the EPA or state agency.

We hope that the President-elect allows the EPA to establish such a rule. But regardless, states can do this independently, based on their authority to regulate the electric industry. Those states that do will be more attractive to future industries, and may consider this a strategy for attracting more than their fair share of the new service and manufacturing jobs created by new renewable energy technologies.

Jigar Shah is Founder of SunEdison and President of Jigar Shah Consulting. Willett Kempton is Associate Professor at the University of Delaware, and Director, Center for Carbon-free Power Integration.