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Down the Energy Road Again

with Devashree Saha

In 2008 gas prices topped $4 per gallon and then slumped during the world recession. Now, here we are again (so soon!), with Middle East oil states in turmoil, gas prices rising, and President Obama giving a major speech on energy security at Georgetown University yesterday.

Overall, the talk was a bit of an omnibus discourse on energy, taken up with a useful rehearsal of the administration’s post-cap-and-trade, “all-of-the-above” energy items, ranging from limited offshore oil exploration and production, an embrace of natural gas, and a balanced push on alternative transportation, energy efficiency, and even nuclear power (but safely!).

Especially noteworthy to us, though, was Obama’s prominent reassertion of his administration’s commitment to a national Clean Energy Standard (CES) as part of a long-term policy for secure and affordable energy.

First proposed in his 2011 State of the Union address, a nation-wide CES--though which Congress would require utilities to obtain a percentage of their electricity from clean sources--matters in our view because it would broaden the scope of clean energy investment by inserting into uncertain U.S. markets a degree of predictable, permanent “demand” for renewable energy sources.

Currently, the U.S. clean energy market is fragmented, with demand variable to slack. Most notably, some three-dozen well-intentioned states--in the absence of federal action--have established a welter of single-state Renewable Portfolio Standards (RPS) or Alternative Energy Portfolio Standards (AEPS). While the state efforts have produced results, they have not produced vibrant demand for clean energy across the entire United States. In fact, one may argue that state efforts have led to a mish-mash of complex and inconsistent policies with varying degrees of ambition. Studies by Benjamin Sovacool and Christopher Cooper and Lincoln Davies have pointed out that state RPS and AEPS statutes have created a patchwork of inconsistent, conflicting mandates that distort the market for renewable energy technologies, underplay private investments in renewable energy generation nationally, and inhibit the expansion of a robust renewable energy sector in the United States By contrast, a single, well-designed CES, whether as proposed by Third Way or with a renewables “carve out” as proposed by the Center for American Progress could help drive broader private investment in the clean energy industry by providing farther-reaching, long-term market certainty, something that the industry desperately needs today.

In any event, it was good to see CES front and center in Obama’s effort to reboot the nation’s recurring, spasmodic energy debate. Look for more on CES as a crucial “market maker” in some of our forthcoming Metro Program work.