You are on page 1of 30

The Business View on Energy Policy Institute for 21st Century Energy

U.S. Chamber of Commerce


Heath Knakmuhs Senior Director, Policy
State Department Visitors from Iraq Washington, DC November 9, 2011

U. S.

C h a m b e r

o f

C o m m e r c e

Institute for 21st Century Energy


Started in June 2007, the Institute for 21st Century Energy is an affiliate of the U.S. Chamber of Commerce Our mission is to advance a common-sense national energy policy that will: - Provide for adequate supplies of affordable, clean,
and diverse energy - Protect the environment - Ensure an energy secure America

U. S.

C h a m b e r

o f

C o m m e r c e

America Focused on Jobs and the Economy

U. S.

C h a m b e r

o f

C o m m e r c e

Energy Remains a Priority for Americans


PRIORITIES FOR CONGRESS
% very important for Congress to act on

The job situation Americas energy needs Immigration policy Financial regulation Climate change

81 67 59 54 32

Source: Pew Research Center & National Journal Poll (May 18, 2010)

U. S.

C h a m b e r

o f

C o m m e r c e

Energy Use Continues to Rise


Energy Security is central to national and economic security

Demand to increase 53% by 2035 Over half in non-OECD Asia Electricity demand to increase 76% 1.6 billion people without electricity $26 trillion of new investment by 2030 to meet rising demand

U. S.

C h a m b e r

o f

C o m m e r c e

Global Energy Demand Growth


Global Energy Demand To Grow 53% by 2035
Global Energy Demand by Region: 2007 & 2035
200 175 150

Quadrillion Btu

125 100 75 50 25 0

U. S.

C h a m b e r

o f

C o m m e r c e

Index of U.S. Energy Security Risk


Institutes first-of-a-kind Index received very well by energy experts June release of Index for 2011 and out to 2035
U.S. energy security risks worsened in 2010 because of higher energy prices and greater price volatility. Future risks are expected to be much higher than predicted just one year agono relief in sight.

Incorporates 37 metrics covering all aspects of energy International Index in development covering major economies
Possible 2012 release

Index is becoming a model for energy policy research

U. S.

C h a m b e r

o f

C o m m e r c e

Index Components
37 Metrics (19702035) 4 Sub-Indexes Geopolitical Economic Reliability Environmental Combined Sub-Indexes create overall Index of U.S. Energy Security Risk

U.S. Energy Security Over the Years

U. S.

C h a m b e r

o f

C o m m e r c e

Numerous Pending Regulations Create Great Energy Risk and Uncertainty

U. S.

C h a m b e r

o f

C o m m e r c e

U. S.

C h a m b e r

o f

C o m m e r c e

U.S. Generation Outlook in 2035

U. S.

C h a m b e r

o f

C o m m e r c e

The Geography of Coal

U. S.

C h a m b e r

o f

C o m m e r c e

Generation Regulation The BIG FOUR


In the absence of federal legislation, the Environmental Protection Agency (EPA) acts: Ozone/Smog Standards Greenhouse Gas Regulations Mercury Standards Cross-State Air-Pollution Rule (CSAPR)

U. S.

C h a m b e r

o f

C o m m e r c e

Ozone Regulations Cancelled


Would tighten smog (ground-level ozone) standard September 2 abandonment Directive from President Obama Defer to five-year review cycle (2013) Data freshness Litigation likely

U. S.

C h a m b e r

o f

C o m m e r c e

Greenhouse Gas Regulations


POSTPONED BUT First-ever rules controlling electric power plant carbon emissions. September 30 draft final expected May 2012 September 14 delay now subject to White House review Political Issue because of climate change connection

U. S.

C h a m b e r

o f

C o m m e r c e

Mercury MACT
Submitted for White House Review
Slashes mercury and other toxic air pollution from power plants Rule initially expected November 16 Between $10 B and $11 B per year Well-known health impacts

U. S.

C h a m b e r

o f

C o m m e r c e

CSAPR The Fight is Brewing


Finalized July 2011 Effective January 1, 2012
Replaces Clean Air Interstate Rule (CAIR) Controls sulfur dioxide and nitrogen dioxide Aims to protect downwind states Unknown reliability impacts $2.4 billion per year

U. S.

C h a m b e r

o f

C o m m e r c e

Impact of New Regulations

American Coalition for Clean Coal Electricity (ACCCE) Study: CSAPR and Mercury MACT Rule could cause 47.8 GW in coal-fired power plant retirements. This equals 15 percent of U.S. coal fleet.

U. S.

C h a m b e r

o f

C o m m e r c e

Federal Legislative Response


House of Representatives
10 regulations targeted Hearing on reliability with Federal Energy Regulatory Commission (FERC) TRAIN Act

Senate
Senate bills targeting CSAPR Seek termination or delay

U. S.

C h a m b e r

o f

C o m m e r c e

Production vs. Protection

U. S.

C h a m b e r

o f

C o m m e r c e

Environmentalist Pressure

U. S.

C h a m b e r

o f

C o m m e r c e

Electric Transmission Policy


Generation retirements = greater need NIMBY, NOPE and BANANA prevail FERC Order No. 1000 Transmission Siting Incentive Rates

U. S.

C h a m b e r

o f

C o m m e r c e

Risk Metric: Transmission Mileage

U. S.

C h a m b e r

o f

C o m m e r c e

Energy Security Risk: Transmission

U. S.

C h a m b e r

o f

C o m m e r c e

Break Down Regional Boundaries

U. S.

C h a m b e r

o f

C o m m e r c e

FERC Acts on Interstate Development


FERC Order No. 1000 Planning Regional transmission process and plan Public policy State, Federal, Regulations Coordinate on mutual solutions Cost Allocation Regional cost allocation (also multi-region) Allocate costs more broadly ROFR Eliminated mostly
Does not affect local or state laws

U. S.

C h a m b e r

o f

C o m m e r c e

Transmission Siting
Federal Backstop Authority
Blackouts Courts Department of Energy and FERC Project-based approach

U. S.

C h a m b e r

o f

C o m m e r c e

Incentive Rates
Intended to get more transmission built FERCs May 2011 Notice of Inquiry Bipartisan issue Northeast pressure Limit incentives to unusual degree of risk Balancing of rates versus expansion

Needed U.S. Energy Strategy


NO SINGLE SOLUTION
Maximize efficiency

U. S.

C h a m b e r

o f

C o m m e r c e

Use Domestic Resources Recognize role for nuclear and clean coal Sustainable policy on renewables Modernize our infrastructure Exert authority to get beyond BANANA syndrome Invest in our technology solutions and our intellectual foundation for innovation Achievable climate approach

For More Information

U. S.

C h a m b e r

o f

C o m m e r c e

WWW.ENERGYXXI.ORG