Updated on April 1 at 6:15 a.m. PDT with comments from utilities.
Updated on April 2, 3:05 p.m. PDT to address dispute over Boehner cost estimate.
The first draft of an energy and climate change bill calls for national mandates for renewable energy and energy efficiency but leaves crucial details on carbon regulations open for negotiation.
The House Energy and Commerce Committee on Tuesday released the first draft of the American Clean Energy and Security Act of 2009, (click for PDF) which its backers hope will be voted on this summer. Key figures for the bill in the House are Rep. Henry Waxman, who chairs the Energy and Commerce Committee, and Rep. Edward Markey, who chairs the Energy and Environment subcommittee.
The document was well received by clean-energy advocates on Tuesday but panned by political foes who complained that the global warming portions of the bill will amount to an energy tax on consumers.
According to a summary document (click for PDF), major provisions of the bill are:
A national renewable electricity mandate where utilities need to get 6 percent of power from solar, wind, biomass, or geothermal sources in 2012 and 25 percent in 2025. One-fifth of the requirement can be met with energy-efficiency measures.
A demonstration facility for carbon capture and sequestration where carbon dioxide from coal-burning power plants is stored underground.
Giving authority to the Federal Electricity Regulatory Commission for planning power grid modernization with smart-grid technology and upgrades to the transmission lines.
A single federal fuel-efficiency standard and low-carbon fuel standard for biofuels.
An "energy efficiency resource standard" to create incentives for electricity and natural gas companies to invest in customer efficiency programs.
A global warming reduction program modeled on recommendations from U.S. Climate Action Partnership, a coalition of large corporations advocating regulation. The target is a 20 percent reduction of greenhouse gas emissions below 2005 levels in 2020, 42 percent reduction in 2030, and 83 percent cut in 2050.
Programs to promote "green jobs," such as training, and rebates for heavily polluting industries that could be put at a competitive disadvantage from costs related to carbon regulations.
The proposals build on the significant energy and efficient-related investments already passed as part of the government stimulus package earlier this year. In general, green technology company executives and investors have said the stimulus plan can help the finance-challenged solar and wind industries in the short term and drive investment in smart-grid technologies and weatherization services.
In reaction to Tuesday's draft bill, environmental groups said that the bill moves the country in the right direction by lessening dependence on imported oil while investing in new green technologies.
"Firm limits on global warming pollution will drive investment to recharge our economy today and enhance our economic stability tomorrow. This discussion draft recognizes that we must act quickly to avoid the worst impacts of climate change and jump-start our economy with clean jobs," said National Resources Defense Council president Frances Beinecke in a statement.
House minority leader, Ohio Republican John Boehner, argued in a statement that the global warming-related portion of the bill will impose as much as $3,100 a year in energy-related costs on households during a recession.
How much and whether carbon regulations will raise electricity prices, is a source of debate. However, the author of a Massachusetts Institute of Technology (MIT) report (click for PDF), which is the source of Boehner's estimate, said that Boehner "misrepresented" the study.
MIT professor John Reilly, who published a study of cap and trade proposals in 2007, on Wednesday sent a letter to Boehner saying that actual number is closer to $340 per household per year, or about ten times less. (Click here for text of entire letter). The Republican party published a release on Thursday defending its cost estimate.
The cost of enacting climate change regulations remains a difficult question both practically and politically. The energy bill draft does not propose a specific mechanism for how a price is fixed to carbon dioxide emissions by heavy polluters. Some observers expect that an energy bill will only be passed this year if climate regulations are separated out.
At least two utilities on Wednesday supported the bill. Lew Hay, CEO of Florida-based FPL Group, a significant investor in wind and solar energy, said in a statement that the bill is a "bold blueprint" to confront "a triple threat of challenges: an economy in recession, an overdependence on foreign energy, and a warming planet."
While touting its actions on energy efficiency, National Grid also applauded the bill for addressing climate change but added that the entire country now needs a "clear framework" to reduce carbon emissions.
For more reaction to the draft bill, see the The New York Times, GreenWire, and Dow Jones.
Bill Gates' investment firm is funding Sapphire Energy, a company that intends to make auto fuel from algae.
Sapphire Energy said Wednesday that a series B round will bring the total amount it has raised to more than $100 million. Investors include Gates' investment firm Cascade Investment, as well as Arch Venture Partners, Wellcome Trust, and Venrock.
The lowly algae is the renewable fuel industry's great green hope. Because algae is rich in oil and can grow in a wide range of conditions, many companies are betting that it can create fuels or other chemicals cheaper than existing feedstocks.
So far, no company has made cost-competitive fuel at large scale from algae. But a handful predict they will within three years.
San Diego-based Sapphire Energy said last year that it has successfully made its product, Green Crude, which yielded 91 octane gasoline from algae.
Its process can use algae to yield a range of fuels, including the chemical equivalents of gasoline, jet fuel, and diesel. It has a test facility in New Mexico.
The series B equity will help the company build out its operations with a target of producing 10,000 barrels per day of fuel from algae and help it operate at commercial scale within three to five years.
Sapphire Energy has not provided many details publicly about its technology except to say that it doesn't need fresh water to grow the algae and that it has assembled a team with expertise in cell biology, plant genomics, and algal production.
The stake in Sapphire Energy is not the first foray into alternative fuels for Gates' Cascade Investments. The firm invested in Pacific Ethanol, but later sold its shares as the company's stock price fell.
Dealing a blow to the solar and wind industries, the U.S. Senate is expected to pass an energy bill later on Thursday that strips out a tax provision to encourage investment in renewable energies.
The House last week passed an energy bill that extended tax incentives beyond 2008 for businesses and consumers who purchase renewable energy systems.
On Thursday, the Senate delayed passage of the bill until later today, a move which will lead to the removal of the tax provision, according to industry executives and published reports.
The centerpiece of the energy bill is an overhaul to the fuel-efficiency standards for vehicles.
The House version included an extension to the incentive tax credit and a provision that would require utilities to have 15 percent of their power come from renewable sources. Both are expected to be stripped.
Not surprisingly, executives from the solar and wind industries criticized the result of Thursday morning's Senate vote.
"Today's vote is out of step with Americans across the political spectrum who overwhelmingly support clean, home-grown renewable energy," said Gregory Wetstone, the senior director of governmental and public affairs at the American Wind Energy Association, in a statement.
The tax incentives would have extended a 30 percent tax credit on renewable energy investments. The Solar Energy Industry Association lobbied for lifting the existing $2,000 cap on that the federal tax credit for residential installations.
The credit will continue through 2008, but the solar and wind industries need a multi-year tax regime in order to ensure continued investment, particularly for large-scale projects which take years to build, according to industry executives.
"When you start construction of power plants, anything of this size is a three-year project so you need to know what the federal policy is four years out," said John O'Donnell, executive vice president of Ausra, a solar power plant company. "You only get to claim the credit the day the project goes online."
Changes in the incentive tax credit can mean a 20 percent change in the price of projects and increased risk for financiers, O'Donnell said.
Without a multi-year tax program, the solar industry will be delayed, he said.
Extending or raising the tax credits on renewable energy faced opposition because it would have been paid by new taxes, mostly on the oil industry, according to industry executives and published reports.
President Bush also threatened to veto the energy bill that the House had passed.
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