Sen. Tina Smith on the Democratic plan to clean up the US electricity sector

A wide range of climate and clean energy measures are being considered for inclusion in the budget reconciliation bill that Democrats are now hashing out, alongside a raft of other policies ranging from a child care tax credit to universal pre-K to an expansion of Medicare.

According to the office of Senate Majority Leader Chuck Schumer (D-New York), the climate provisions in the draft bill as of early this month would collectively reduce total U.S. greenhouse gas emissions by 45 percent below 2005 levels by 2030 — getting us close to America’s Paris Agreement pledge.

Schumer’s numbers have not yet been backed up by outside analysts, so they should be taken with a grain of salt. But what’s clear, and unlikely to change, is that the bulk of the emission reductions would come from the electricity sector — specifically, from the clean energy tax credits and the Clean Electricity Payment Program.

As my regular readers know, the Clean Electricity Payment Program is a version of the more familiar clean energy standard that has been modified to fit within the rules of budget reconciliation. It would set up a federal program to offer utilities financial incentives to increase their proportion of clean energy and levy fines on those that failed to do so. Its goal would be to reduce emissions from the U.S. electricity sector by 80 percent by 2030.

As Schumer’s graph shows, the Clean Electricity Payment Program, in combination with the extension and expansion of the clean-energy tax credits, would be responsible for almost 42 percent of the bill’s total reductions.

To hear more about the program and how it would work, I talked with Minnesota Senator Tina Smith (D), the policy’s sponsor and its greatest champion in the Senate. Smith is one of the handful of senators with in-depth knowledge of the dynamics in the U.S. electricity sector, and she’s deeply involved in budget negotiations, so I was excited to ask her about how the program would work and how it might affect coal states. Here is an excerpt, condensed and lightly edited, from the conversation we had on August 30. (After our conversation, a House committee released its draft version of the budget reconciliation bill, which includes the program Smith describes but labels it the Clean Electricity Performance Program.)

David Roberts: On the state level, renewable portfolio standards or clean energy standards mandate that utilities increase their proportion of clean energy. There are dozens of them across the country.

The Clean Electricity Payment Program that you have proposed on the federal level is not quite that. What is it, and how is it similar to and different from these more familiar state policies? 

Sen. Tina Smith: The basic goal is the same. We want to move the power-generating sector so that it is adding clean energy. One way of doing that is to have a regulatory framework that says: You will add clean energy, and if you don’t, you’ll pay a penalty.

But another way of achieving that goal is to do what we’re doing with the Clean Electricity Payment Program. This is a plan that says: We will provide financial incentives to utilities to add clean power; there’ll be a fee if you fail to add clean power; and our goal is to get, on a national average, 80 percent of our power generation from clean energy sources by 2030.

I think this mechanism has some real advantages because under a regulatory framework, adding that clean power costs money in the short term (though it saves money in the long term), and often those costs are passed on to ratepayers. With the clean electricity plan that we’re proposing, this federal incentive would defray the costs that utility ratepayers would normally pay.

Roberts: To what extent are the details of the program fixed and in place versus being negotiated right now? Are we sure that the target is going to stay the same through negotiations?

Smith: Well, of course, everything is in the midst of being negotiated all the time.

But the goal of achieving 80 percent clean power in the power sector nationally, on average, is set in stone. That was described in the Democratic budget resolutions that we passed at the end of the last session. That is the goal of the president. So to me, that’s the starting point.

Then there are a couple of other things that are crucial. One is that this clean electricity plan is technology-neutral, which means we don’t say this kind of clean energy is better than that kind of clean energy, or it must be renewables versus carbon capture. Two is that each utility starts from where they are, and they improve from there. This is a big deal, because some utilities and regions are already well along the path of adding clean power, and others are just starting. You don’t want to unfairly penalize the utility that maybe is only at 10 percent clean power.

Roberts: How is the plan customized on a per-utility basis? If I’m a coal-heavy utility, what does it look like to me?

Smith: If you are a coal-heavy utility, this is very much in your favor, because you need to figure out how to add clean energy while you have a lot of assets in coal power. Rather than having your utility ratepayers end up having higher rates in the short term because you’re adding new, clean power infrastructure, this would help you to add clean.

You may be a utility that’s only 10 to 20 percent clean; so under our plan, we would still ask you to add clean power every year at a percentage level yet to be negotiated, at a pace that is moving you strongly and speedily in the right direction.

But there’s no expectation that a utility that starts at, say, 10 percent clean power must catch up with a utility in the Pacific Northwest that relies heavily on hydropower and may easily get to 85 or 90 percent clean within a 10-year period.

At the end of that 10-year period, you’re going to have some utilities that are over 80 percent, and some that are below 80 percent. The utilities I speak to that are further along will probably argue that it’s harder for them to add that incremental 20 percent of clean, whereas the utility that’s starting with ample untapped renewable resources, you could argue that they could add more quickly.

Roberts: So there’s a national average target, but it’s not that each utility has to hit that same target.

Smith: That is exactly right. That’s the flexibility. It makes it much more appealing to utilities that are not as far along the curve.

Roberts: You’ve said that you don’t actually expect utilities to be fined very often since they’d be dumb not to take incentives that are on the table. But are there protections written in about where the fines come from and how the incentive payments are used?

Smith: Yes, we want to write into this what are allowable uses for the incentive payments. It could be building out clean resources. It could be deploying carbon capture technology. It could be adding energy efficiency resources to a system because if you are reducing electricity demand at the same time that you’re adding clean, the percentage of clean of your overall system goes up faster.

I speak to utilities and power generators that have coal power plants or natural gas plants that they want to phase out, but they have a stranded asset; you could potentially use these resources to help to retire those resources more quickly.

Then, similarly, we need to have rules around who bears the cost of the penalties in order to protect ratepayers as much as possible.

Roberts: How do you pitch this program to a person — say, for instance, a friend of yours named Joe — in a coal-heavy state with a lot of coal-related jobs? Fossil-fuel-heavy states have traditionally been resistant to things like this because they feel like they’re starting on the back foot.

Smith: I think about answering that question from the perspective of a place in Minnesota that is similar in many ways to parts of West Virginia, which is Minnesota’s Iron Range. This is a part of my state where the bread and butter of the economy, and historically the culture and the source of pride, has been producing the iron that has driven the economy of the United States.

There is a real sense in that part of Minnesota, just as I think there is in West Virginia — though [Senator] Joe Manchin [D-West Virginia] knows way more about West Virginia than anybody — that this economy is passing people by. There are new opportunities out there, but is it ever going to come to me, to my community, to my world?

That is one of the real strengths of this idea. First of all, clean power, including renewable energy, is rural energy. That’s where it is most likely developed. In fact, West Virginia has abundant renewable energy assets that are waiting to be developed. If you care about wanting to be a part of this clean energy transition — which is going to happen — the question is: Do you want to lead? Do you want to be at the forefront of that? Or do you want to be left behind?

The opportunities for West Virginia, and other states that are part of the traditional fossil fuel economy, to seize this moment, to move forward with the kinds of proposals that Joe Manchin has put forward, like the American Jobs in Energy Manufacturing Act, and deploying carbon capture and storage technology, and taking advantage of the skills and expertise of the working folks in West Virginia to drive those innovations — to me, that’s all about being in the forefront.

The percentage of people in West Virginia that are employed in coal is 2 percent. So again, similar to Minnesota’s Iron Range, it looms large in the history and the economic foundation of the state, but it’s a relatively small percentage.

The West Virginia University Law School just put out a really excellent summary of what moving to this clean energy future could mean for West Virginia in terms of increase in employment, growth and state GDP.

Roberts: As a matter of fact, I just posted a piece about West Virginia and that study. One of the interesting things is it shows pretty substantial benefits for West Virginia, but the analysis was done before the Clean Electricity Payment Program was on the table. So the Clean Electricity Payment Program would more than double all those benefits; the amount of money that could flow into the state from federal coffers just through the Clean Electricity Payment Program is pretty enormous.

Smith: It is. It’s such a perfect case study of how, the way that this is structured, along with the other clean and renewable energy tax credits, is actually a giant boost to employment and jobs, and not a gloom-and-doom ​“we’re going to all have to sacrifice because the climate is warming” mindset that has too often been the way that these issues have been approached.

Roberts: Of course, the question for West Virginia is: What is the alternative? Coal is on its way out, according to the markets, so it’s now or never. 

Smith: That’s exactly right. Coal demand has gone down substantially, and this transition is occurring. A lot of times people will say, why should we make sacrifices in the United States when we see China increasingly being a source of carbon pollution? What I like to point out is that China added substantially more wind and solar resources than the United States over the last 10 years or so. They are making significant investments in wind and solar, not to mention electric vehicles and other new energy technologies. So let’s lead on this.

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You can listen to the full conversation and read the full transcript at Volts.