Indeed, according to a White House fact sheet, a goal of the new standard is “to give utilities the flexibility to generate clean energy wherever it makes the most sense.” Therefore, the fact sheet says, “all clean sources—including renewables, nuclear power, efficient natural gas, and coal with carbon capture and sequestration—would count toward the goal.”
But even as the bill is being written in Washington, special interests are likely to intervene. “You can make it look exactly like cap-and-trade. The problem is that’s extremely unlikely to happen,” says Severin Borenstein, a professor in the Economic Analysis and Policy Group at the University of California, Berkeley. “It usually ends up getting highly politicized, so that every renewable-energy source says we need our special share of the pie,” he says. This forces utilities to use certain forms of clean energy regardless of price.
Even if the system implemented is as flexible as possible, it is likely to increase electricity prices by forcing utilities away from one of the least expensive sources of electricity—conventional coal. But the increase might not be much more than it would have been without a policy, says Kevin Leahy, managing director of climate policy at Duke Energy, a major utility. Utilities are already shifting away from coal to natural gas, largely because of existing pollution controls, he says. “If you include natural gas in this policy, then you’re just going to see the world do what was going to do anyway, which is use natural gas,” Leahy says. But, he adds that “a lot would depend on the details.” For example, the White House has suggested that utilities using natural gas may receive only partial credit toward the clean-energy goal. So they may need to draw on sources of power such as solar or nuclear to a greater extent than they would have without a clean-energy standard, driving up electricity prices.
To offset the likely increases in electricity prices, the Obama plan includes energy-efficiency incentives. There are already many ways that people can affordably cut electricity consumption—such as buying more efficient lightbulbs and appliances, and installing better insulation. But, Wallace Tyner says, the evidence suggests that most consumers won’t make these investments, even if they pay for themselves in just a few months. “If they have to pay a little more, even if they get it back very quickly, they don’t do it,” he says. But in the past, energy-efficiency standards, tax credits, and other incentives—much like the ones Obama has proposed—have led consumers to adopt efficiency measures. If these measures save enough energy, he says, “you could end up with bills that are lower.”