Ask Ed Bell about energy trading and risk management (ETRM) technology and he’ll likely bring up his days with Enron back in the early 1990s. Bell—now a principal at Houston-based technology...
What Do You Mean by Green?
Seemingly eco-friendly definitions can prevent adoption of renewable portfolio standards.
The recent failure of H.B. 2200 in Illinois, which would have established mandatory renewable portfolio standards (RPS) for electric energy suppliers, can be attributed to a failure to achieve agreement on workable definitions of "green." Flawed conceptions of "green" in Illinois and elsewhere have undermined the broad-based progress toward environmentally compatible energy sources that green and renewable energy proponents claim to seek.
The two most often stated goals of advocates for green and renewable energy are the lowering of energy-related emissions and the avoidance of resources that disrupt the environment. The case of Illinois shows how seemingly eco-friendly definitions of green can actually prevent adoption of RPS.
For the RPS debate to move beyond the ideological and toward policies that actually can be implemented, a new framework is needed that will provide a solid foundation for policy debate. First, categorizations of green should be oriented toward reducing effluents from generating facilities and using more restorable resources as fuel. A working definition would define low-emission energy as electricity generated at facilities plants that emit below a certain cap of CO 2, NO X, and SO 2 per kilowatt of average capacity. Second, renewable resources would be defined as those that are sustainably self-replenishing or otherwise non-extractive. Green energy, therefore, could be that generated with renewable resources or at power plants that, while perhaps not using renewable resources, would nonetheless result in emissions lower than some set standard.
The rub may come when a renewable resource causes emissions above the cap. This problem has been treated as a definitional question but is actually better handled as an implementation issue.
The framework proposed here recognizes the importance of both fuel and method of generation without linking them, leading to a net decrease in pollution and fossil fuel use. This approach also rewards technological advances and individual high-quality plants by anticipating that new fuels and generation technologies may arrive on the market. Over time, policy-makers could lower the caps for CO 2, SO 2, and NO X, and the list of pollutants could change as researchers better understand the effects of effluents.
One particularly useful application of this definition is with emission trading. The Illinois Environmental Protection Agency could accept and retire a certain number of CO 2, SO 2, and NO X credits in exchange for the certified labeling of additional kilowatt-hours of production as green. This green energy would have the same regulatory attributes as traditional green power: counting toward an RPS or selling at a green premium. This opens a new market for emissions credits, a compliance method that has proven its value. Public and private institutions (such as the Chicago Climate Exchange) are already emerging that could facilitate this future market.
It may not be obvious that the proposed definitional framework for the green debate is warranted. The recent Illinois experience helps to make the case. Illinois H.B. 2200 would have established an impossible-to-fulfill RPS. It mandated an RPS of 2 percent of