New Energy Bill Could Move USA Energy System into the 21st Century

Amy Gutierrez, MPP, Staff Writer Brief Policy Perspectives

It’s easy to focus solely on fossil fuel production when discussing energy policy. The current debates concerning hydraulic fracturing and the Keystone XL pipeline lead many to believe the United States can only innovate by drilling for fossil fuels. The Senate American Energy Innovation Act (SAEIA) dispels that idea. This bill is a policy juggernaut that tackles modernization of the electric grid, cyber security, research and development, and flexible carbon savings. This holistic approach is exactly what the US needs to move its energy system into the 21st century.

Grid Modernization and Cyber Security

The archaic structure of the electric grid and its deficiencies is a national security problem, particularly in a time of innovative energy alternatives. The SAEIA uses Department of Energy grant programs to spur grid modernization through grid-scale storage, the development of micro-grids.  The development of micro-grids – localized grids that can disconnect from the traditional grid to operate autonomously – is an important piece of the cyber security initiatives in the SAEIA because they can help lessen the severity of outages if there are disturbances to the grid.

Cyber security plans are a priority in the bill due to the national security risks associated with an attack on the U.S. electric grid. A recent GAO report highlighted vulnerabilities at the Tennessee Valley Authority (a large federal utility in the United States), finding that, “[The] interconnections between [The Tennessee Valley Authority’s] control system networks and its corporate network increased the risk that security weaknesses[] on the corporate network could affect control systems networks and we determined that the control systems were at increased risk of unauthorized modification or disruption by both internal and external threats.”

The SAEIA promotes a resilient grid by empowering stakeholders to create working groups comprised of the Department of Energy, national labs, private industry, and public utilities to discuss emergency management plans and improve emergency response times.

Research and Development

The SAEIA promotes innovation through grant programs and technical assistance, which is important as new technologies such as carbon capture and hydraulic fracturing are discovered. With five prizes of up to 2 million dollars each, the Advanced Materials Prize Competition is a financial mechanism within the bill that will directly fund advanced materials, such as more environmentally friendly building materials made from ceramic. Vehicle innovation, carbon fiber recycling, and energy market capacities (prices, consumer behavior, and new power generation) are other examples of research and development funding allocated in this legislation.

Flexible Carbon Savings

The SAEIA aims to increase energy efficiency and carbon reduction by broadening the incentives for all types of clean energy. In the past, similar legislation focused on promoting the newest or most frequently tested energy sources. In contrast, this bill realizes that taxpayers can best determine where to introduce clean energy into their consumption or production activity. Additionally, this bill encourages greater participation through flexible tax credits. Taxpayers can choose between the investment tax credit (ITC), or the production tax credit (PTC). These tax incentives allow taxpayers and industries to determine the most economical way to move forward into clean energy by providing credits to offset either upfront costs or production costs.  For example, a facility that qualifies as a “zero emission” facility could choose between a PTC in the amount of 2.3 cents per kilowatt hour, or an ITC that would let the facility re-coup 30% of the upfront costs of investing in clean energy.

Additionally, this legislation creates opportunities for innovative investments by focusing on carbon dioxide equivalents instead of on legislating specific chemical air contaminants.  Carbon dioxide equivalents allow all industries and agencies to speak in the same language for lowering emissions. By providing a standard unit of measurement, the SAEIA addresses the burden of passing a bill through Congress that concerns scientific technology: it keeps the legislation from getting too specific about one aspect (the emission gas) and allows the legislation to span long term to cover emerging technologies.

The bill as introduced by Senate Democrats is not politically feasible in the current Republican led Congress. However, a bipartisan energy bill that includes some of these provisions is being pushed by Senator Murkowski of Alaska and Senator Cantwell of Washington. The bipartisan bill, named Energy Policy Modernization Act, will include some of the provisions in the earlier SAEIA with more emphasis on fossil fuel extraction, and nuclear and geothermal energies.

The initiatives in the SAEIA provide a step-by-step method to affirm our commitment to upgrade our energy system. They focus on streamlining the government’s participation in an already ground-breaking and innovative energy market, and take the partisan mess out of the Keystone XL pipeline, off-shore drilling, and hydraulic fracturing.

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