The benefits to cleantech companies if a renewable energy standard (RES) is passed doesn’t have to be a nuanced discussion.
The answer is simple: the benefits will be myriad. And they’re long overdue.
In fact, the idea has been mulled so long that it’s gone through two acronyms, migrating to RES from renewable portfolio standard.
Different name, same great results.
The most important thing to remember here is that an RES guarantees demand.
Take a hypothetical required soda standard (RSS), in which the government requires a certain percentage of soda sales come only from Coke, at a much higher market share than they have now.
Coke’s business would skyrocket, right? They would be guaranteed increased market share.
Welcome to the new, competitive world of renewable energy.
Renewable Energy Standard: The Proposal
Though a few have been floated, the suggested outcomes are essentially the same. For our purposed, I’ll use the most recent draft.
And that’s the energy bill by Henry Waxman and Ed Markey that was introduced to the House Energy and Commerce Committee earlier this week. It’s a one-bill climate and energy proposal that, in addition to establishing cap-and-trade, would also enact and RES requiring 25% by 2025, after making a mandated pitstop at 6% by 2012.
They’re calling it the "American Clean Energy and Security Act of 2009," and are promising a committee vote by Memorial Day. (Something I said would happen, in these very pages, in early February.)
In the Senate, Jeff Bingaman has floated a plan that would require utilities to get 16% of their electricity from renewable resources by 2019 before jumping up to 20% by 2021. His plan would allow a portion of the target to be met with efficiency standards.
Each would have the same outcome: the expanded use of renewable energy in a dramatic way.
Renewable Energy Standard: The Implications
Even by liberal measures, renewable energy currently only provides about 3% of our energy needs.
Climbing to 20% by in the next 10 years would be a boon to the industry to say the least.
I’ve often called an RES the Holy Grail of renewable energy, with cap-and-trade acting as the Holy Goblet. It’s the nudge that will wake the sleeping giant.
The most recent data from the Energy Information Administration shows that the U.S. consumes ~40 quadrillion Btus of electricity annually. Here’s the current breakdown:
At just 2.5% (I told you 3% was liberal), renewable energy generated about 1 quadrillion Btus of our electrical energy.
Getting to 20% means we’re in for 800% growth when it comes to the use of renewable energy, all the way up to 8 quads.
That means rapid sustained growth in all sectors –and complimentary sectors — of the renewable energy industry. Increased panel production. Increased turbine, tower, and nacelle production. Increased sales of geothermal turbines.
It also means the de facto expansion of the smart grid, transmission capacity, and green jobs.
If you’re involved in the sector in any way –employed, investor, enthusiastic observer– this piece of legislation will be a boon.
Keep an eye on it as it progresses in both the Senate and the House. Changes are likely, and attempts at watering it down will be made, but in the end, I’m confident we’ll get what we’ve been waiting for: a guaranteed expanded market for renewable energy.