patches

I think this one’s got it!

There is a belief that with the Democratic shift in Congress, we finally have the votes to get a national renewable portfolio system (RPS). I don’t buy it. As I pointed out here, a “pure” wind-and-solar-only RPS means a wealth transfer from Eastern to Western U.S., and no political party is inclined to vote against their state’s economic interests. The basic electoral math of the Senate makes such an RPS impossible.

Many in the environmental community still don’t get this, but in my experience, Congress does. Perhaps not universally, but as a collective body, it has created a situation where the headline RPS conversation is taking place in parallel with a whole host of sidebar conversations that would expand the eligibility to include other technologies with a broader electoral appeal.

Most notably, this has taken the form of the Energy Efficiency Resource Standard (EERS), led primarily (but not exclusively) by ACEEE and ASE. In its simplest version, an EERS is simply an RPS with a different suite of eligible technologies, using the tool of a clean energy credit to apply not only to traditional renewables but also to energy efficiency.

At the highest level, that’s a good thing. A wind/solar dominated RPS won’t pass, so by adding other comparably clean things to the mix, we get a bill that works. Politics is, after all, the art of the possible. The trouble’s down in the weeds. And you don’t have to stoop very far to get into them.

The ugly politics of RPS

The first problem the EERS faces is that there’s a strong renewable contingent that really doesn’t want to let efficiency into the tent. So there is no unified clean energy coalition approaching Congress with a politically viable bill.

This has manifested in a structure whereby the EERS is limited to 15-25% of the total RPS eligibility, with a different set of “tags” such that the supply of EERS cannot in any way affect the price for “pure” RPS credits. The argument for this approach is that if you let energy efficiency participate in these markets, their supply and lower cost will swamp out any incentive for higher cost solar and wind. But this idea itself is goofy, since excess supply of clean energy only creates a problem to the extent that it exceeds demand. And the demand is set by the regulation itself! If a renewable energy standard that includes energy efficiency is too small to encourage both to participate, embiggen it.

The efficiency community isn’t blameless either. Crafting a regulation in which EE can participate necessarily requires that you define energy efficiency. And since that definition defines the parameters of participation, it is a highly politicized conversation. Do better lightbulbs count? If so, what’s the definition of better? Does combined heat and power count? If so, at what threshold efficiency level? In all cases, do we provide differential incentives to more efficient devices or simply provide full participation for everyone who passes some flat threshold?

Answering these questions in a way that sends the right policy signals is easy — but answering them in a way that keeps a political coalition in tow is hard. Take, for example, the question of scaling. If you sell a lightbulb that is twice as efficient as mine, should you earn more credits than I do? At a policy level, it’s impossible to say that’s a bad idea. But at a political level, if we make that decision I may be less inclined to support the legislation and the chance for passing the overall bill becomes (sadly) dependent on my political clout relative to yours.

Suffice to say, the efficiency community has been far from coherent in the way they have framed these issues to Congress. No slight to those leading the EE community in this effort — indeed, there is a special place in heaven for those who volunteer to be cat-herders in the name of good energy policy — but the result is that, as one Congressional staffer put it to me, “none of you guys are asking for the same thing.” This is the type of thing that causes Congress to pass something with a patch for a policy problem here, a patch for a political problem there, and pretty soon it’s patches all the way down. Notwithstanding the fact that this is, traditionally, how the U.S. makes energy policy, it is sure to lead to a lousy outcome.

Five whys

It seems to me that there is an easy solution, if we could just get organized. Bearing in mind that good policy rewards goals, not paths, it’s worth asking the question: what is the goal of an RPS?

One of the great frustrations of RPS policies at the state and federal level is that it’s maddeningly difficult to get a consistent answer to this question. Some will say it is to lower CO2. Others that it is to accelerate the transition to a renewable future. Others will say that it is to accelerate the commercialization of early stage technologies. Those are all noble goals, but the fact that you cannot get a consistent answer to that question is, at core, why there is so much inconsistency between definitions of renewable technology from one jurisdiction to the next — and why the whole RPS/EERS discussion is so patch-ridden.

Back in the 90s, when Total Quality Management was all the rage, business schools spent a lot of time digging up the post-WWII era work of Deming and Taguchi, which led to the quality programs at Toyota and other Japanese companies. One of the principles that emerged from this work was the idea of “Five Whys.” The concept is pretty simple: if you ask why five times, you’ll probably get to the root cause of the problem — but if you stop too soon, you’re simply solving proximate problems without ever getting to the root.

Since our energy legislation is so rife with patches, it behooves us to ask five whys more often. Specific to the RPS, I’d posit that whatever you think is the motivation for renewable energy incentives, asking five whys ultimately gets down to a single, pure motivation: reduce fossil energy use.

This suggests that we would be vastly better off throwing out our RPS, throwing out our EERS, throwing out any definitions of eligible technologies, and simply providing a clear incentive paid to anyone who is taking demonstrable activities to lower the fossil intensivity of the U.S. power grid, paid pro rata with the fossil energy they reduce.

More on how to do that in my next post.