The Kyoto Protocol has already created a more favorable climate for renewables in the U.S. business community, though it has also deepened differences between the Clinton administration and Congress over support for these technologies. The administration moved quickly to strengthen support for renewables through several modest initiatives in early 1998. The fiscal year (FY) 1999 budget proposal includes a Climate Change Technology Initiative of $6.3 billion over five years.⁴¹ As proposed, the program puts $2.7 billion into increased research, development, and deployment of clean energy technologies, and an additional $3.6 billion into tax incentives for energy efficiency, renewable energy, and carbon reduction technologies. As of June 1998, however, congressional appropriations committees were scaling back the budget requests and increasing the climate change technology budget from $114 million to just $139 million rather than the $230 million requested by the administration.⁴² Efforts had begun to restore part of the funding through amendments, but the results were unclear.

Renewable energy programs are slated for a 25% increase under the administration's proposals, from $346 million in FY98 to $437 million in FY99. Congress has not reacted well to these proposals either, however, as both House and Senate committees moved to hold the budgets roughly even with the previous year's figures -- which represent significant reductions from the renewable energy budgets of the mid-1990s.⁴³ Ironically, just as Congress was making these cuts on the rationale that the proposals were tied to an unratified treaty, the Congressional General Accounting Office released a report sharply criticizing Clinton's climate initiative for not being explicitly tied to the target, and for lacking an overall goal and plan for meeting the Kyoto requirement.⁴⁴

The most high-profile element of the administration's climate proposal is the Million Solar Roofs Program, originally announced by President Clinton in June 1997 at the United Nations Special Session commemorating the fifth anniversary of the Earth Summit. The program, which is modeled after similar European and Japanese programs, aims to install 1 million rooftop PV systems by 2010.⁴⁵ Unlike its counterparts elsewhere, however, the U.S. government is not planning on large subsidies to get the program going. The 20% budget addition targeted for solar PVs in the FY99 budget includes a meager $6.4 million to establish 25 partnerships with utilities, builders, government agencies, cities, and financial institutions to carry out the rooftop program.⁴⁶ In addition, a five-year tax credit worth $120 million has been proposed to cover 15% of the cost of installing a rooftop solar system -- up to $1,000 for water heating systems and up to $2,000 for PV panels. The credit would apply to systems put in service between 1999 and 2003 for solar water heaters and until 2005 for PV systems.⁴⁷ (See Table 3.) To date, federal agencies have made commitments to install 20,000 roof systems, while states, communities, and utilities have made proposals for more than 350,000 roofs.⁴⁸

Wind and biomass energy are also beneficiaries of the administration's climate initiative. Wind R&D is slated for a 34% increase, with a new goal of lowering the cost of wind power from 4ó to 2.5ó per kilowatt-hour at sites where the wind averages 15 miles per hour. Biomass energy R&D is to be increased $39 million, with a focus on improving the conversion of wood and crop wastes to fuels and electricity. In addition, President Clinton has proposed a five-year extension of the existing 1.5ó-per-kilowatt-hour tax credit for wind- and biomass-based power generation.⁴⁹

The administration requested $33 million for geothermal energy R&D in FY99, a 12% increase from FY98. $29.5 million was intended for geothermal electric power. The remaining $3.5 million was budgeted for geothermal heat pumps, which move heat from the ground into buildings during the winter, and pump heat into the ground during the summer. While the Senate originally proposed $18 million for FY99 geothermal R&D, it now appears that funding will be closer to the administration's request. The funding increase will allow DOE to expand, among other activities, geothermal heating applications in colder regions.

To encourage renewable energy -- and reduce carbon emissions -- the administration recommended a Renewable Portfolio Standard (RPS) requiring that 5.5% of the nation's electricity be generated by renewables (not including hydropower) by 2010, allowing electric companies that fall short of this target to purchase renewable energy credits from companies that exceed the minimum standard. The package proposes a $3-billion matching Public Benefits Fund for renewables support, funded through a fee on electricity of $0.001 per kilowatt-hour. The proposal also includes right-to-know provisions requiring electricity suppliers to disclose the source of their generation as well as their emissions.⁵⁰ In addition, all consumers would be eligible for net metering programs, which allow them to sell small amounts of electricity back to the supplier at the same price they pay for power -- a policy already adopted by 20 states and pending in another five.⁵¹

The eventual shape of the U.S. power industry will ultimately be decided by Congress as well as the legislatures of the 50 states. Renewables have fared well in some of the restructuring bills proposed so far, including three introduced in the U.S. Congress in 1997 that include some form of Renewable Portfolio Standard, ranging from 2% to 5%.⁵²

Public system benefits charges -- small fees paid by all consumers -- are another approach to promoting renewables included in some restructuring proposals. At the federal level, Senate Bill 687 (Jeffords) includes a public benefits charge that the Department of Energy (DOE) estimates would increase average monthly electricity bills by no more than $2.⁵³ Public benefit funds at the state level, meanwhile, totaled $6 billion in 1996.⁵⁴ California, which considered but decided against an RPS, set up a $540-million public benefits fund to support renewables, efficiency, and low-income programs over four years. The fund only went into effect in early 1998, so its impact remains to be seen. Rhode Island, Illinois, and Massachusetts have also adopted public system benefits charges.⁵⁵ (See Table 4.)

Other strategies for promoting renewables in a more competitive environment are premised on public support for new energy sources. Green power pricing and marketing offer consumers the chance to purchase renewable electricity, a concept that may benefit from increased public awareness of the climate issue. The idea has taken the industry by storm in the past couple of years, and already 32 utilities have set up green pricing programs that offer consumers the option of paying a small premium for renewable electricity.⁵⁶ From Michigan to Colorado, several of these programs have been oversubscribed, attracting the interest of small businesses as well as residential customers.⁵⁷

The prospect of a competitive power market in which customers can choose their electricity supplier has meanwhile led to the proliferation of "green power marketers" that offer various packages of renewable electricity. The first serious test of the concept began in California in April 1998, when an estimated 13 million households were able to choose their electricity supplier for the first time. To prevent false claims and confusion, the private, non-profit Center for Resource Solutions has established a "Green-e" certification brand. To be certified, the electricity supplied must be at least 50% based on renewables (excluding large hydropower), while the other half must be no more polluting than the current average California electricity mix -- which includes only 16% coal and 32% natural gas, with hydropower 27% and other renewables 9%.⁵⁸

As the California electricity market opened, seven retail electricity "products" from five companies and one utility had been certified to use the Green-e label.⁵⁹ Its potential will not be clear for some time, however, and will only be realized with effective government regulation of key factors such as access to transmission lines. One particularly important issue for renewable power marketers is whether customers will be informed of the energy sources being used, and the emissions produced, in generating the power they receive. Eight of the 11 state restructuring laws with environmental provisions have disclosure requirements, as do all three congressional proposals.⁶⁰ But as of June 1998, prospects for federal electricity restructuring legislation were clouded by divisions in the power industry, including the opposition of many utilities. Most of the focus is at the state level, where restructuring is proceeding at a rapid pace, posing both risks and opportunities for renewables.

Some U.S. policymakers are meanwhile beginning to focus on broader efforts to control the nation's carbon emissions. One way to implement the limits required by the Kyoto Protocol after 2008 would be to adopt a national "emissions cap and trade" program similar to the sulfur dioxide program in the 1990 Clean Air Act. This would likely include only large emitters such as big factories and power plants, requiring that they either reduce their own emissions or purchase permits from other companies that go below their reduction requirements.

Although such a program is still hypothetical, and would require congressional action to be implemented, some analysts are already proposing schemes for giving companies credit for emissions reductions made in the decade prior to 2008 -- schemes that could give a boost to renewable energy markets in the near future. As an initial testing of the waters, the U.S.-based utility Niagara Mohawk began a greenhouse gas emissions trading program with the Canadian utility Suncor Energy in March 1998. Suncor purchased 100,000 tons of "carbon emission reduction credits" and acquired an option to buy a total of 10 million tons over the next decade from Niagara Mohawk, which is selling credits because its emissions are currently about 50% below their 1990 levels.⁶¹

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