Carbon Control in the U.S. Electricity Sector: Key Implementation Uncertainties

Prepared for Members and Committees of Congress

Congress has been debating a range of potential initiatives for reducing atmospheric CO2 from
U.S. sources. Legislative proposals would seek to limit U.S. CO2 emissions to historical levels th
through emissions caps, carbon taxes, or other mechanisms. In the 110 Congress, the most
prominent CO2 proposals sought reductions of nationwide CO2 emissions to 1990 levels or lower
by 2030. President-elect Barack Obama has proposed cutting carbon CO2 emissions to 1990
levels by 2020, and by an additional 80% by 2050.
A fundamental question arising from carbon control proposals is how the CO2 reduction targets
can be achieved in the electricity industry, which is responsible for nearly 40% of U.S. CO2
emissions. It appears from the policy research and technical studies that substantially reducing
CO2 emissions in the U.S. electricity sector over the next few decades would likely require every
key carbon mitigation measure at the nation’s disposal. However, it is also clear that significant
uncertainty exists about the potential of individual measures to achieve their hoped-for carbon
• Energy efficiency—Can the United States overcome socioeconomic barriers to
achieve four times more potential savings than ever before?
• Renewable energy—Will there be enough transmission for wind power? Is there
enough land to grow the needed biomass?
• Nuclear power—Could the United States build new plants fast enough to
• Advanced coal power—Will banks fund them and regulators approve them?
• Carbon capture and sequestration—Will the technology be commercially
deployable in 10 years, 25 years, or never?
• Plug-in hybrid electric vehicles—How much “low carbon” electricity would be
available to charge their batteries?
• Distributed energy resources—Would carbon costs change distributed energy
economics enough to spur deployment?
As the nation’s CO2 mitigation policies develop, the inherent uncertainty associated with specific
carbon measures may be a critical concern. Commitments to specific carbon emissions targets
over time, or to a specific schedule of carbon costs (whatever form they may take) may be greatly
affected by the success of the underlying measures relied upon to achieve them. Notwithstanding
the best efforts of federal policy makers, it is possible that, given the uncertainties each faces, few
if any of the major measures proposed to moderate U.S. carbon emissions will achieve their
anticipated impacts in a 20-year time frame. As Congress considers implementing CO2 policies,
keeping a close eye on the technology and market developments associated with every key
measure could be a priority. Balancing responses to energy market volatility and unexpected
structural changes against the need for a predictability in R&D and private capital investment
may be essential to maintaining the nation on course to meaningful atmospheric CO2 reduction.

Energy Efficiency and Conservation...............................................................................................2
Electricity-Efficiency Potential.................................................................................................3
Impacts from Electricity-Efficiency Initiatives.........................................................................4
Uncertainty about the Efficiency Opportunity..........................................................................4
Renewable Energy...........................................................................................................................6
Wind Power...............................................................................................................................6
Transmission Requirements................................................................................................7
Transmission Grid Uncertainty...........................................................................................9
Biomass Power Generation.......................................................................................................9
Biomass Fuel Supply..........................................................................................................9
Biomass Fuel Uncertainty.................................................................................................10
Nuclear Power Generation............................................................................................................10
Nuclear Power Construction Uncertainty................................................................................11
Advanced Coal-Fired Power Generation.......................................................................................13
Uncertainty in Coal Plant Financing and Approval.................................................................14
Carbon Capture and Sequestration................................................................................................15
CCS Technology Uncertainty..................................................................................................15
Plug-in Electric Hybrid Vehicles...................................................................................................17
Distributed Energy Resources.......................................................................................................18
Policy Issues for Congress.............................................................................................................19
Possible Outcomes for Carbon Control...................................................................................20
Underperformance of Individual CO2 Measures...............................................................20
Failure of the CO2 Mitigation Portfolio............................................................................21
Conclusion ..................................................................................................................................... 21
Figure 1. Potential CO2 Reductions in Electric Power....................................................................2
Figure 2. Wind Power Resources in the United States....................................................................8
Author Contact Information..........................................................................................................22

ederal policymakers have long been concerned about the impact of manmade carbon
dioxide (CO2) emissions on global climate change. To address these concerns, Congress
has been debating a range of potential initiatives for reducing atmospheric CO2 from U.S. F

sources. Legislative proposals would seek to limit U.S. CO2 emissions to specific (historical)
levels through emissions caps, carbon taxes, or other regulatory mechanisms. Many of these
proposals dictate or anticipate a declining long-term trajectory for annual U.S. carbon emissions. th
In the 110 Congress, the most prominent CO2 proposals sought reductions of nationwide CO2 1
emissions to 1990 levels or lower by 2030. President-elect Barack Obama has proposed carbon
reduction targets as well, intending to cut CO2 emissions to 1990 levels by 2020, and by an 2
additional 80% by 2050.
A fundamental policy question which arises from carbon control proposals is how the CO2
reduction targets can be achieved. Numerous analysts have been examining this question and
identifying specific measures to reach particular targets—especially in the electricity industry,
which is responsible for nearly 40% of U.S. CO2 emissions. In the electricity sector, these
measures typically include some combination of energy efficiency, renewable energy, nuclear
power, advanced fossil-fuel power generation, carbon capture and sequestration, plug-in hybrid
electric vehicles, and distributed energy resources. Figure 1 illustrates the CO2 abatement
potential of these measures in the electricity sector as estimated in a widely cited analysis by the
Electric Power Research Institute (EPRI). In the EPRI example, overall CO2 emissions associated
with the electricity sector would be reduced below 1990 levels by 2030. Other studies have
generated their own projections, with alternative targets and assumptions leading to distinct 3
trajectories for CO2 emissions and different contributions from the various abatement measures.
Analyses like that in Figure 1 are important for understanding the potential opportunities and
limitations of specific technological measures which may be needed to meet CO2 abatement
goals. However, with their focus on technical potential, such studies often have difficulty
conveying in a straightforward way the key infrastructural, environmental, regulatory, or
operational uncertainties which might affect how much of that potential could practically be 4
achieved. These uncertainties, nonetheless, are of critical concern to legislators overseeing
existing carbon-related programs or considering future CO2 abatement policies. In addition to
their technical aspects, Congress faces a need to gauge the overall viability of specific CO2
abatement measures—what are their prospects for helping to achieve CO2 targets in the electricity
sector. Legislators also face a need to assess the time frame over which such measures could be
expected to work, and how these measures may fit together to achieve overall CO2 abatement
goals under a national carbon policy.

1 World Resources Institute,Comparison of Legislative Climate Change Targets, (Washington, DC: June 18, 2008):
2 President-elect Barack Obama, Remarks before the Governor’s Global Climate Summit, Beverly Hills, California
(November 18, 2008).
3 For another prominent analysis, see also: S. Pacala and R. Socolow, “Stabilization Wedges: Solving the Climate
Problem for the Next 50 Years with Current Technologies, Science, Vol. 305, No. 5686 (August 13, 2004): 968 - 972.
4 See, for example: Seung-Rae Kim, Klaus Keller, and David F. Bradford, “Optimal Technological Portfolios for
Climate-Change Policy Under Uncertainty: A Computable General Equilibrium Approach,” Presented at the 10th
International Society of Computational Economics Conference on Computing in Economics and Finance (Amsterdam:
July 8-10, 2004).

Figure 1. Potential CO2 Reductions in Electric Power
Source: Adapted from Barbara Tyran, Electric Power Research Institute, “The Power to Reduce CO2
Emissions: The Full Portfolio,” Slide presentation (May 15, 2008): 7.
This report examines key uncertainties associated with the CO2 emissions abatement measures
identified in Figure 1. The report briefly describes each measure and discusses expectations for
its potential in the context of past experience, technical challenges, infrastructure requirements, or
other factors which may inform performance expectations. For each measure, it identifies and
discusses a critical uncertainty which may influence its overall viability. The report concludes
with a discussion of the implications of these uncertainties in the context of the congressional
carbon control debate.

When an energy conversion device, such as a household appliance or automobile engine,
undergoes a technical change that enables it to provide the same service (e.g, cooling, lighting,
motor drive) while using less energy it is said to have increased “energy efficiency.” The energy-
saving result of the efficiency increase is often called “energy conservation.” The energy
efficiency of buildings can likewise be increased through the use of certain design changes such 5
as more insulation, thermal windows, improved ventilation, and solar orientation. Energy
efficiency is often viewed as interchangeable with energy supply options like electric generation,
oil, or natural gas. Energy efficiency can also reduce energy resource use and associated
environmental impacts—like CO2 emissions from power plants.

5 Strictly speaking, “conservation means “avoiding waste,” but the term is typically used interchangeably with
efficiency in the energy policy context, as it is in this report. “Efficiency and “conservation” contrast with
“curtailment or “load management” which decrease output (e.g., turning down the thermostat) or services (e.g.,
driving less) to decrease energy use at specific times. Curtailment is often employed as an emergency measure.

Baseline improvements in energy efficiency occur over time as an economic response to changes
in energy prices, the availability of new technology, turnover in end-use equipment, and other
factors. However, conservation studies since the OPEC oil embargoes of the 1970s have
identified substantial potential for energy efficiency improvements above baseline levels. One
seminal analysis in 1976 stated
technical fixes in new buildings can save 50 percent or more in office buildings and 80
percent or more in some new houses.... [B]y 1990, improved design of new buildings and
modification of old ones could save a third of our current total national energy use—and 6
save money too.
A 1981 study by the Solar Energy Research Institute7 likewise found that “through energy
efficiency, the U.S. can achieve a full-employment economy and increase worker productivity, 8
while reducing national energy consumption by nearly 25 percent.” The study further concluded
that “the consumption of electricity can be reduced to a point where, on a national basis, demands
through the end of the [twentieth] century can be met with generating equipment now operating 9
or in advanced stages of construction.”
More recent studies continue to identify significant electricity conservation potential. The “Five
Lab Study” in 1997 estimated a technical electricity savings potential of approximately 23%, and
a maximum “achievable” potential of 15% among residential and commercial buildings,
assuming aggressive policies promoting conservation and a $50/metric tons (1993 dollars) carbon 10
cost. A 2004 meta-analysis by the American Council for an Energy-Efficient Economy of
several regional studies reported a technical electricity conservation potential of 33%, and an 11
achievable potential of 24% over a 5 to 15 year time horizon, depending upon the study. The
U.S. Department of State’s 2006 Climate Action Report concludes that “by using commercially
available, energy-efficient products, technologies, and best practices, many commercial buildings 12
and homes could save up to 30 percent on energy bills.”

6 Amory B. Lovins, “Energy Strategy: The Road Not Taken? Foreign Affairs, Vol. 55 No. 1 (October 1976).
7 Now the National Renewable Energy Laboratory.
8 Solar Energy Research Institute (SERI), A New Prosperity: Building a Sustainable Energy Future, Brick House
Publishing (Andover, MA: 1981): 1.
9 Ibid: 2.
10 Interlaboratory Working Group on Energy-Efficient and Low-Carbon Technologies, Scenarios of U.S. Carbon
Reductions: Potential Impacts of Energy-Efficient and Low-Carbon Technologies by 2010 and Beyond, (1997) :3.3-3.4. The five laboratories are Oak Ridge National Laboratory, Lawrence Berkeley
National Laboratory, Pacific Northwest Laboratory, Argonne National Laboratory, and the National Renewable Energy
11 Steven Nadel, Anna Shipley and R. Neal Elliott, “The Technical, Economic and Achievable Potential for Energy-
Efficiency in the U.S. A Meta-Analysis of Recent Studies, Proceedings of the 2004 ACEEE Summer Study on
Energy Efficiency in Buildings, American Council for an Energy-Efficient Economy (Washington, DC: 2004).
12 U.S. Department of State, U.S. Climate Action Report—2006 (July 2007): 40.

Both federal and state agencies have implemented a multitude of electricity efficiency initiatives
over the last 40 years to capture energy efficiency potential in the electricity sector. These
initiatives have included appliance, equipment, and building efficiency standards; electric utility-13
administered conservation incentives; consumer information campaigns; and other initiatives.
Notwithstanding these efforts, the levels of incremental electricity conservation actually achieved
since the 1970s have been more modest than the 25%-30% suggested in conservation potential
studies. A 2004 analysis examining a comprehensive range of both federal and utility-sponsored
conservation and energy efficiency programs (including federal efficiency standards)
administered through 2000 concluded as follows:
[P]rograms for which ex post quantitative estimates of energy savings exist are likely to have
collectively saved up to 4.1 quads of electricity annually. These estimates typically reflect
the cumulative effect of programs (e.g., all appliance efficiency standards, past and present)
on annual energy consumption. This total energy savings represents about 6% of annual 14
nontransportation energy consumption....
A study of California’s 2001 energy demand reduction initiative (promoted heavily as an
emergency measure to avoid blackouts during the state’s electricity crisis) reported 6% reduced
electricity usage compared to the prior year, although only 25%-30% of this reduction was
“attributable to savings from energy efficiency or onsite generation projects ... likely to persist for 15
many years.” Consistent with these studies, a 2008 analysis by EPRI projected a “realistic” U.S.
electricity savings potential of 7% beyond baseline levels which would occur without additional 16
market intervention.
Taken together, the studies of technical conservation potential and actual conservation impacts
suggest a perpetual opportunity for incremental electricity conservation on the order of 25%—
more than four times the savings such programs have actually realized. Moving beyond the 5% to
7% electricity savings range has been a persistent challenge to conservation proponents, primarily
because of the diffuse nature of the efficiency opportunity and the economic complexity of
decision making and capital investment by electricity consumers.
Students of end-use markets have long been puzzled by the lack of adoption of ostensibly
cost-effective energy efficiency technologies. A rich literature has developed around this

13 Commonly referred to asdemand-side management” orDSM” programs.
14 Kenneth Gillingham, Richard G. Newell, and Karen Palmer, Retrospective Examination of Demand-Side Energy
Efficiency Policies, Resources for the Future, RFF DP 04-19 REV (June 2004; revised September 2004): 63-64.
15 Charles A. Goldman, Joseph H. Eto, and Galen L. Barbose, California Customer Load Reductions during the
Electricity Crisis: Did they Help to Keep the Lights On?, Lawrence Berkeley National Laboratory, LBNL-49733 (May
2002): iii, 20.
16 Michael Howard, Senior Vice President, “Electric Power Research Institute, Energy Efficiency: How Much Can We
Count On? Presented at the Edison Foundation Conference, Keeping the Lights On: Our National Challenge, (April
21, 2008): 14.

question, and evidence for various barriers to adoption of efficiency technologies is 17
Among the barriers to energy efficiency analysts have identified are–
• limited market availability of new efficiency measures,
• incomplete consumer information about efficiency options,
• insufficient capital for efficiency investments,
• fiscal or regulatory policies discouraging efficiency investments,
• builder focus on first costs vs. lifecycle costs,
• lack of consumer focus on energy costs relative to other costs, and
• energy prices not reflecting the full social costs of energy supply.18
Conservation advocates and federal policy makers have proposed a range of additional policy
approaches to further overcome these barriers, but there is limited consensus on which policies
would be effective and how much additional conservation they might achieve. As a study of
conservation barriers from Lawrence Berkeley National Laboratory concluded–
Although these rationales provide a basis for some type of intervention, we acknowledge that
they do not justify any particular intervention.... [W]e suggest that differences of opinion
about the appropriateness of public policies stem not from disputes about whether market
barriers exist, but from different perceptions of the magnitude of the barriers and the efficacy 19
and (possibly unintended) consequences of policies designed to overcome them....
There have been numerous legislative proposals to promote electricity efficiency and 20
conservation. The key uncertainty faced by all of them, and future conservation proposals, is
whether, as a whole, they may cost-effectively capture much more of the “latent” electricity
conservation potential than such programs have done in the past. Carbon control studies which
project electricity efficiency savings on the order of 5% to 10% over a 20-year time frame appear
consistent with U.S. conservation program experience, and may be aided by any future costs of
CO2 emissions if they are reflected in electricity prices. Unlike large physical infrastructure,
however, such as power plants or electric transmission lines, conservation impacts do not
necessarily “scale up” to achieve greater impacts simply by increasing the size or funding of a
given conservation program. Efficiency potential is also extremely diffuse—existing literally at
the individual light socket level in nearly every household. Consequently, policy makers seeking
large conservation impacts may need to try alternative or more aggressive policies (e.g., very

17 J.G. Koomey, C.A. Webber, C.S. Atkinson, and A. Nicholls, “Addressing Energy-Related Challenges for the U.S.
Buildings Sector: Results from the Clean Energy Futures Study, Energy Policy, Vol. 29, No. 14 (November 2001):
18 Howard Geller and Sophie Attali, “The Experience with Energy Efficiency Policies and Programmes in IEA
Countries: Learning from the Critics, International Energy Agency, IEA Information Paper (August 2005): 23.
19 William H. Golove and Joseph H. Eto, Market Barriers to Energy Efficiency: A Critical Reappraisal of the Rationale
for Public Policies to Promote Energy Efficiency, LBL-38059, UC-1322, Lawrence Berkeley National Laboratory
(March 1996): xii-xiii.
20 For further analysis of conservation proposals, see CRS Report RL33831, Energy Efficiency and Renewable Energy
Legislation in the 110th Congress, by Fred Sissine, Lynn J. Cunningham, and Mark Gurevitz.

strict building efficiency codes) with little track record upon which to base projections of future

Renewable energy supplies in the electricity sector typically include the following types of power 21
plants: geothermal, solar, wind, biomass, and municipal solid waste/landfill gas. Many carbon
control advocates and federal policy makers have high expectations for the potential of renewable
generation to help reduce CO2 emissions in the United States. The widely publicized Pickens
Plan, for example, announced by T. Boone Pickens in July, 2008, envisions deploying enough 22
wind generation in the Great Plains states to produce 20% of U.S. electricity by 2018. The
Obama-Biden presidential campaign similarly pledged to establish a federal Renewable Portfolio
Standard requiring that 25 percent of electricity consumed in the U.S. be “derived from clean, 23
sustainable energy sources, like solar, wind, and geothermal” by 2025. Some groups have 24
advocated even more aggressive targets for U.S. renewable power development. Others are less
optimistic. EPRI, for example, assumes renewable sources (excluding hydroelectric generation) 25
could contribute 9% of electricity production in the electric power sector by 2030.
According to the Energy Information Administration (EIA), biomass and wind generation are the
two types of renewable power with the greatest overall economic potential, and therefore, the 26
greatest potential to reduce CO2 emissions. Biomass and wind power are inherently different
technologies, however, so they face distinct uncertainties related to their potential expansion
under a national program of carbon control. They are discussed, in turn, in the following sections.
Wind power does not consume fuel and produces no CO2, so it is an extremely attractive 27
technology for CO2 mitigation in the electricity sector. Wind generation technology is also fairly
mature. It has been deployed commercially throughout the United States—albeit with federal
assistance in the form of renewable energy production tax credits and state renewable energy

21 This report excludes hydroelectric power generation from the renewables category because of environmental
constraints and associated limits on potential new hydro capacity.
22 T. Boone Pickens, The Plan, Internet page (August 7, 2008).
23 Obama-Biden, Barack Obama and Joe Biden: New Energy for America, Fact sheet (August 3, 2008).; A 2004 Illinois state senate bill cosponsored rd
by Senator Barack Obama (SB2321, 93 General Assembly) excluded new construction hydroelectric power from its
proposed state RPS.
24 See, for example: American Council On Renewable Energy, The Outlook on Renewable Energy in America Volume
II: Joint Summary Report (Washington, DC: March 2007).
25 Barbara Tyran, Electric Power Research Institute, (May 15, 2008): 7.
26 U.S. Energy Information Administration, Annual Energy Outlook 2008 (June 2008): 70.
27 For a more comprehensive analysis of wind power, see CRS Report RL34546, Wind Power in the United States:
Technology, Economic, and Policy Issues, by Jeffrey Logan and Stan Mark Kaplan.

portfolio standards.28 Wind plants accounted for just over 1% of U.S. electricity generation in 29


A 1991 study of available U.S. wind resources by Pacific Northwest Laboratory concluded that
“the wind electric potential that could be extracted with today’s technology ... across the United 30
States is equivalent to about 20% of the current U.S. electric consumption.” A 2003 analysis by
the National Renewable Laboratory similarly concluded that “by 2050, wind could account for 31
about 25 percent of all generation in the U.S.” Consistent with these technical assessments, the
Department of Energy (DOE) recently examined the practical possibility of 20% wind power
production in the United States by 2030 (a longer time frame than either the Pickens or Obama-
Biden campaign proposals). The DOE report concluded that a “20% Wind Scenario in 2030, 32
while ambitious, could be feasible.”
Although studies have identified substantial untapped wind power potential for the United States,
the rapid expansion of U.S. wind generation faces significant challenges. According to the DOE,
these challenges are related to the integration of intermittent wind power into regional electricity
control areas, cost reduction and efficiency improvement for wind turbine technology, and wind 33
facility siting issues. The principal challenge the DOE identifies, however—and, according to
many experts, the principal uncertainty facing wind power—is “investment in the nation’s 34
transmission system.”
As Figure 2 shows, the nation’s most abundant wind resources tend to be located far from
population centers where the electricity is needed. Consequently, wind generators require a robust
transmission grid to move power to the market. But the U.S. transmission network is constrained,
significantly limiting the availability of transmission capacity to new wind farms. Transmission
owners, in agreement with the DOE, have pointed to transmission grid constraints as the single
greatest impediment to aggressive wind power expansion.
Although there is sufficient evidence showing that wind generation can be reliably integrated
into the electricity system, ... obstacles to new generation sources continue to exist due to the
lack of adequate transmission system access. The remoteness of wind sources, an
underinvested transmission infrastructure, and lack of workable transmission investment 35
policies all hinder the development of wind power in the US.

28 Federal tax credits are provided for under the Energy Policy Act of 1992 (P.L. 102-486 § 1914) and subsequent
29 U.S. Energy Information Administration, Electric Power Monthly, DOE/EIA-0226 (2008/10) (October 28, 2008):
Tables 1.1 and 1.1a. This figure is year to date through July.
30 D. L. Elliott, L. L. Wendell, G.L. Gower, An Assessment of the Available Windy Land Area and Wind Energy
Potential in the Contiguous United States 1991, Pacific Northwest Laboratory, PNL-7789 (August, 1991): iii.
31 Walter Short and Nate Blair, The Long-Term Potential of Wind Power in the U.S., Solar Today
(November/December 2003): 29.
32 U.S. Department of Energy, 20% Wind Energy by 2030: Increasing Wind Energys Contribution to U.S. Electricity
Supply, DOE/GO-102008-2567 (July 2008): 1.
33 U.S. Department of Energy (July 2008): 14.
34 Ibid.
35 National Grid Corp., Transmission and Wind Energy: Capturing the Prevailing Winds for the Benefit of Customers
(Westborough, MA: September 2006): 9.

The DOE study estimates that to achieve 20% wind energy in the United States would involve
building “more than 12,000 miles of additional transmission, at a cost of approximately $20 36
billion in net present-value terms.” A similar conceptual transmission plan by the American
Electric Power Company (AEP) to integrate 20% wind energy estimated that 19,000 miles of new 37
765 kV transmission lines would be needed, with a net present value of $26 billion. While such
plans put a needed focus on some of the specific requirements for a U.S. transmission upgrade,
marshaling the level of investment to expand transmission capacity quickly could stress the
supply and price of materials, labor, and other resources. Any wind power project requiring the
construction of extensive new transmission infrastructure from remote to populated areas also
could face concerted community opposition to the siting of those transmission lines. Public
challenges to electric transmission projects have long been considered among the most serious 38
and most intractable challenges in the U.S. energy sector. With wind projects in mind, Congress
included provisions increasing federal authority to approve interstate electric transmission
projects in the Energy Policy Act of 2005 (P.L. 109-58 § 1221). Nonetheless, challenges continue
to delay or prevent new transmission development in some regions.
Figure 2. Wind Power Resources in the United States
Source: National Renewable Energy Laboratory (2008).

36 U.S. Department of Energy (July 2008): 95. This compares to 200,000 miles of existing transmission lines operating
at 230 kV and above.
37 AEP, “Interstate Transmission Vision for Wind Integration,Electricity Today (September 2007): 30-37.
38 Shalini P. Vajjhala, “Siting Difficulty and Transmission Investment,IAEE Energy Forum (International Association
for Energy Economics: 2nd Quarter 2008): 5-7; North American Electric Reliability Council, 2006 Long-Term
Reliability Assessment (October 2006): 22-23.

If U.S. wind power is beginning to face transmission constraints at only 1% of total U.S.
electricity production, analysts raise concerns about the practicality of transmitting 20 times that
amount of wind power in the near term. In its 2007 wind program plans, for example, the DOE 39
itself states that large wind power deployment projections “seem too good to be true.” A 2008
New York Times assessment makes the point more strongly: “Experts say that without a solution 40
to the grid problem, effective use of wind power on a wide scale is likely to remain a dream.”
The key uncertainty for wind power then, is whether the electric grid, after decades of under-
investment, will expand sufficiently to support a rapid expansion of wind power.
Biomass power plants are combustion power plants that effectively recycle the CO2 they emit
through carbon sequestration in the crops grown (continuously) for fuel. Crops take up carbon
dioxide from the air via photosynthesis as they grow and release it to the air when they are 41
burned, so they cause no net increase in atmospheric CO2. Currently, most biomass power plants
are fueled with waste materials from farming, forestry, and manufacturing (e.g., paper mill
byproducts), although future expansion of biomass generation is expected to rely increasingly on
dedicated fuel crops, such as poplar and switchgrass. Biomass power plants accounted for 1.3% 42
of U.S. electricity generation in 2008.
The principal factor which constrains the potential expansion of biomass power in the United
States is the availability of biomass fuel. Biomass crops dedicated for power generation require
land to grow—potentially in competition with food crops, lumber, and other traditional crops. Up
to a point, such competition may not be a significant barrier to growth, since biomass power
producers can use more waste from existing agricultural production (e.g., corn stalks) or grow
fuel crops on U.S. lands not currently in agricultural production. A 2002 analysis by the Energy
Information Administration concluded that U.S. biomass power generation capacity could
increase by a factor of ten (from approximately 7 GW to 70 GW) through 2020 and not conflict 43
with land requirements for existing crop production. A 2005 analysis by the Department of
Agriculture similarly concluded that forestland and cropland had the potential to support a seven-44
fold increase in the amount of biomass consumed for “bioenergy and biobased products.”

39 U.S. Dept. of Energy, Wind Energy Multiyear Program Plan For 2007–2012, DOE/GO-102007-2451 (August
2007): 8.
40 Matthew L. Wald, “Wind Energy Bumps into Power Grid’s Limits, New York Times (August 27, 2008).
41 Additional CO2 is emitted by combustion of fossil fuels used to produce and process fuel crops, but those emissions
are small compared to power plant combustion emissions.
42 U.S. Energy Information Administration, Electric Power Monthly, DOE/EIA-0226 (2008/10) (October 28, 2008):
Tables 1.1 and 1.1a. This value is year-to-date through July 2008.
43 U.S. Energy Information Administration, Biomass for Electricity Generation (2002).
analysispaper/biomass/ The study excludes biomass and coal co-firing.
44 U.S. Department of Agriculture, Biomass as a Feedstock for a Bioenergy and Bioproducts Industry: The Technical
Feasibility of a Billion-Ton Annual Supply, (April 2005): 34.

While studies like those above seem to support the potential expansion of biomass power
production, others contradict them, raising critical questions about the limits of biomass fuel
supply in the United States. As a 2008 RAND report states, “the cost and supply of future 45
biomass feedstocks are highly uncertain factors.” This uncertainty is exacerbated by the possible
expansion of biomass demand for transportation fuels such as ethanol and biodiesel—also
motivated by CO2 abatement objectives, but in the transportation sector. To the extent that
biomass for power and biomass for liquid fuels are pursued aggressively and concurrently, overall
competition for U.S. agricultural resources may become a serious concern.
The significant resulting increase in biomass usage would require harvesting various energy
crops at a scale that vastly exceeds current practice. Greatly increased biomass production
could be accompanied by adverse environmental and economic impacts due to land 46
Adverse impacts limiting biomass production for electric power could include increases in food
prices. Some analysts, for example, have argued that corn price increases could be partly linked to 47
the diversion of U.S. corn crops from food and feedstock supply to fuel ethanol production.
Biomass crops could also compete for land with forest carbon sequestration, the latter likely to
increase in importance as a source of valuable CO2 emissions offsets under future carbon control 48
policies. Some analysts have suggested that biomass fuel or food crops could be imported to
alleviate domestic land constraints, but such imports would raise other concerns about U.S.
energy and food supply independence. A 2007 MIT study concluded,
If we restrict USA biofuels to those produced domestically, as much as 500 million acres of
land would be required in the USA for biofuels production.... The result would be that the
USA would need to become a substantial agricultural importer. This suggests that the idea
that biomass energy represents a significant domestic energy resource in the USA is 49
Carbon release from previously untilled lands and from agricultural processing are other factors
which may reduce the life cycle CO2 benefits, and therefore the economic potential, of rapid
biomass crop expansion.

Nuclear power has been a significant part of the U.S. electricity sector for decades. The U.S.
nuclear power industry currently comprises 104 licensed reactors at 65 plant sites in 31 states and

45 Michael Toman, James Griffin, and Robert J. Lempert, Impacts on U.S. Energy Expenditures and Greenhouse-Gas
Emissions of Increasing Renewable-Energy Use, RAND Corp. (2008): 38.
46 Michael Toman, et al. (2008): xiii.
47 For further analysis of renewable fuels issues, see CRS Report RL34265, Selected Issues Related to an Expansion of
the Renewable Fuel Standard (RFS), by Brent D. Yacobucci and Tom Capehart.
48 U.S. Environmental Protection Agency, Greenhouse Gas Mitigation Potential in U.S. Forestry and Agriculture, EPA
430-R-05-006 (November 2005): 4-12.
49 John Reilly and Sergey Paltsev, “Biomass Energy and Competition for Land,” MIT Joint Program on the Science and
Policy of Global Change, Report No. 145 (April 2007):16.

generates about 20% of the nation’s electricity.50 Although no nuclear power plants have been
ordered in the United States since 1978, and more than 100 reactors (all ordered after 1973) have
been canceled, nuclear power is receiving renewed interest, prompted by a spike in fossil fuel
prices, new federal subsidies and incentives—and possible CO2 mitigation policies. As of
September 30, 2008, the Nuclear Regulatory Commission had received, or anticipated receiving, 51
license applications for 20 new nuclear reactor projects comprising 30 reactors in total.
Because nuclear power generation is an established technology and produces virtually no direct
CO2 emissions, an expansion of U.S. nuclear power is viewed by many as essential for reaching 52
long term CO2 mitigation goals. For example, in recent remarks before the Governor’s Global
Climate Summit, President-elect Obama stated that “we will tap nuclear power” as one way to 53
help “build a clean energy future.” Likewise the Intergovernmental Panel on Climate Change
Fourth Assessment Report states that “[n]uclear energy ... could make an increasing contribution 54
to carbon free electricity and heat in the future.” EPRI proposes a 64% net increase in U.S.
nuclear generating capacity, over four times the capacity addition in EIA’s reference forecast, by 55

2030. A 2003 study by MIT postulates a 300% net increase in U.S. nuclear power capacity by 56


Although nuclear energy proponents have high hopes for growth in this sector, not all groups
concerned about climate change favor nuclear power as a key element of U.S. carbon control. The
Natural Resources Defense Council, for example, argues that nuclear power may be too costly
relative to clean energy alternatives, and may present unacceptable risks of nuclear proliferation 57
and environmental damage from radioactive waste. Other analysts raise questions about long-58
term nuclear fuel supply constraints, plant safety and security, and public acceptance. These are
all vital questions, any one of which could influence the viability of a U.S. nuclear resurgence.
Perhaps a more fundamental uncertainty, however, even if these questions were resolved, is
whether nuclear power plants could be constructed quickly enough to significantly reduce U.S.
carbon emissions in a 20-year (or longer) time frame.

50 U.S. Nuclear Regulatory Commission, Information Digest 2008-20098, NUREG-1350, Vol. 20 (August 2008): 32.
51 U.S. Energy Information Administration, Status of Potential New Commercial Nuclear Reactors in the United States
(October 9, 2008): Table 1.
52 Processes related to nuclear generation, such as the mining, processing, and transportation of nuclear fuel, do
generate CO2 emissions. The levels of these emissions are the subject of debate. See Kurt Kleiner, “Nuclear Energy:
Assessing the Emissions, Nature Reports: Climate Change (September 24, 2008).
53 President-elect Barack Obama (November 18, 2008).
54 Intergovernmental Panel on Climate Change (IPCC), Climate Change 2007: Mitigation, Contribution of Working
Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge University
Press: 2007): 253.
55 Barbara Tyran, Electric Power Research Institute, (May 15, 2008): 7.
56 Massachusetts Institute of Technology (MIT), The Future of Nuclear Power (2003): 3.
57 Natural Resources Defense Council, Nuclear Facts, (February 2007): 1.
58 IPCC (2007): 253; MIT (2003): 21-24.

Uncertainty arises about the possible pace of U.S. nuclear expansion because nuclear power
plants are large, complex, and must go through a lengthy and rigorous siting approval process.
Furthermore, global capability to construct nuclear plants has diminished since the 1980s. A 2001
DOE analysis concluded that, because of limited growth in the nuclear sector over many years,
there had been a “gradual erosion” in important nuclear infrastructure elements, such as qualified
personnel in nuclear operations, qualified suppliers of nuclear equipment, and contractors with 59
the necessary skills for nuclear design, engineering, and construction. Little has changed since
that report was released. Nuclear plant construction in the United States remains constrained by
time, access to critical construction resources, and the availability of qualified engineering and
construction firms.
Given the decline in U.S. nuclear infrastructure, there is ongoing debate among nuclear analysts
about the prospect for rapid nuclear power expansion. A 2008 analysis by the Organisation for
Economic Co-operation and Development (OECD) concluded that, based on historical experience
from the 1970s and 1980s, and more recent growth in the world economy, “the capability could
be rebuilt to construct 35-60 1000 GWe reactors per year” worldwide by 2030, and “[b]y 2050, 60
capability could grow to 70-120 reactors per year.” Roughly consistent with this assessment, a
2008 study by the DOE’s Nuclear Energy Advisory Committee concluded that, with additional
infrastructure, it would be “plausible,” albeit “a major challenge,” to build 30 new U.S. reactors 61
by 2030. The latter rate of construction is substantially lower than that during the peak period of
U.S. nuclear development, from 1963 to 1985, during which time 77 nuclear reactors were 62
ordered, constructed, and began commercial operation.
Others are more pessimistic about the potential for a rapid expansion of nuclear power in the
United States. For example, one analyst concludes that “contrary to the public’s perception and
the industry’s efforts, nuclear power will continue [a] long-term decline rather than move toward 63
a flourishing future revival.” The debate is complicated by the need to replace U.S. nuclear plant
capacity retiring in the near future simply to maintain nuclear power’s current electricity supply
contribution. Referring specifically to such construction limitations, another expert concludes that
“nuclear energy will remain an option among efforts to control climate change, but given the
maximum rate at which new reactors can be built, much new construction will simply offset the 64
retirement of nuclear reactors built decades ago.” Observing that “the nuclear capability of the
U.S. has atrophied in the 30 years since the last nuclear plant was ordered,” Secretary of Energy
Samuel Bodman has remarked more bluntly: “let’s not kid ourselves about the challenges here.” 65
In its 2008 report, the National Intelligence Council likewise states–

59 U.S. Department of Energy, A Roadmap to Deploy New Nuclear Power Plants in the United States by 2010: Volume
1 Summary Report (October 31, 2001): 7.
60 Organisation for Economic Co-operation and Development (OECD), Nuclear Energy Agency, Nuclear Energy
Outlook 2008, NEA No. 6348(2008): 316. GWe=Gigawatt-electric.
61 Nuclear Energy Advisory Committee, Nuclear Energy: Policies and Technology for the 21st Century (November
2008): 8.
62 Compiled from the Energy Information Administration (EIA) Reactor Status List, available at
63 Mycle Schneider, “2008 World Nuclear Industry Status Report: Global Nuclear Power, Bulletin of the Atomic
Scientists, Web edition (September 16, 2008).
64 Sharon Squassoni, Nuclear Renaissance: Is It Coming? Should It? Carnegie Endowment for International Peace
(October 2008): 2.
65 U.S. Secretary of Energy Samuel Bodman, Remarks before the Nuclear Energy Summit: Renewing America’s

expansion of nuclear power generation by 2025 to cover anywhere near the increasing
demand would be virtually impossible. The infrastructure (human and physical), legal
(permitting), and construction hurdles are just too big. Only at the end of our 15-20 year 66
period are we likely to see a serious ramp up of nuclear technologies
Faced with these divergent assessments, experts disagree on the ability of nuclear power to help
meet CO2 mitigation goals.
Members of the Nuclear Power Joint Fact Finding (NJFF) reached no consensus about the
likely rate of expansion for nuclear power in the world or in the United States over the next
50 years. Some group members thought it was unlikely that overall nuclear capacity would
expand appreciably above its current levels and could decline; others thought that the nuclear
industry could expand rapidly enough to fill a substantial portion of a carbon-stabilization 67
“wedge” during the next 50 years.
Consequently, congressional policy makers face a key uncertainty as to the achievable pace of
nuclear power industry expansion, and therefore, the potential contribution nuclear generation
may make to near-term CO2 reduction.

One set of technologies that may help to reduce CO2 emissions from coal power plants is
advanced coal-fired power generation. Advanced coal technologies include ultra-supercritical
pulverized coal plants and integrated gasification combined cycle (IGCC) units, the latter of
which convert coal into a synthetic gas prior to combustion. Compared to conventional coal-fired
power plants, which typically operate at around 33% efficiency, advanced technologies under 68
development or demonstration could improve coal plant efficiency to 46% or more. Because
they use coal more efficiently, advanced coal plants could yield proportionate reductions in CO2
emissions per unit of electricity output compared to conventional coal plants. If carbon capture
and sequestration technology (discussed in the next section) could be added to these plants their
CO2 emissions could be further reduced.
Some analysts and policy makers anticipate that advanced coal generation, either in the form of
new coal-fired plants or upgrades to certain existing plants, will make a significant contribution to
U.S. carbon reduction goals. They argue that, until carbon capture and storage technology is
commercialized, advanced coal plants will be a cost-effective option for meeting future electricity
demand growth while limiting CO2 emissions growth compared to its current rate of growth.
EPRI, for example, proposes CO2 reductions from advanced coal plants on par with those from 69
customer energy-efficiency programs through 2030.

Nuclear Power Partnership For Energy Security and Economic Growth, Convened at the U.S. Department of
Commerce (October 8, 2008).
66 National Intelligence Council, Global Trends 2025: A Transformed World, NIC 2008-003 (November 2008): 45.
67 Keystone Center, Nuclear Power Joint Fact-Finding (June 2007): 10.
68 Massachusetts Institute of Technology (MIT), The Future of Coal (2007): 115, 124.
69 Barbara Tyran, Electric Power Research Institute, (May 15, 2008): 7.

While power plants employing advanced coal-fired generation technology face important
questions about technological readiness and cost-effectiveness, the key uncertainty is whether
they can be built—that is, whether the capital markets will finance them and whether regulators
will permit them. Although they are more efficient than traditional coal plants, advanced
technology coal plants still burn coal and—absent carbon capture technology—still release large
volumes of CO2 to the atmosphere. Once constructed, they may remain in service for 40 years or
more. Hence they may not satisfy regulatory objectives for carbon control and may face financial
risks stemming from future policies imposing costs on CO2 emissions. Furthermore, industry
arguments that these plants will be retrofitted with carbon capture technology when it becomes
available are assuming the availability of that technology, which faces uncertainties as discussed
in the following section.
Due to the potential carbon-related risks faced by new coal generation projects, major financial
institutions are imposing greater requirements on developers seeking capital for new coal plant 70
investments. Regulatory agencies also have begun withholding regulatory approval from
advanced coal project proposals. For example, in August 2007, the Minnesota Public Utilities
Commission rejected a developer’s proposal to construct a new IGCC power plant in the state as 71
“not in the public interest.” The Sierra Club reports that at least 30 other proposed IGCC or
supercritical coal generation projects have been cancelled across the country over the last several 72
years due to financial and carbon emissions concerns. In November, 2008, the Environmental
Protection Agency’s (EPA) Environmental Appeals Board ruled that an EPA region could not
issue a permit for proposed coal-fired power plant without considering whether the “best 73
available” CO2 controls should be required for such a plant. According to industry analysts, the
EPA ruling would place a “freeze on the construction of as many as 100 new coal-fired power 74
plants around the U.S.” The EPA Administrator has subsequently overruled the board’s decision,
apparently clearing the way for numerous coal plant permit applications to proceed, but raising
new questions about future regulatory treatment of coal plant emissions under the next 75

70 Citi, JPMorgan Chase and Morgan Stanley,Leading Wall Street Banks Establish The Carbon Principles,” Joint
press release (New York: February 4, 2008).
71 Minnesota Public Utilities Commission, Order Resolving Procedural Issues, Disapproving Power Purchase
Agreement, Requiring Further Negotiations, and Resolving to Explore the Potential for a Statewide Market for Project
Power under Minn. Stat. § 216b.1694, Subd. 5, Docket No. E-6472/M-05-1993 (August 30, 2007):15.
72 Sierra Club, “Stopping the Coal Rush,” Internet database (December 16, 2009).
73 U.S. Environmental Protection Agency, Environmental Appeals Board, In re: Deseret Power Electric Cooperative
PSD Permit No. PSD-OU-0002-04.00, PSD Appeal No. 07-03 Order Denying Review in Part and Remanding in Part
(Decided November 13, 2008).
74 Kate Sheppard, “Is That a Bonanza in Your Docket?,Gristmill, Internet blog (November 14, 2008).
75 Stephen L. Johnson, Administrator, U.S. Environmental Protection Agency, EPA’s Interpretation of Regulations that
Determine Pollutants Covered By Federal Prevention of Significant Deterioration (PSD) Permit Program,
Memorandum (December 18, 2008).

Another approach to mitigating atmospheric carbon emissions is direct sequestration of carbon
dioxide: capturing CO2 at its source and storing it indefinitely to avoid its release to the
atmosphere. Carbon capture and sequestration (CCS) is of great interest because potentially large
amounts of CO2 emitted from the industrial burning of fossil fuels in the United States could be
suitable for sequestration. In theory, carbon capture technologies are seen as potentially removing
80%-95% of CO2 emitted from an electric power plant or other industrial facility. Power plants
are the most likely initial candidates for CCS because they are predominantly large, single-point
sources, and they contribute approximately one-third of U.S. CO2 emissions from fossil fuels.
Many analysts and policy makers have high hopes for CCS technology to help meet future CO2
reduction goals in the U.S. electricity sector and worldwide. For example, one expert has testified
before Congress that “[c]apturing and sequestering CO2 emissions from coal-fired power plants
and eventually all fossil combustion is a foundational technology component of any emissions 76
reduction plan” seeking to stabilize atmospheric CO2. In the International Energy Agency’s

2007 forecast CCS is “widely-deployed” under global CO2 stabilization assumptions and 77

accounts for 21% of avoided CO2 emissions by 2030. In EPRI’s analysis, CCS makes the single 78
greatest contribution to reduced CO2 emissions among all measures by 2030.
Developing technology to capture CO2 in an environmentally, economically, and operationally
acceptable manner—especially from coal-fired power plants—has been an ongoing interest of the
federal government for a decade. Nonetheless, the technology on the whole is still under
development: no commercial device is currently available to capture carbon from coal plants.
(Technology is currently available for capturing CO2 from certain industrial processes, such as
ammonia production, or natural gas processing, but the volumes of CO2 emitted from coal-fired
power plants dwarf any current industrial process in use today.) Various new CCS technologies
have been tested successfully in laboratories, and some are being demonstrated in limited
capacity field trials, but they are costly and face technical challenges to reaching commercial
scale. Consequently, analysts disagree as to whether, when, and how CCS technology might be
widely available in the United States at a cost competitive with commercially available 79
technologies for generating electricity—particularly natural gas turbines. Policies that impose
costs on generators for CO2 emissions, such as carbon taxes or cap-and-trade programs,
presumably, would benefit CCS competitiveness, but they, too, are highly uncertain and
constrained by other economic factors. As one study notes, “[t]he success of a cap-and-trade

76 Raymond J. Kopp, Director of the Climate Policy Program, Resources for the Future, Testimony before the Senate
Energy and Natural Resources Committee (June 25, 2008).
77 International Energy Agency (IEA), World Energy Outlook 2007 (2007): 208.
78 Barbara Tyran, Electric Power Research Institute, (May 15, 2008): 7.
79 For discussion of specific carbon capture technologies and analysis of the potential costs implications of carbon
capture relative to other generation technologies, see CRS Report RL34621, Capturing CO2 from Coal-Fired Power
Plants: Challenges for a Comprehensive Strategy, by Larry Parker, Peter Folger, and Deborah D. Stine.

program in spurring widespread CCS deployment depends on a wide range of factors that cannot 80
be controlled or even predicted in advance.”
A review of recent studies reveals a broad range of opinion as to how quickly CCS could be
commercially deployed on large scale. An analysis from Imperial College, London, sees initial 81
commercial deployment of CCS technology in the 2015-2020 period. DOE officials reportedly
have stated that the agency hopes to have carbon capture technology “in a deployable position 82
within a decade.” A 2008 study by McKinsey & Company projected that early commercial CCS 83
projects would be built “around 2020.” The World Business Council for Sustainable 84
Development believes CCS technology will enter commercial deployment by 2025. The
Intergovernmental Panel on Climate Change 2005 report on CCS technology states that “many
integrated assessment analyses ... foresee the large-scale deployment of CCS systems within a 85
few decades from the start of any significant regime for mitigating global warming.” A coalition
including Greenpeace, Friends of the Earth, and other public interest groups asserts that “the best-86
case scenario is that [CCS] technology would be ready by 2030.” Referring to IEA’s long term
projections for carbon control, the OECD states that “there must be significant doubt as to 87
whether or not it is feasible to achieve the assumed contribution from CCS by 2030.”
Given the range of expectations for CCS technology readiness, policy makers may not be able to
establish to their satisfaction the contribution this technology may make to CO2 emissions
abatement. As one former DOE official reportedly has cautioned, “[p]eople’s conception of how
much [CCS] can deliver is probably wildly overrated. So I’m hopeful that carbon capture and 88
storage could be part of the solution, but ... one just has to put a big question mark on it.”
Echoing this view, Nobel laureate Steven Chu, Director of the Lawrence Berkeley National
Laboratory and nominee for Secretary of Energy, reportedly has remarked, “it’s not guaranteed 89
we have a solution for coal.” Accordingly, the key uncertainty for policy makers regarding CCS
is if and when the technology might be available for widespread deployment.

80 Ken Berlin and Robert M. Sussman, Global Warming and The Future of Coal, Center for American Progress (May
2007): 34.
81 J. Gibbins and H. Chalmers, “Preparing for Global Rollout: aDeveloped Country First’ Demonstration Programme
for Rapid CCS Deployment,” Energy Policy, Vol. 36, No. 2 (2008): 501-507.
82 Acting Deputy Energy Secretary Jeffrey Kupfer quoted inBush DOE Transition Head Sees Commercial Carbon
Capture In 10 Years,EnergyWashington (December 2, 2008).
83 McKinsey & Company, Inc., Carbon Capture & Storage: Assessing the Economics (September 22, 2008): 18.
84 World Business Council for Sustainable Development, Pathways to 2050: Energy and Climate Change (December 7,
2005): 5.
85 Intergovernmental Panel on Climate Change (IPCC), Special Report: Carbon Dioxide Capture and Storage, 2005
(2005): 341
86 Greenpeace,Tell Congress To Keep Carbon Capture and Storage Out Of Energy Legislation,” Internet page
(Washington, DC: May 6, 2008);Public Interest
Groups Oppose Carbon Capture Scam,” It’s Getting Hot in Here, Internet blog (May 6, 2008).
87 OECD (2008): 133.
88 Joseph Romm, Center for American Progress, as quoted inCoal’s Carbon Capture in Question, Living on Earth,
Public Radio International, audio transcript (February 8, 2008).
89 Keith Johnson, “Steven Chu: ‘Coal is My Worst Nightmare,” Wall Street Journal, Environmental Capital, Internet
blog (December 11, 2008).

A recent development in advanced vehicle technologies is the potential introduction in the next
few years of plug-in hybrid electric vehicles (PHEVs). PHEVs, like commercially available
hybrid electric vehicles (HEVs), would combine an electric motor and battery pack with an
internal combustion engine to improve overall fuel efficiency. PHEVs would use a much higher-
capacity battery pack than a typical HEV, however, and would be able charge the vehicle on grid
power rather than solely by the combustion engine during operation. With their larger batteries,
PHEVs could achieve an all-electric range of 20 to 40 miles (the average commuting distance).
By using grid electricity rather than gasoline in this way, PHEVs could lower overall fuel-cycle 90
pollutant emissions—including CO2 emissions—from vehicles. Accordingly, many analysts and
policy makers believe PHEV’s offer substantial opportunities to reduce the nation’s overall CO2
emissions. A 2007 joint EPRI-Natural Resources Defense Council (NRDC) study, for example,
concluded that, through the widespread adoption of PHEV technology, “cumulative [CO2] 91
savings from 2010 to 2050 can be large.” The Obama-Biden presidential campaign pledged to 92
“[p]ut 1 million plug-in hybrid cars ... on the road by 2015.”
While PHEVs are an innovative technology, there are important questions about the impact
PHEVs may have on CO2 emissions over the next 20 ot 30 years. One key uncertainty is whether
such vehicles would be purchased in sufficient numbers (approximately 50% of new car sales by 93
2025, according to the EPRI/NRDC study) to have a significant carbon impact despite their high
cost. PHEVs are projected to retail for over $40,000 per vehicle in the near-term compared to 94
approximately $28,000 for an HEV and $23,000 for a conventional vehicle. As a point of
reference, conventional HEVs accounted for 2.4% of new vehicle sales in the United States 95
through November 2008. Of greater uncertainty, perhaps, are the projected carbon emissions of
power plants operating to supply PHEV electricity. As a general rule, PHEVs only reduce net
carbon emissions if the power plants supplying them produce relatively little carbon per kWh.
But some studies show that, if the U.S. generation portfolio does not significantly reduce its
overall carbon intensity, widespread adoption of PHEVs through 2030 may have only a small 96
effect on, and might actually increase, net CO2 emissions. Thus, the carbon abatement potential
of PHEVs is largely dependent upon the concurrent implementation of renewables, nuclear
power, and CCS—each of which face great uncertainties of their own as discussed above.

90 While these emissions reductions, technically, affect the transportation sector, they are linked to emissions in the
electricity sector and so are often assessed in both contexts.
91 Electric Power Research Institute and Natural Resources Defense Council, Environmental Assessment of Plug-In
Hybrid Electric Vehicles, Volume 1: Nationwide Greenhouse Gas Emissions (July 2007): 5-10.
92 Obama-Biden, Barack Obama and Joe Biden: New Energy for America, Fact sheet (August 3, 2008).
93 Electric Power Research Institute and Natural Resources Defense Council (July 2007): 4-8. This value is for the
“Medium PHEV fleet penetration case.
94 Andrew Simpson, Cost-Benefit Analysis of Plug-In Hybrid Electric Vehicle Technology, National Renewable Energy
Laboratory, NREL/CP-540-40485 (November 2006): 10.
95 Green Car Congress, US Sales of Hybrids Down 50% in November, Web page (December 9, 2008).
96 See, for example: Stanton W. Hadley and Alexandra Tsvetkova, Potential Impacts of Plug-in Hybrid Electric
Vehicles on Regional Power Generation, Oak Ridge National Laboratory, ORNL/TM-2007/150 (January 2008): 68;
Constantine Samaras and Kyle Meisterling,Life Cycle Assessment of Greenhouse Gas Emissions from Plug-in
Hybrid Vehicles: Implications for Policy, Environmental Science and Technology, Vol. 42, No. 9. (2008): 3170-3176.

Distributed energy resources are small-scale power generation technologies located near homes or
businesses to provide an alternative to, or an enhancement of, conventional grid power.
Distributed resources include technologies such as rooftop photovoltaics, natural gas-fired
microturbines, wind turbines, and fuel cells. The category also includes combined heat and power
(CHP) systems, which make productive use of “waste” heat from electricity generation, thereby 97
increasing the total useful energy extracted from electric generation fuels. Distributed energy
resources (DER) offer potential benefits to customers in terms of energy costs, power reliability,
and power quality. DER technologies also can help mitigate CO2 emissions because some use
renewable energy sources, or, as in the case of CHP systems, they make more efficient use of 98
fossil fuels than the utility power generation they displace.
Among DER technologies, CHP is the most widespread, accounting for nearly nine percent of 99
U.S. electric generating capacity in 2007. CHP is also viewed as having the greatest near-term
potential to reduce CO2 emissions. A 2008 report from Oak Ridge National Laboratory concludes
that, by achieving 20 percent generation capacity from CHP by 2030 (an “aggressive target”), the
United States could avoid 60 percent of the projected increases in CO2 emissions during that 100
time. A 2007 study by McKinsey & Company further concludes that much of this added 101
capacity could be installed at negative marginal cost. Nonetheless, CHP, along with other DER
technologies, has not been implemented to its potential due to technical and utility infrastructure
CHP, or cogeneration, has been around in one form or another for more than 100 years; it is
proven, not speculative. Despite this proven track record, CHP remains underutilized and is
one of the most compelling sources of energy efficiency that could, with even modest 102
investments, move the Nation strongly toward ... a cleaner environment.
Other DER technologies, such as photovoltaics and fuel cells, likewise face barriers limiting their
implementation. As a United Kingdom government study stated,
The complexity and novelty of some of the technologies, together with their need to be
integrated into the built environment, often by players new to the energy business, means
there is a significant gap between potential and delivery. Moreover, many of the technologies
are not yet cost-competitive at their current state of development and with current fuel and 103
carbon prices.

97 CHP systems are also commonly referred to as “cogeneration systems.
98 S.W. Hadley, J.W. Van Dyke, W.P. Poore, III, and T.K. Stovall, Quantitative Assessment of Distributed Energy
Resource Benefits, Oak Ridge National Laboratory, ORNL/TM-2003/20 (May 2003): 23.
99 Oak Ridge National Laboratory, Combined Heat and Power: Effective Energy Solutions for a Sustainable Future,
ORNL/TM-2008/224 (December 1, 2008): 4.
100 Oak Ridge National Laboratory, (December 1, 2008): 21.
101 McKinsey & Company, Inc., Reducing U.S. Greenhouse Gas Emissions: How Much at What Cost?, (December,
102 Oak Ridge National Laboratory, Combined Heat and Power: Effective Energy Solutions for a Sustainable Future,
ORNL/TM-2008/224 (December 1, 2008): 3.
103 United Kingdom, Department for Business Enterprise and Regulatory Reform, UK Renewable Energy Strategy:
Consultation Document (2007): 135.

Analysts also question whether policies imposing costs on CO2 emissions would substantially
increase DER adoption due to the existing alignment of carbon reduction and cost reduction 104
objectives, even without carbon costs, and the fundamental economics of renewables. Thus,
DER faces a key uncertainty similar to that faced by energy efficiency. The key question is
whether new programs and the imposition of carbon costs would enable the electricity sector to
capture substantially more DER potential than it does today.

Policy research and technical studies show that substantially reducing CO2 emissions in the U.S.
electricity sector over the next few decades likely requires successful deployment of every major
carbon mitigation measure at the nation’s disposal. However, it is also clear that significant
uncertainties cast doubt on the potential of individual measures to achieve their hoped-for carbon
impact. For the measures discussed in this report, the key uncertainties can be summarized as
• Energy efficiency—Can the United States overcome socioeconomic barriers to
achieve four times more potential savings than ever before?
• Renewable energy—Will there be enough transmission for wind power? Is there
enough land to grow the needed biomass?
• Nuclear power—Could the United States build new plants fast enough to
• Advanced coal power—Will banks fund them and regulators approve them?
• Carbon capture and sequestration—Will the technology be commercially
deployable in 10 years, 25 years, or never?
• Plug-in hybrid electric vehicles—How much “low carbon” electricity would be
available to charge their batteries?
• Distributed energy resources—Would carbon costs change distributed energy
economics enough to spur deployment?
Policy makers and interest groups recognize these uncertainties, and have put forth numerous
proposals to address them. It is beyond the scope of this report to examine each of these
proposals, but they include the broadest range of policy instruments at government’s disposal:
higher efficiency standards, new regulatory authorities, tax incentives, direct subsidies, research
and development (R&D) grants, environmental rules, public information campaigns, and a host of
other policy instruments. Specific examples include calls for more federally-funded CCS
demonstration projects and proposals for federal preemption of state siting authority to promote 105
new transmission development. While they run the gamut, it remains to be seen which

104 Ryan Firestone and Chris Marnay, “Distributed Energy Resources for Carbon Emissions Mitigation, Conference
paper for The European Council for an Energy Efficient Economy 2007 Summer Study, (La Colle sur Loup, France:
June 4-9, 2007): 5.
105 Union of Concerned Scientists, Coal Power in a Warming World (October 2008): 3-4; Testimony of Joseph

proposals may be pursued by Congress and what effects they would have. Consequently, the
overall success of a multi-measure CO2 mitigation scheme such as that proposed by EPRI in
Figure 1, and its economic underpinnings, is inherently unpredictable.
The cost of building and operating coal plants with and without CCS systems, the cost of
natural gas, nuclear power and renewable sources of power, the cost of emissions offsets
from outside the utility sector, and ultimately the market price of CO2 itself are all variables
that will dictate the decisions of future power plant developers. These variables are all highly
uncertain from todays perspective and may create a set of economic drivers dramatically 106
different from those anticipated by policymakers.
Identifying key uncertainties for carbon abatement measures is not the same as predicting their
ultimate success or failure. This report does not independently assess the likelihood of particular
measures meeting any specific CO2 reduction target. The whole point of this report’s focus on
uncertainty is that CO2 outcomes are not known, and expert opinions vary as to what the future
will be. It is, therefore, entirely possible that a portfolio of CO2 measures such as those in Figure
1, implemented under the optimum subset of policies currently under debate, could achieve the
types of carbon reductions projected. Indeed, EPRI has characterized its CO2 scenario as “very 107
aggressive, but potentially feasible.” Other CO2 abatement analyses have also been developed
in good faith with a similar belief in their practicality. Successfully reducing U.S. carbon
emissions to 1990 levels, say, by 2030 would validate the overall policy approach as well as the
specific measures comprising it. Such an outcome would not be conclusive, as deeper CO2 cuts
would arguably need to follow, but the intervening years would probably provide greater clarity
on the best policy options to 2050 and beyond.

Although successful implementation of all carbon abatement measures is the goal, it is also
entirely possible that, under a multi-measure strategy like EPRI’s, one or more measures would
fall short of meeting expectations for CO2 reduction. Nuclear industry expansion, for instance,
could easily fail to materialize, or the transmission grid could expand too slowly for sustained
wind power development. In such a case legislators might need to revisit both the enabling
policies for the underperforming measures and for the carbon strategy as a whole.
One obvious solution could be to rely on more successful measures to compensate for the
underperforming ones. As the OECD study posits, “if CCS and/or end-use efficiency fail to
achieve the required targets, it follows that other technologies, including nuclear power, will need 108
to make bigger contributions to fill the gap.” But based on a review of the relevant research
cited in this report, such an approach may simply not be realistic. Since the CO2 targets of the

Kelliher, Chairman of the Federal Energy Regulatory Commission, before the Senate Energy and Natural Resources
Committee (July 31, 2008).
106 Ken Berlin and Robert M. Sussman (May 2007): 34.
107 Barbara Tyran, Electric Power Research Institute, (May 15, 2008): 7.
108 OECD (2008): 133.

individual measures are already viewed by some analysts as “ambitious,” “aggressive,” or “ a
major challenge,” and there are questions as to whether the initial targets can be achieved,
increasing those targets may stretch credibility and sharply increase the uncertainty of the overall
CO2 mitigation effort. Alternatively, legislators could revisit measure-specific policies to see if
more intervention could improve their particular prospects. Larger tax credits for renewable
energy, for example, could potentially improve the competitiveness of biomass generation,
thereby encouraging biomass investment. Such an approach might still encounter difficulty
making up for early underperformance of a measure in the out years, as CO2 emissions are
cumulative, but any improvement would arguably be helpful. A third option would be to increase
the level of any future carbon costs with the expectation that an increase would benefit carbon-
mitigating technologies across the board. Such an action, however, could have broad implications
for energy prices, reliability, and availability.

Notwithstanding the best efforts of federal policy makers, it is possible that, given the
uncertainties they face, that few if any of the major measures proposed to moderate U.S. carbon
emissions would achieve their anticipated impacts in a 20-year time frame. In its 2008 report, the
National Intelligence Council suggests just such an outcome:
[A]ll current technologies are inadequate for replacing the traditional energy architecture on
the scale needed, and new energy technologies probably will not be commercially viable and
widespread by 2025.... Even with a favorable policy and funding environment for biofuels, 109
clean coal, or hydrogen, the transition to new fuels will be slow.
Under such a scenario, legislators may face different policy alternatives, each with distinct but
potentially significant implications. Congress might increase future carbon emissions costs even
higher than under the previous scenario—to a level that virtually guarantees the targeted CO2
reductions—although the effects of very high carbon prices on electricity costs might be
detrimental to specific industries (e.g., coal) or to the economy as a whole. Alternatively,
Congress might refocus its efforts on a single measure (e.g., CCS or nuclear power) restructuring
its policies to expand the implementation of that specific measure far beyond its original targets.
Congress could also reset its national CO2 targets, deferring reduction goals until they are more in
line with the maturation and implementation of the key CO2 reduction technologies. In this case,
legislators would signal acceptance that near-term targets could not be met and hope for greater
success later in the century. This alternative risks unacceptable implications, however, and might
violate future international emissions treaties. Finally, Congress could abandon its focus on CO2
reduction altogether, instead directing resources at mitigating the effects of global warming and
adapting to a hotter climate.

Reducing U.S. emissions of manmade CO2 is a priority of both the President elect and leaders in
Congress. Comprehensive policies have been proposed to achieve these reductions. Most
envision aggressive implementation of a portfolio of major carbon reduction measures, with the

109 National Intelligence Council, Global Trends 2025: A Transformed World, NIC 2008-003 (November 2008).

goal of reducing U.S. CO2 emissions to 1990 levels by 2020 or 2030. Numerous studies support
the potential of specific measures to lower CO2 emissions, but also identify key implementation
uncertainties which may impact their overall viability. Congress is considering policies to address
these uncertainties, but which policies may be implemented and how effective they may be
cannot be known at this time.
As the nation’s CO2 mitigation policies continue to develop, the inherent uncertainty associated
with specific carbon measures may be a critical concern. Commitments, either domestic or
international, to specific carbon emissions targets over time, or to a specific schedule of carbon
costs (whatever form they may take) may be greatly affected by the success of the underlying
measures relied upon to achieve them. The reverse is also true; a schedule of carbon costs may
also influence the success of CO2 abatement measures. Therefore, policy makers may benefit
from a complete and integrated understanding of measure-specific uncertainties and the range of
carbon outcomes they imply. As one study has concluded, “explicitly including uncertainty in
both technical change and in climate damages is important for understanding the relationship
between technical change, climate change, and policy.... [O]ptimal policy is different ... when 110
uncertainty is taken into account.
As Congress considers implementing CO2 policies, keeping a close eye on the technology and
market developments associated with every key measure may be an oversight priority. Success or
failure of any particular measure may be apparent early on in its implementation, affording an
opportunity through quick action to make policy adjustments to improve a measure’s chances for
success, or to abandon it in favor of more promising options. Perhaps more importantly, given the
complexity and scale of the carbon control problem, Congress may also find it useful to expect
the unexpected in the electricity sector. Apart from the measures discussed in this report, new
technologies, consumer behavior, or infrastructure developments (e.g., a rush to natural gas) may
emerge rapidly and unexpectedly to change fundamental aspects of the nation’s carbon emissions
trajectory. One way or another, electricity supply will balance with demand—but perhaps in
unanticipated ways. The recent volatility in global oil prices is a relevant example of unexpected
structural changes in energy markets. Balancing responses to energy market volatility and
unexpected structural changes against the need for a predictability in R&D and private capital
investment may be essential to maintaining the nation on course to meaningful atmospheric CO2
Paul W. Parfomak
Specialist in Energy and Infrastructure Policy, 7-0030

110 Erin Baker, Leon Clarke, Jeffrey Keisler, and Ekudayo Shittu,Uncertainty, Technical Change and Policy Models,”
University of Massachusetts, Boston, College of Management, UMBCMWP 1028 (July 2007): 3-4.