PJM Interconnection is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 US states and the District of Columbia. The amount of renewable energy proposed changes throughout the year as new projects are added and some are withdrawn from the process, and PJM aims to track it all. With so much at stake in energy legislation currently being put together by the US Congress, I thought it would be helpful to get an industry prespective on Cap & Trade proposals and renewable energy. Please welcome PJM's President and CEO, Terry Boston.John Laumer for TreeHugger: Critics say that the Waxman-Markey bill is going to increase electricity rates. What do you think?
Terry Boston for PJM Interconnection: We studied the legislative proposals of the 110th Congress (pdf file) to reduce carbon dioxide and found that the bills would have cap and trade prices of CO2 in the $35 to $40/ton range before it changed our market dispatch of power enough to reduce CO2 emissions. Regardless of the higher prices, the increased market penetration of energy efficiency and some types of demand response can reduce total consumption and customer costs for electricity. In turn, they can mitigate the wholesale price impacts, and result in additional CO2 emissions reductions.
TH: Are you planning to study the financial impact of the current bills being debated in Congress?
TB: Not at this time. The current House bill still seems to be in flux but moving toward passage.
TH: People such as Rep. Altmire have said that cap and trade is bad policy and would hurt Pennsylvania, especially western Pennsylvania. What's PJM's view?
TB: We believe cap-and-trade makes the most sense because it is the most cost-effective policy tool available to help control emissions. There are so many avenues through which price impacts can be mitigated, including renewable energy, nuclear energy, plug-in-electric vehicles, demand response and energy efficiency — all of which can help.
TH: Do you think cap and trade will work?
TB: Given the history of success with the control of sulfur dioxide and nitrogen oxide emissions through the use of cap & trade I believe it will work, but it won't happen overnight and, as I indicated, we are going to have to do more than target coal-fired plants to effectively control carbon dioxide emissions.
TH: Why not be straight up and go with a carbon tax?
TB: A tax places a price on emissions just like cap & trade with certainty about that price, but the resulting emissions reductions are uncertain. In contrast cap & trade places certainty on emissions reductions leaving the price on emissions to be uncertain. There are legitimate arguments supporting both types of policies.
TH: Do you think we need a national Renewable Portfolio Standard to really get a significant amount of renewables in the mix?
TB: Twenty-eight states and the District of Columbia have Renewable Portfolio Standards. Five other states have renewable energy goals. We can expect a significant amount of renewable generation to be developed even in the absence of a Federal mandate.
TH: The president has a goal of reducing greenhouse gas emissions by 80 percent by 2050. Even if all the transmission that's needed gets built, do you really think that's possible?
TB: We believe that it's an extremely ambitious goal and would require an enormous, sustained will by both the public and private sector. I don't know if we're there yet.
TH: You said energy efficiency could play a role in reducing costs. What's changed?
TB: PJM just completed its sixth capacity auction, which saw the increase in demand response by 400 percent or 5,682 MW, over last year's auction. Energy Efficiency was bid into the auction for the first time for a total of 569 MW. By participating in our wholesale power market both demand response and energy efficiency are on par with other forms of generation.
TH: You've been quoted as saying that "a significant amount of new transmission projects will have to be developed to integrate renewable generation onto the grid." What is PJM doing to facilitate new transmission construction? Can you estimate how many new miles of transmission lines are necessary?