1. Reduce the federal deficit

2. Promote a clean energy economy

3. Make sure our children are the best educated in the world.

No mention of cap-and-trade, no mention of immigration reform. Pushing health care reform when he had a large majority in both chambers made sense strategically. Pushing education reform and investments in clean energy makes sense now that he doesn’t.

The chart, included in an Economic Policy Institute primer on the issue, illustrates the United States’ massive trade deficit with China on clean energy technology, a deficit that estimates indicate has more than doubled in the last two years. The Economic Policy Institute put it this way:

Overall, imports of clean energy products increased 74% per year, on average, between 2000 and 2010.  U.S. exports also increased very rapidly, but from a tiny base.  As a result, the U.S. developed large and very rapidly growing trade deficits with China in clean energy products.

It’s this trade deficit with China that’s got the United Steelworkers all worked up. The Steelworkers are concerned that China is going to leave the United States in the dust and the union is hoping it can stop China before it’s too late. In a 5,000-page-plus petition to the Obama administration, the union alleges that China is breaking a number of World Trade Organization rules by subsidizing key energy technology exports, among other things.

The Obama administration announced last week that it’s investigating the Steelworkers’ allegations. In the next 90 days, the administration (led by United States Trade Representative Ron Kirk) will decide whether to bring a trade case before the WTO.

As I noted earlier today, the announcement has already led to heightened tension between the U.S. and China. A Chinese official accused the administration of trying to score political points ahead of the midterm elections (It’s not clear whether it was the administration’s intent, but the announcement was popular on both sides of the aisle). And today, The New York Times reported that China is blocking shipments to the United States of rare earth minerals necessary in the manufacturing of key clean energy technologies.

But challenging China’s trade policies is just one way to ensure that the United States can compete on the world stage. Without the right policies, economists say it will be nearly impossible to develop the so-called “clean energy” economy that President Obama and others have been touting for years. At the end of the day, the United States imports so many components for clean energy technology not just because it’s so cheap to buy them from China and other countries, but also because the U.S. clean energy manufacturing sector is underdeveloped.

China established itself years ago as one of the world's leading producers of solar energy equipment. (Imaginechina/ZUMApress.com)

In a last-ditch effort to build support in the Senate for a comprehensive climate bill this July, President Obama told the White House press corps that a failure to pass the legislation could help cement China’s position as the world clean energy industry leader.

[Environment1] “We can’t stand by as we let China race ahead to create the clean energy jobs and industries of the future,” he said. “We should be developing those renewable energy sources, and creating those high-wage, high-skill jobs right here in the United States of America.”

Conjuring up images of the Cold War, the race metaphor has become a go-to talking point for American politicians during the last year. By all accounts, the United States is getting lapped in the race for the so-called clean energy economy. During the last year or so, the Chinese government has made huge strides in reducing its carbon dioxide emissions and, above all else, making the country a veritable testing ground for research, development and large-scale deployment of wind and solar technology.

The United States, on the other hand, has failed to pass even scaled-back energy and climate change legislation. The Obama administration is betting that there is still hope — that the clean energy race is not yet won and the United States can come out on top.

But some experts say that while competition is essential, the metaphors used to describe our relationship with China on energy and climate change fail to account for a number of nuances, including the fact that the global supply chain makes any one country’s border less clear. In a sense, America and China are more like partners in a relay race, where each country’s advances helps the other get ahead.

Edward Steinfeld, a political economy professor at the Massachusetts Institute of Technology and director of the school’s China program, argues that framing the relationship between the United States and other countries as a race is “sort of divorced” from the way technology is developed and deployed. The parts necessary to manufacture a wind turbine, for example, are likely produced all over the country by multinational corporations.

“We’re talking about complicated systems,” he said. “We’re not talking about a shoe. Usually these systems involve constellations of companies, in most cases global companies. In the end, it’s really hard to identify exactly what flag is on any given product.”

Because China has positioned itself as a clean energy leader, many companies are looking to China to conduct necessary research and development. In order to bring costs down, research and development must be done in the location where the product can be deployed on a massive level. Right now, Steinfeld said, that place is China.

But although technologies are fine-tuned in China, they are not always manufactured by Chinese companies. For example, several years ago, as part of a massive effort to reduce greenhouse gas emissions from the country’s rapidly growing industrial sector, the Chinese government declared that all coal plants must install technology that keeps sulfur dioxide from entering the atmosphere.

“Out of nowhere, the world’s biggest market for smoke-stack scrubbers was in China,” Steinfeld said.

Though local technology companies came forward to design the scrubbers, the Chinese government opted to use designs from Europe, Japan and the United States, partly because there was little confidence in the skills of local companies and partly because the foreign technology was more developed, Steinfeld said.

The same thing is now happening with other Chinese policies. The country is looking outside its borders, and foreign companies, including many in the United States, are eager to step up to the plate.

“If you’re an American company, of course you’re going to go to China,” Steinfeld says. “Where else are you going to go? You need to team up with the people that are going to let you develop the technology.”

Because companies are able to use China as a testing ground for their clean energy technologies, the price of solar panels and wind turbines has gone down.

“I think the most tangible impact of China’s energy policies is that we’re now buying not just wind turbines, but solar panels from China,” said Sierra Club Director of International Climate Policy John Coequyt, “and the price of those products is very competitive.”

Therein lies the problem for many in the Obama administration and elsewhere. Though in some ways it’s good that Chinese development has made the cost of parts for wind turbines and solar panels cheaper, it makes it much more difficult to develop a domestic clean energy manufacturing base here in the United States.

The United Steelworkers, in a September petition to the Obama administration, argue that China is unfairly subsidizing exports to encourage companies in the country to send their clean energy products around the world. At the same time, the union accuses China of limiting the exports of certain rare-earth minerals necessary to produce solar panels so that foreign companies will settle in the country.

Both of these charges would be violations of international trading rules, and the United Steelworkers are hoping that the Obama administration will raise the issue in front of the World Trade Organization. “I do think they will take up some of this because some of it is so obvious,” said Linda Andros, legislative counsel on trade law issues at the United Steelworkers. “They don’t have to. They have discretion. But on the merits the case is there. The blatant stuff you’ve just got to take up.”

But some experts argue that regardless of whether the United States can compete with China on clean energy manufacturing, expanding U.S. reliance on wind and solar will create local jobs that can’t be exported to China.

Lutz Weischer, research analyst at the World Resources Institute, says many solar facilities create a significant number of local, American jobs. “If you look at job creation in the solar industry, most jobs are in construction, installation and maintenance,” he said. “Those jobs have to be local. If you import panels that are cheap, you’re able to install more panels and create more local jobs.”

“That’s the thing you have to weigh. It’s pretty likely that you’ll have less manufacturing jobs in the United States,” he said. “But you have to look at the entire supply chain. You’re gaining jobs elsewhere.”

Weischer also says that Chinese manufacturing has helped to lower the cost of solar panels, which fell in price by some 40 percent in 2009 as compared to 2008. “Even though this decline has a number of reasons — including technological progress, less demand due to the recession and changing policies in Spain, etc. — it would not have been possible without China producing large quantities of low-cost modules,” said Weischer.

The Chinese market is also important because it often functions as a “laboratory” to test new technology. Because the United States has lagged behind other countries in developing a stable investment environment for the wind industry, for example, General Electric has focused much of its attention on China. It recently announced a partnership with Harbin Power Equipment, a Chinese company, to expand its presence in the country, which currently has the largest wind market in the world.

For these reasons, Weischer says the race metaphor might not work for the relationship between China and the United States on clean energy. “The problem with the race image is that it suggests that only one country can win,” he says. “But if you look at wind, every country that has decided to focus on wind has won. You win if you decide to play.”

Like other experts, Barbara Finamore, China Program Director at the Natural Resources Defense Council, said the clean energy race metaphor oversimplifies the way global supply chains work. “Race is not necessarily the right term here,” she says. “Because of the way supply chains are interconnected, you can’t win the clean energy race by banning technologies from other countries or by banning investment because it hurts U.S. companies.”

There are a number of examples of Chinese companies coming to the United States and creating jobs for American workers. Suntech, a Chinese solar company, began production this month at a solar manufacturing facility in Arizona, the first in the country. The facility will create almost 100 American manufacturing jobs.

At the same time, despite initial resistance, the United Steelworkers signed an agreement in August with A-Power Energy Generation Systems, a Chinese company, to allow the construction of a wind power plant in Texas and a wind turbine manufacturing plant in Nevada. Despite the fact that the company is Chinese, the thinking goes, the jobs created will be American.

Finamore says there are a number of reasons that China is eclipsing the United States in terms of its clean energy development. But at the end of the day, the main reason is because the United States has not enacted policies that create a stable investment climate.

“The countries that establish strong national policies to reduce greenhouse gas emissions and incentivize renewable energy are the ones that are establishing strong positions in the clean energy economy,” she said.

The Sierra Club has worked for six months to determine how to reduce the United States' oil dependence. (Flickr, The Sierra Club)

Despite the Gulf oil spill, a massive pipeline break in Michigan and broad concerns about global warming, ambitious climate-change and energy legislation is likely dead for the year. That poses a conundrum, going forward, for environmentalists: How to convince lawmakers of the need for legislation to sever the country’s decades-long ties to oil and to reform energy policy more generally?

[Environment1] The Sierra Club is in the process of trying to answer that question. For the past six months, it has worked on a massive study on how to reduce the United States’ oil dependence in an economically and environmentally beneficial way. The group is also building a coalition of environmental advocates and lawmakers to support the project, which will quantify potential oil-use reductions across every industrial sector.

“Over the next 20 years, how steep can we make cuts in oil consumption while allowing the economy to flourish and while creating more jobs rather than penalizing individual workers or communities?” Sierra Club Executive Director Michael Brune asked. “So, this will be a major priority of the club over the next several years — to build a broad based coalition of organizations and elected officials who will want to stand up for a very thoughtful and pragmatic, but visionary and aggressive plan to get off oil.”

In an interview with The Washington Independent, Brune, who took over his post just one month before the oil spill started, outlines the organization’s oil study, talks about the prospects for energy legislation and previews the upcoming mid-term elections.

Here is an edited-down version of our interview:

What is the major issue going forward for the Sierra Club right now?
Our top issue remains fighting climate change in a way that increases the availability of clean energy like solar and wind, while also improving the public health benefits associated with decreasing our reliance on fossil fuels.

Is the focus now on Environmental Protection Agency regulations, Congress or both?
I would say both for sure. We see great opportunity in EPA rulemakings to increase public health benefits by forcing utilities in particular to account for the cost of their pollution. A top priority right now is organizing around EPA’s hearings on coal ash, to make sure that coal ash is treated as a hazardous waste. But, over the next couple of years, we’ll be looking at a whole series of rulemakings, many of which are focused on stationary sources like coal plants, but we’re also looking at EPA rulemakings to cut our dependence on oil.

Is there a serious concern about challenges to EPA’s regulatory authority under the Clean Air Act going forward?
Yeah, certainly many threats have been made to EPA’s authority to act under the Clean Air Act, attempts either to gut the Clean Air Act or eliminate EPA’s authority. So, we’re taking those threats very seriously. We also think that should there be a public debate about these issues that the public overwhelmingly supports strong, effective and cost-effective regulations that have come out of the EPA for the last 40 years under the Clean Air Act. We think there’s broad public support for retaining its authority.

In terms of Congress, it doesn’t seem that anything is going to happen on cap-and-trade any time soon. Is that your thinking as well?
Well, you know, I think it is difficult to predict too far into the future. We think Congress should act. We know that members were put into office with the expectation that there would be a meaningful, substantive response to climate change and that Congress would enact laws that would put a down payment on scaling up clean energy. So, we know that the demand is there. But whether or not senators in particular will respond remains to be seen.

Putting aside cap-and-trade, there’s been talk of a narrower energy bill. It looks like Sen. Jeff Bingaman (D-N.M.) and Sen. Brownback  (R-Kans.) are introducing a renewable energy standard that they are hoping to get passed. Is there a specific RES target that you would like to see or is it that the policy needs to move forward as soon as possible?
Well, let me make a general point. There was far too much of a focus earlier this spring on a single bill to address climate change economy-wide. And, in reality, there are dozens of things that Congress can do to fight climate change and to increase energy security in the country. In regards to this particular RES bill, our focus is primarily on keeping it clean. We want to see a renewable energy standard that is focused on truly clean energy and doesn’t have absurd giveways to nuclear power or so-called clean coal or any one of the other handful of options. And then of course to increase those investments as quickly as possible.

Is there a number that’s being thrown around among your members now?
Yeah, but it’s not something I really want to discuss in the public right now.

What other things are you focusing on in Congress?
I’d say the top thing is a plan to get off oil. We just experienced the largest environmental disaster in our country’s history and in response, Congress has done nothing. There’s not even a plan to fully reform what used to be called MMS and there’s not yet a plan to hold oil companies fully accountable and to lift the liability cap. And most importantly, there’s no effective plan right now to significantly reduce our dependence on foreign oil. So, if there’s one thing that Congress can do in the next couple of months, it would be to challenge the oil industry and deliver us a plan to get off oil.

It’s been sort of an uphill battle trying to get an oil spill response bill to pass, something that is incredibly popular with the American people. And you’re right, it seems like the bill is getting held up on this idea of liability, whether or not an oil company should be held 100 percent liable for spilling thousands of gallons of oil into the ocean. What are your thoughts on that?
We shouldn’t be privatizing the gain and sharing the risk with the public. If oil companies are going to be benefiting from oil drilling, they also have to be able to absorb any of the risks associated with drilling.

Do you expect that Congress will pass an oil spill bill this year?
We do.

I wanted to also touch on the mid-term elections. It’s on everybody’s mind right now. What is the Sierra Club doing in terms of working with individual candidates?
So, there’s lots that we’re doing. The Sierra Club has 1.4 million members and supporters, so over the next several weeks, a big job of ours will be to educate our supporters about what’s at stake Nov. 2., trying to get people out to the polls and to engage our members to become volunteers. So, the Sierra Club endorses specific candidates.

We get very heavily involved in local and state propositions. Arguably our biggest priority this year is to defeat Prop 23, which would undermine the Global Warming Solutions Act, AB32, that was passed in California a few years ago. With that, we’re doing a massive voter mobilization drive. Individual members will be calling voters to encourage them to get out. We are also part of a coalition of groups that is doing advertising, thought we’re not doing any ourselves.

Are there any other races that are of particular concern for you?
We’re looking at the Senate races in Nevada and Missouri. Obviously, Harry Reid has been excellent in fighting the coal industry as well as supporting big investments in clean energy. We are also looking at the Florida race. Democratic Senate candidate Meek has a 100 percent League of Conservation Voting score. He’s been strongly in favor of Florida’s solar bills as well as the ban on offshore oil drilling. There’s obviously dozens or even hundreds of races in which the environmental voice is an important one.

There has been a lot said by the oil industry and Gulf coast lawmakers about the Obama administration’s offshore drilling moratorium’s impact on jobs, though there was a report that came out last week that said job losses might not be quite what people estimated. What’s the Sierra Club’s position on all of this? Should the moratorium be lifted?
No, I think that a full moratorium should be put in place. We’re mindful of the fact that we need to make stronger investments in clean energy jobs so that those who work in the oil industry who want to put food on the table for their families have viable alternatives in growing industries that they can work in.

To be clear, we’re not advocating turning off the spigot in the Gulf. There are more than 4,0000 rigs operating in the Gulf right now and we are not saying there should be no oil drilling in the Gulf, not until we have a clear plan to get off oil. But what we’re saying is that since it’s been proven now that oil drilling offshore is dirty and it’s dangerous and it’s deadly, we need to tighten up the safety regulations to make sure that disasters like this don’t happen in the future. And we need to stop investing in exploring for new oil and instead explore much more carefully and aggressively investments in solar and wind so that we’re not poisoning our coastlines as we’re trying to keep our lights on.

On pipeline safety. There have been a couple major disasters this year. Of course, the natural gas pipeline explosion in San Bruno, Calif. And before that there was an oil spill in Michigan from an oil sands pipeline. Looming over this you have a massive proposed pipeline project, the Keystone XL project, that is going to go from Canada to Texas. Has the Sierra Club been looking at the issue of pipeline safety through a new set of eyes now that we’ve had these disasters?
Yes, we have. There’s two things that we’re doing. Clearly, the cost of our reliance on oil — when you talk abut the Michigan spill, the Gulf oil spill and the Keystone pipeline — is so much higher than what we pay at the pump when you consider the foreign policy implications, the fact that our entire economy is held hostage to wild fluctuations in oil prices.

So, what we’ve done over the last six months since I started at the Sierra Club is to build out a much more aggressive, comprehensive plan for how our country can get off oil. Over the next 20 years, how steep can we make cuts in oil consumption while allowing the economy to flourish and while creating more jobs rather than penalizing individual workers or communities. So, this will be a major priority of the club over the next several years — to build a broad based coalition of organizations and elected officials who will want to stand up for a very thoughtful and pragmatic, but visionary and aggressive plan to get off oil.

And then, regarding natural gas, we don’t think we can simultaneously phase out coal, oil and gas at the same time. Gas will need to stick around for a while. But there the challenge is to have much higher and much tighter safety standards so we’re not in this disastrous position again and again and again where people are losing their lives due to an industry is ineffectively regulated.

On oil sands or, as some call them, tar sands. There were senators in Canada last week reviewing oil sands production in there. Is there a message you would like to send to them in terms of how oil sands should be treated? Because there’s an argument out there that it’s better to get oil from Canada, despite the high greenhouse gas emissions of oil sands production, because we’re no longer reliant on the Middle East.
I think that’s just misguided thinking. The Pentagon says that climate change is one of the top national security threats in the 21st century. We have to deal effectively with climate change. Importing oil from the tar sands is 2-3 times more greenhouse gas intensive than conventional oil. You don’t solve a problem by making it worse. So, I understand that the notion that we have oil that is under the sands of our neighbors to the north is attractive to people who think we can have a simply pipeline solve a lot of problems. But the reality is that if we rely too much on a different source of oil that is dirtier, that will accelerate climate change rather than reduce it’s impacts, we’re only going to be replacing one set of problems with an entirely different set of problems. The only effective way to address this problem systemically is to adopt a plan to get America off oil.

Can you be more specific about this plan?
We’ll have a plan that we can introduce probably in the next 3-6 months. It looks at every major industrial source of oil consumption, from the oil that’s used in medium- and heavy-duty trucks, light trucks, cars and SUVs, the oil used for pesticides and paints. Whatever the major source of consumption is, we’re looking at a major, comprehensive plan to phase it out where and whenever possible.

What’s the time frame of this phase-out?
The big challenge is political will. For example, clearly it is technically possible, one would presume, to produce nothing but plug-in hybrid and electric vehicles in the next couple years. Whether that’s politically possible, of course remains to be seen. If the United States were to mobilize as we did in World War II and completely transition the entire automobile fleet to produce a new technology, clearly that could be done.

What we need to do is measure the distance between what we can do and what we’re willing to do as a country and develop what we feel as responsible and pragmatic, but also aggressive tactics to achieve energy independence. To help inform that decision we would look at the cost of different decisions under different time scenarios, the benefits economically, environmentally or socially depending on our foreign policy and what would the oil savings be in real-world terms. Then we’d highlight a few different options. We’ll have the data shortly. Then we’ll figure out how to use it. We’ve commissioned this first study just as the Sierra Club, but we anticipate doing more with a broad coalition.

As I wrote back in July, for many environmentalists, Bingaman’s RES falls short of the targets necessary to spur significant clean energy development:

What kind of impact would Bingaman’s RES have on renewable energy?

This 2009 analysis from the National Renewable Energy Laboratory, a research arm of the Department of Energy, gives us some idea. The analysis is based on Bingaman’s original 20 percent by 2021 RES proposal, which was cut down to 15 percent to win support from Republicans on the committee. And the results aren’t good. The analysis finds that the Bingaman bill likely won’t increase renewable energy development beyond a business-as-usual scenario.

Of course, proponents of Bingaman’s RES will argue that it is just a starting point. And, given the tight calendar in the Senate, it looks like it’s the only thing that can pass right now.

The announcement comes as the renewable energy industry has ramped up lobbying efforts to pass an RES this year and Senate Majority Leader Harry Reid (D-Nev.) has left the door open to considering such a proposal. But it remains unclear when, exactly, the Senate might take up the bill and whether it will be coupled with other provisions or go forward as a standalone measure.

In a statement, Bingaman said he believes the Senate has the votes to pass the measure, which would require that a certain percentage of the country’s electricity come from renewable sources like wind and solar. Bingaman said:

I think that the votes are present in the Senate to pass a renewable electricity standard.  I think that they are present in the House.  I think that we need to get on with figuring out what we can pass and move forward.

Brownback, who hails from the wind-rich state of Kansas, called for a “sensible and modest” RES proposal.

Provisions setting up the so-called Clean Energy Deployment Administration, or CEDA, were included in the broad energy legislation passed by Bingaman’s committee last summer. But, Bingaman acknowledged in the op-ed, it is highly unlikely that the bill can pass this year. Instead, Bingaman calls for passage of legislation establishing CEDA.

According to Bingaman:

This bipartisan proposal for a Clean Energy Deployment Administration was designed to accelerate the technology revolution we need. CEDA would help move a wide range of clean energy technologies from laboratory to marketplace, combining the technological expertise of the Department of Energy with a new, independently overseen cadre of business professionals who can craft the financial support that entrepreneurs need to negotiate the “valley of death” where new technologies languish for lack of investment support.

CEDA would have a broad mandate to identify, on a continuing basis, technologies with the best potential to deliver sustainable energy with the most efficient use of federal dollars.

A broad comprehensive energy bill may not be possible in this Congress. But action on common-sense bipartisan proposals like CEDA should not be put off. If we want to realize the energy security, environmental security and economic benefits of the clean energy revolution, then the investments we need in clean energy technology deployment cannot wait.

Look for CEDA to become  a major topic of discussion in the coming weeks on the Hill. Bingaman rarely throws his support behind a proposal unless he knows that it has a chance of passage. And with the fate of energy legislation, even a scaled-back version that focuses on efficiency and vehicles, up in the air, CEDA could be environmentalists’ only hope for a legislative victory this year.

The op-ed comes as Bill Wicker, Bingaman’s spokesman, told reporters Friday that “news will be made” at a press conference tomorrow.

The Department of Energy’s National Renewable Energy Lab estimated it would cost at least $43 billion to upgrade the nation’s electric system to move to 20 percent wind by 2030. (Flickr, Travel Aficionado)

By now, the Obama administration has made clear it wants to ramp up the use of renewable energy, calling it a key to the nation’s leadership in the 21st century. And some in Congress are hoping to pass a federal renewable energy standard, requiring the production of more wind, solar, biomass and geothermal energy.

[Environment1] Utilities recognize the shift to green energy as a major growth prospect. But they also recognize an impediment: Infrastructure. Indeed, across the country, utility and energy companies are preparing for a massive fight over how to deliver clean energy to people’s homes — and, more to the point, who will pay for the necessary infrastructure to get the energy there.

Behind the scenes, in recent months, utilities have battled over how to allocate the costs of the new high-powered electric lines necessary to move wind energy from one part of the country to the other. Despite efforts by federal regulators to referee the fight, some experts foresee further delays in the construction of the new electric, or transmission, lines they say are essential for meeting federal and state renewable energy mandates.

“A lack of transmission lines is the single greatest barrier to wind here in the Midwest. The lack of transmission has proved to be a huge barrier,” says Jamie Karnik, communications manager at Wind on the Wires, an advocacy group. Karnik says the Midwest produces about 10,000 megawatts of wind now, and needs to build at least 25,000 to 40,000 further megawatts of capacity to meet state and regional renewable energy goals.

Many utilities in the wind-rich Midwest would like to move excess electricity to the Northeast on new, high-powered lines. But utilities in the Northeast see Midwestern wind as a threat to its nascent offshore wind industry. While offshore wind is plentiful in the region, it has been plagued by regulatory delays and high costs. Cheap wind from the Midwest could keep the Northeast from developing its own local source of renewable power.

“As the nation looks to move to a renewable energy standard, a lot of that really comes down to how to meet the energy needs of the East coast,” Karnik says. “Certainly people who are building wind in the Midwest, have their eye on the eastern market.”

Utilities on both sides of this divide are drawing the battle lines over so-called cost allocation policies, which lay out a structure for how the costs for these lines are spread among ratepayers. One faction (including some Midwestern utilities and renewable energy advocates) proposes spreading the costs broadly over an entire region, arguing that new lines deliver broad economic and electric reliability benefits to all ratepayers. The other faction (including many Northeastern utilities) says costs should be paid by the specific beneficiaries of the new line.

Electric industry stakeholders — utilities, renewable energy developers, transmission companies — stand to lose or gain billions of dollars based on the structure of these policies. As a result, they are pouring significant lobbying resources into their development. “Needed transmission in the eastern interconnection would be about $85 billion,” says one lawyer following the issue who was not authorized to speak on the record. “The dollars involved here are huge and the regional economic impacts are huge. Utilities are keenly aware of that and that’s why they are fighting over cost allocation.”

A 2008 study by the Department of Energy’s National Renewable Energy Lab said it would cost at least $43 billion to upgrade the nation’s electric system to move to 20 percent wind by 2030. Others have put estimates significantly higher. A study conducted by the lab in January also said that any effort to meet the 20 percent goal in the Northeast would require “significant expansion of the transmission infrastructure.”

At the center of this fight is the Federal Energy Regulatory Commission, or FERC, a little-known agency that has often played second fiddle to the Department of Energy, but energy policy experts say has far more power over shaping the country’s energy policy. After months of discussions with industry stakeholders, FERC released in June a cost allocation proposal meant to assuage utilities’ concerns. It drew on elements of both utility factions’ proposals, giving some preference to projects that meet policy goals like renewable mandates, while ensuring that the costs allocated are at least “roughly commensurate” with the benefits delivered.

For the most part, industry stakeholders say they can work within the framework FERC set up: It gives utilities latitude to develop their own workable proposals. But as the public comment period on FERC’s proposal comes to a close at the end of this month, they also say the cost allocation debate might take years to resolve.

The lawyer following the issue said the ongoing battles between utilities over cost allocation could significantly impact states’ abilities to meet renewable energy standards. “I think it will affect it tremendously,” the lawyer says. “I think it’s going to continue to be really, really hard to build big lines.”

Rob Gramlich, senior vice president for public policy at the American Wind Energy Association, the wind industry’s national trade group, says he is “encouraged by what FERC is doing,” adding, “They clearly understand the challenges of the new clean energy economy and what that entails.” He says that FERC is working to expand a “Balkanized” electricity grid that was meant only to work on a local, rather than a regional basis.

In order to meet a stringent renewable energy standard, Gramlich says transmission must be built across regions in order to bring wind from the Midwest to states that don’t have many renewable resources. “To do that we’d need more regionalization of the type that FERC is pursuing now,” he says. “To do it cost effectively, by using the most economic resource areas, significant new transmission would be needed.”

But Gramlich notes that any rulemaking that FERC finalizes will likely be challenged in court, as some companies will “stand to lose a lot” no matter what proposal is adopted. Such challenges could delay a process that likely won’t even go into effect until 2012, given the various compliance periods allowed under the plan.

Joseph Kelliher — former FERC chairman and current executive vice president of federal regulatory affairs at NextEra Energy, the country’s largest renewable energy developer — says FERC’s cost allocation proposal is “critical and essential to translating conceptual renewable energy projects to real projects. They actually won’t get built until there is some clear conception of cost recovery.”

Kelliher also defends broad cost socialization, saying that entire regions benefit from new lines that carry renewable energy. “The notion that only ‘A’ and ‘B’ have to pay for that line and nobody else has to pay for anything, economists would look at that and say it’s a classic ‘free rider,’” he says. “Free riders tend to like the status quo and would like to get something for nothing. The current policy does discourage investment.”

At the same time, offshore wind is just not as cost competitive as onshore wind from the Midwest, Kelliher says. “The difference between onshore wind and offshore wind is about 400 percent. If transmission constraints don’t allow you to import good onshore wind from the Midwest for at least part of your renewable energy needs, you’re left paying” more, he says.

But Tim Fagan, director of public policy at the New Jersey-based PSEG, says broad socialization of costs puts the Northeast at a disadvantage because it favors Midwestern wind. “The concern is that we may end up with an overall less economic solution,” he says. “If the resources from the Midwest are able to have these long transmission lines paid for, that may competitively eek out other options.”

Fagan says Northeastern states need to be given time to develop local offshore wind and solar resources. “Eastern states are looking to develop offshore resources; they’re plentiful and they’re close to load,” he says. “In New Jersey, we’ve been aggressively developing PV solar.”

While a broad energy bill authored by Sen. Jeff Bingaman (D-N.M.) addressed some electric transmission issues, those provisions are not expected to come up for a vote in the Senate this year. Until then, electric utility officials say they will be watching Congress closely in the coming weeks to see if momentum is building for passage of a federal RES. Renewable energy advocates have been working feverishly behind the scenes during the August recess to convince key senators that the proposal could get the 60 votes necessary for passage.

“You’re beginning to see people stepping up and saying we can’t meet these mandates if we can’t get transmission built,” says one utility official who requested anonymity to speak openly. “All of this comes down to whether or not we have a federal RES. That has the potential to change things.”

Whitney Smith, Kerry’s spokeswoman, sends this tidbit on timing:

Senator Kerry is hopeful that energy tax provisions will be part of any energy package that moves this year.  His bill highlights key priorities for advancing clean energy and reducing carbon emissions.

Kerry introduces his energy tax incentives bill today.

- Oil spill response

- Clean energy job creation

- A title to “reduce oil consumption”

- A “broader” title, which he’s working on with the Finance Committee, and which will address the utilities sector. No details on whether it’ll include a cap on emissions, but he said it would deal with “pollution.”

More to come…