ANALYSIS - Obama energy plan best chance for clean power

WASHINGTON Thu Jan 27, 2011 2:59am IST

U.S. President Barack Obama walks along the White House Colonnade in Washington January 25, 2011. REUTERS/Larry Downing/Files

U.S. President Barack Obama walks along the White House Colonnade in Washington January 25, 2011.

Credit: Reuters/Larry Downing/Files

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WASHINGTON (Reuters) - President Barack Obama's new plan to double U.S. clean power output could provide the kind of compromise needed to pass a divided Congress because it offers benefits to lawmakers who want to cut planet-warming emissions and those who want more jobs in energy-rich states.

The plan Obama introduced in his State of the Union speech on Tuesday would require power plants to generate 80 percent clean electricity by 2035.

It is far broader than legislation debated last year that would have set mandates only for power from renewable energy sources like wind and solar.

It also includes generation from nuclear power, natural gas and technologies to capture and bury carbon from coal -- a process that is not yet commercially available.

And it goes further than legislation for a clean electricity mandate introduced by Republican Senator Lindsey Graham late last year.

There is no way to say for sure if a bill incorporating Obama's plans will pass. But such legislation would represent the best chance for developing clean energy in this Congress, especially after a broad energy bill containing a cap and trade market for emissions failed to pass in the Senate last year, analysts said.

"A clean energy standard that includes clean coal, nuclear and natural gas in addition to renewables has created a vast regional and ideological constituency," said Paul Bledsoe, a senior adviser at the Bipartisan Policy Center.

"The notion that you have all those industries involved is a big boost and is probably the only kind of coalition that could pass a bill to reduce emissions in this Congress."

NEW PLAN CREATES BIGGER TENT

Last year, a bipartisan group of senators led by Jeff Bingaman, a Democrat, pushed a mandate concentrating only on renewable electricity, like solar and wind power. [ID:nN24246449] It faced tough opposition from lawmakers representing states in the Midwest and South that are not blessed with bountiful wind and sunshine.

Obama's new direction could gain support from lawmakers across the country, many of whom opposed last year's climate bill. A nuclear component could win support from Republican Senators like Graham, Lamar Alexander and George Voinovich, while a clean coal provision could garner votes from Democratic Senators Joe Manchin and John Rockefeller from coal-rich West Virginia.

A clean power mandate could benefit companies that make components for wind and solar like General Electric (GE.N), First Solar (FSLR.O) and SunPower Corp SPWRA.O.

Increased natural gas development could benefit producers like Chesapeake Energy Corp (CHK.N), Devon Energy (DVN.N) and Anadarko Petroleum (APC.N).

Clean coal incentives could benefit producers like Arch Coal Inc (ACI.N) and Massey Energy MEE.N.

If Obama can work with Congress to pass the bill, he could begin to achieve his goal of cutting greenhouse gases blamed for global warming, and repair some of the political damage he suffered from failing to pass the last year's energy bill.

BATTLE IN THE HOUSE

Obama's plan was light on details and successful execution of it will depend on how carefully lawmakers craft a bill that would satisfy leaders in the House of Representatives, now controlled by Republicans after the midterm elections.

Energy Secretary Steven Chu said on Wednesday the plan represents roughly a doubling of electricity generation from cleaner power sources in less than 25 years. [ID:nWNA9656]

Adele Morris, policy director of climate and energy economics at the Brookings Institution, said a challenge for a bill would be lawmakers who oppose federal regulation.

A federal clean power mandate would require new types of government oversight of electricity generation and "there are going to be folks that oppose that," she said.

Obama said his plan hinges on eliminating billions of dollars in oil, coal and natural gas subsidies. He wants the money to be shifted into clean energy research and deployment.

That idea could irk some Republicans in the House. Doc Hastings, head of the House Natural Resources Committee, said the Obama administration needs to focus on comprehensive energy policies that include traditional fuels like oil.

But a promising sign for Obama's plan was the power industry's cautious interest in at least considering the plan.

Obama's embrace of a wide variety of fuels "is a positive development and underscores the notion that traditional fuels, including coal, can be utilized in an environmentally friendly way," said Scott Segal, an industry lobbyist at the law firm Bracewell & Giuliani.

The trick for authors of a bill will be to satisfy fossil fuel interests without completely alienating lawmakers who want to cut emissions and boost alternative energy.

"If I were they, I'd take it and run," Reid Stuntz, a lawyer focusing on energy issues with Hogan Lovells said about the latter group. "Because otherwise your option is nothing."

(Additional reporting by Ayesha Rascoe; editing by Todd Eastham)

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