Power Execs Foresee Carbon Emission Caps
- From: "lkgeo1" <lkgeo1@xxxxxxx>
- Date: 22 Oct 2006 06:00:44 -0700
Power Execs Foresee Carbon Emission Caps
By BRAD FOSS, AP Business Writer
2:51 AM PDT, October 22, 2006
When Duke Energy Corp. CEO James E. Rogers considers global warming, he
sees more than a costly quagmire for the U.S. power industry; he sees
grand monuments. Notre Dame in Paris, St. Peter's Basilica in Rome.
Rogers has adopted what he calls "cathedral thinking," a view that
tackling climate change is a chance for the industry to leave a proud
environmental legacy for future generations.
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This philosophy may not deliver results as quickly as environmentalists
would like, or sit well with all his counterparts, but it does aptly
describe an approach toward reducing greenhouse gases that a small but
growing number of power executives are embracing.
"The science says we need to act," said Rogers. Of course, shifting
political winds are an equally persuasive force in an industry that
accounts for almost 40 percent of U.S. carbon dioxide emissions.
Rogers and many other executives are convinced the United States is
likely to join Europe in placing limits on carbon dioxide emissions --
believed by scientists to cause global warming -- perhaps as early as
next decade. This rising expectation of mandatory carbon caps is
reviving interest in nuclear power, accelerating the use cleaner
coal-burning technologies and spurring investment in alternative fuels
such as wind and biomass.
Some of the country's biggest power producers are even setting
voluntary greenhouse-gas reduction goals now in hopes of gaining a
competitive edge down the road.
"The first movers now kind of realize... there will be a carbon regime
in this country," said Peter Fusaro, chairman of Global Change
Associates and a longtime proponent of clean energy. "This is not just
talk," he added.
Despite good intentions, however, it will likely be several decades
before any meaningful progress is made on reducing carbon emissions,
according to experts on energy and the environment. That is because
half the country's electricity comes from burning coal -- by far the
largest industrial source of carbon dioxide -- and the most promising
technology for capturing these emissions and sequestering them
underground is still in the experimental phase.
Meantime, the Edison Electric Institute, the industry's main trade
association, is lobbying to prevent mandatory carbon caps, calling them
an unnecessary financial burden at a time when the power industry needs
to invest billions just to meet anticipated demand.
Rogers, who is the chairman of EEI through next June and welcomes
economy-wide carbon caps, is at odds with the association's official
position: it favors voluntary measures, a stance also advocated by the
Bush administration.
U.S. electricity demand is expected to rise by about 1.5 percent a
year, resulting in a 50 percent increase from current levels by 2030.
Factor in the anticipated industrialization of China, India and other
developing nations, and the global rate of growth for electricity
demand is even higher.
The Electric Power Research Institute forecasts that, with today's
technology, global carbon dioxide emissions will more than double by
2050 to 80 billion metric tons a year. The U.S. already accounts for
more than 7 billion tons a year.
Increasing energy efficiency standards and deploying "improved
versions" of today's power plants would substantially slow the rate of
growth, according to EPRI, a non-profit that provides scientific and
technical research on electricity. But in order to actually reduce
annual global carbon dioxide emissions by 2050, EPRI estimates that
nearly half of the world's electricity would need to come from
carbon-free fuels, such as nuclear, wind and solar. Today, carbon-free
fuels account for a third of global power generation.
This is one reason why some U.S. power executives vow to fight carbon
limits unless the constraints are carried out worldwide.
"The issue is global warming, not U.S. warming," said Mike Morris, the
chief executive of American Electric Power of Columbus, Ohio, the
largest coal-burning utility in the country. Unless China, India and
other developing nations also are forced to adopt costly alternatives
to traditional fossil fuels, U.S. manufacturers -- a major customer for
AEP -- will be at an unfair competitive disadvantage, Morris said.
But Morris has a pragmatic side as well, which is why AEP is part of a
small group of companies that has voluntarily agreed to cap their
carbon emissions in the United States as part of an experimental market
that is based in Chicago.
Indeed, there is enough momentum at the state level that a critical
mass of pragmatists say it would be foolish to ignore the writing on
the wall in terms of eventual federal legislation.
* In California, Gov. Arnold Schwarzenegger last month signed
legislation aimed at reducing greenhouse gas emissions from utilities,
refineries and manufacturing plants to 1990 levels by 2020.
* In the Northeast, a regional "cap and trade" system of buying and
selling emissions allowances is being developed to cut greenhouse gases
from Maine to Delaware.
* And more than 20 states require utilities to buy a share of their
electricity from renewables such as wind, solar and geothermal energy.
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Some opponents of mandatory carbon caps say the power industry would be
better off with one federal standard than a hodgepodge of state
regulations with which to comply. But, either way, the basic principle
of putting a price on carbon is gaining traction: the Congressional
Budget Office said last month that any cost-effective U.S. policy on
global warming will require emissions taxes or a cap and trade system
similar to Europe's.
It is against this backdrop of legislative activity at the state level
-- and with help from federal tax breaks included in last year's energy
bill -- that some utilities are tweaking their long-term strategies.
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David Crane, the head of Princeton, N.J.-based NRG Energy, said at a
recent conference that the industry's long-standing attitude of "see no
carbon, hear no carbon, speak no carbon" is increasingly out of touch
with mainstream American values.
Crane, who oversaw NRG's July acquisition of wind-farm developer Padoma
Wind Power, predicted that "companies and industries which deny the
issue will be marginalized."
The growing long-term appeal of carbon-free power in the U.S. is
exemplified by the phenomenal growth of wind power, which has
quadrupled since 2000 to more than 10,000 megawatts nationwide. That
said, wind still represents less than 1 percent of all U.S. power
capacity.
Perhaps more telling is the resurgence of interest in the U.S. for
nuclear power, whose image was battered by the Three Mile Island
accident in 1979 and bruised by the Chernobyl accident in 1986.
Concerns about nuclear waste also run high.
But sensing that public resistance to nuclear will wane as concerns
about global warming rise, more than a dozen companies, including Duke,
NRG, Entergy Corp. and Exelon Corp., have notified the federal Nuclear
Regulatory Commission that they plan to apply for licenses to build new
reactors.
Notifications began pouring in after Congress passed an energy bill
last summer that included tax credits and other perks to encourage
nuclear power, which is also seen as a way to become less reliant on
high and volatile natural-gas prices.
Constellation Energy Group Inc. of Baltimore, in a partnership with
France's Areva called UniStar Nuclear, is considering building five new
reactors, including one each at existing nuclear facilities in Maryland
and New York.
For Constellation, nuclear is "the most preferred energy supply of the
future," said Mike Wallace, head of the company's power-generation
division.
If all goes smoothly, the first new reactor in the U.S. since the
mid-1970s could be completed within ten years, analysts and industry
officials said.
While nuclear presents a significant opportunity in the fight against
carbon emissions, the country's unbridled dependence on traditional
coal is a major obstacle.
More than 150 new coal plants have been proposed in the U.S., which has
the world's largest coal reserves. And while there is much optimism
about the long-term potential for "clean coal" technology, it will only
be used in about 10 percent of the plants currently on the drawing
board.
Even these so-called coal gasification plants will not solve global
warming overnight. While they are far more efficient than older coal
plants, the real promise rests in their compatibility with
emissions-capture equipment. Unfortunately, "a laundry list of
technical challenges" could take a decade or more to resolve, according
to Revis James, director of EPRI's technology assessment division.
The dearth of simple carbon-free solutions leaves an executive like
Duke's Rogers in a difficult position. Sure, he is making plans to add
nuclear and coal-gasification power plants, but an important aspect of
"cathedral thinking" is a recognition that addressing global warming
requires immediate action.
For that reason, Rogers is promoting the need for greater energy
efficiency whenever he can.
But in order for that to succeed, Rogers said elected officials and
regulators will have to come up with financial incentives that will
encourage utilities to sell less electricity.
"Hope," he said, "is not a plan."
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