Running in Circles Over Carbon

Cutting carbon dioxide emissions is a fine idea, and a lot of companies would be proud to do it. But they would prefer to be second, if not third or fourth.

This is not a good way to get started in fighting global warming.

As efforts to pass a global warming bill collapsed in the Senate last week, companies that burn coal to make electricity were looking for a way to build a plant that would capture its emissions. There is a will and a way — several ways, in fact — to do just that.

Capturing carbon from these plants may become a lot more important soon. Emissions from coal-fired power plants already account for about 27% of American greenhouse emissions, but as prices for other fuels rise, along with power demand, utilities will burn more coal. And if cars someday run on batteries, a trend that $4-a-gallon gasoline will accelerate, then the utilities will burn even more fuel to generate the electricity to recharge those batteries.

This could be good news, because controlling emissions from a few hundred power plants is easier than controlling them from tens of millions of house chimneys, or hundreds of millions of tailpipes. And in the laboratory, at least, there are three very promising systems for capturing carbon dioxide before pumping it underground.

But supplying electricity is not like most other businesses. Unlike the companies that make microchips, clothing for teenagers or snack foods, the companies that make electricity can see no advantage in going first. This is true for the traditionally regulated utilities that can charge everything to a captive class of customers (if regulators approve), and it is also true for the “merchant generators,” who build power plants and sell their output on the open market.

Click here full the full NY Times article.

Sizing Up the Utilities, if Carbon Caps Take Hold

FUEL prices and dividends are usually big drivers of the share prices of utilities. Now there is a new variable to consider: how much carbon their power plants emit. Federal regulations over the next few years could limit the carbon emissions of these companies, and Wall Street analysts have begun compiling lists of potential winners and losers, based on that possibility.

All of the leading presidential candidates say they favor such measures, and some kind of legislation affecting utilities is likely at some point after the November election, Citi Investment Research said in a January report.

If “carbon caps” — limits on carbon emissions — eventually become law, the winners may include operators of nuclear power plants (which don’t emit carbon), while the losers may include power companies that mainly burn coal, analysts say. Beyond that, who wins and who loses will depend on the details of possible future regulations, which can’t be predicted with certainty. Still, a cottage industry on Wall Street has begun to evaluate these questions.

“I think the time when you can keep your head in the ground is just over,” said Hugh Wynne, a senior analyst at Sanford C. Bernstein & Company.

Some analysts have begun to evaluate the potential impact of carbon caps on stock prices.
“Carbon has been an ongoing issue for the investment community for the last three or four years,” said Brian Chin, an equity analyst at Citi Investment Research.

Federal carbon rules might be similar to regional efforts in the Northeast and California. These plans are to place emission limits on plants that emit carbon dioxide, and, in the case of California, on other greenhouse gases as well. Allowances or credits to emit a certain level of greenhouse gases are either auctioned or granted free.

Under such a system, called “cap and trade,” utilities that stay below emissions quotas can hold credits for the future or sell them on the open market. In Europe, the cost of one credit has averaged $25 a metric ton of carbon dioxide since January 2005, when the European Union's emissions trading plan began.

Companies like the Exelon Corporation, the Constellation Energy Group and the Entergy Corporation, which operate nuclear power plants, would benefit from cap-and-trade plans under consideration, like the Lieberman-Warner Climate Security Act, which is pending in Congress, Mr. Chin said.

“They all potentially get a very large benefit from higher power prices being pushed up by carbon,” he said.

Click here to read the full NY TIMES article.

ENERGY: Coal for electricity: important and dirty

Coal is used to generate more than 50% of our electricity needs in the US and President Bush made coal the centerpiece of his plan for meeting future energy needs. The US has over 200 years of reserves. But in the increased threat of regulation, the lack of adequate transportation from source to customers, and increased worldwide demand have made the future of coal-fired plants in their current incarnation less certain in recent years.

These three factors (regulation, transportation, and demand) have led companies to cancel over 50 new US coal-fired plants in 2007 because: 1) regulations for increased use of renewable energy by utilities and for carbon emissions limits will almost surely be enacted in Washington in the next few years; 2) our transportation infrastructure requires considerable upgrade to economically deliver coal to market; and 3) increased coal consumption by countries like India and China has caused world prices to rise which increases the cost of coal-fired plants (the coal production and consumption graph is courtesy of the BP statistical review of world energy 2007).

US electricity costs are rising and will continue to do so in this environment.

Based on the assumption that carbon emissions control legislation will be passed in the next few years, the Electric Power Research Institute (EPRI) estimates coal power costs will pass nuclear and natural gas by 2030. The most likely legislation will require plants to collect and sequester CO2, and we will discuss more about this technology soon.

The EPRI uses a bathtub analogy for our energy policy discussion: the carbon dioxide faucet (emissions) has to be slowed enough to allow the drain (renewable energies brought online) to keep the tub from overflowing (climate change). The coal industry will have plenty to say about that whether they're selling here in the US or across the developing world.

More renwable energy news soon.


(classic Bacsik)