sri-advisor.com
where checking accounts rebuild communities
Back to homepageInstitutional ReportsSRI Financial Professionals DirectoryToolsNewsSRI Performance and TrendsAbout Us   
News


March 20, 2008
New Coal Plants: At What Cost?
    by Anne Moore Odell

Uncertainties abound around the 100-plus proposed US coal-burning power plants contends a report from the Interfaith Center on Corporate Responsibility.


Americans' hunger for cheap electricity certainly isn't abating. However, their love affair with coal-burning power plants, which currently produce half of the nation's electricity, might be ending. Coal, once a predictable investment, is now viewed as a risk asserts a new report from the Interfaith Center on Corporate Responsibility (ICCR).

Prepared for the ICCR by Synapse Energy Economics, "Don't Get Burned: The Risks of Investing in New Coal-Fired Generating Facilities," by lead author David Schlissel, outlines why coal-burning electrical plants are risky long-term investments, from anticipated federal and state regulations of greenhouses gases to the unknown costs of carbon capture and storage, to the rising costs of constructing new coal-burning power plants.

Over 130 coal-burning power plants have been proposed over the next 10 to 20 years. However, the report pulls no punches: "The costs of constructing and operating these plants are highly uncertain due to multiple factors in the industry, and the owners will face significant financial, economic and environmental risks. In particular, investments in these plants will be at risk if the utilities and/or companies are unable to recover all of the costs from customers and earn forecast profits."

Schlissel draws parallels between the failure of the nuclear power industry in the 1970s and today's uncertainties around constructing new coal power plants. When the costs of building new nuclear power plants became difficult to predict, many nuclear plants were cancelled and investors were left out in the cold.

The US is competing with the global construction market when building new coal-burning power plants, with costs of materials like steel and concrete growing extremely fast the report adds. Leslie Lowe, Energy and Environment Program Director for ICCR, told SocialFunds.com that China alone is building the equivalence of the UK's power infrastructure every year.

Alongside the uncertainties of construction costs, changes in federal and state regulations make the building of new coal burning plants a risky bet, the report puts forth. Concerns regarding the dangers of climate change are causing national and state regulatory commissions to reject plans for new coal-fired power plants. Policies will most certainly be written regarding greenhouse gases reductions by the US Congress and state governments in the near future. Coal, which is the most carbon intensive fuel, will face the highest scrutiny the report asserts.

Proposed national carbon cap-and-trade programs likewise create unknowns for the coal-burning power plant industry. The report concludes: "Paying for CO2 emission allowances is likely to have a very significant impact on the variable costs of operating new coal-fired power plants."

Proponents of building new coal-burning power plants point to the possibility of capturing and sequestering (CCS) CO2 emissions from new plants. Yet questions around CCS abound. According to the report: "Although many are confident that CO2 can be captured in the pre-combustion CCS technologies used in IGCC [Integrated Gasification Combined Cycle] facilities, there currently is no commercially viable technology for carbon capture and sequestration from utility scale pulverized coal plants."

To store the compressed carbon from power plants, coal-burning power plants either have to be built on or near the geologic rock formations that support storage, or the CO2 will have to be shipped in a huge pipe system to storage units.

"Storing CO2 in the ground acidifies the rock and causes the rock to be more porous," said Lowe. "When we are talking about storing CO2 it is forever, not just one hundred years."

Besides CO2 emissions, more stringent regulations of non-greenhouse gas emissions are being contemplated, for example, restrictions on NO2, SO2 and mercury. These regulations will further impact the cost of coal-burning power plants.

Several of ICCR's members have filed shareholder resolutions this proxy voting season with Bank of America and Citigroup, asking the banks not to finance technology that is CO2 emitting.

"After the subprime loan debacle, the banks can no longer just say trust us," said Lowe. "It is not about trust any, more it's about show me."

Lowe concluded that ICCR sees the building of new coal-burning power plants as a mistake, for reasons beyond the many covered in the report. Lowe mentioned the environmental impact of coal mining, and the costs and problems of delivering coal to the power plants on bottlenecked railroads. One of largest issues of building more coal-burning power plants for ICCR is that large centralized power plants are no longer the answer to the need for more electricity.

Instead of rushing to build more power plants, US utilities should seriously explore energy efficiency and conservation. Lowe suggested looking at the energy efficiency policies already in place in California.

"We have a wasteful energy system in this country." Lowe said. "If you look at the US, we waste more energy than most countries produce. If you are looking for the easiest and cheapest way to create new energy, look at using the energy we are producing now, reach for the low hanging fruit."

 

 
Home
| Reports | SRI Financial Professionals Directory | Tools | News | SRI Performance and Trends | About Us | Contact
© SRI World Group, Inc. - All rights reserved
Terms of use - Privacy Policy - OneReportTM Network