A couple years ago I had lunch with a top executive of one of the state’s leading utilities. Here’s the gist of the question I put to him.

“I know you guys want to build a new coal plant nearby here, and I believe you when you say you fully intend to sequester CO2 down the road. But here’s the problem. You can’t even begin building without first raising the price of electricity. We can argue how much – 15, 20, 30 percent – but we all know it’s going to go up.”

He nodded.

“Well, I’m not an economist, but I do remember from Econ 101, that if you raise the price of something, demand goes down. Furthermore, if you raise the price of something, for which the market is already soft, where demand is already flat or declining, and for which people have readily available alternatives – demand could go down a lot. So you raise rates – demand goes down, revenue goes down, you can’t pay the cost of your note for the new plant.”

“So you raise your rates again. See what I’m getting at? It’s a downward spiral. We’ve seen this before in the 70s and 80s, when, in the wake of the oil price rises, people realized for the first time that energy conservation made sense, and electrical use flattened out – completely flummoxing the economic planners who said that would destroy the economy.”

“Your position is unenviable. If you build a giant new power plant, you’re riding into a box canyon economically – the economics of the death spiral are unassailable – and frankly, I think the last thing this state needs is another one of our flagship companies to be circling the drain.”

We finished our lunch and parted amicably.

A few months later, the company put the project on hold.

Now, 18 months later, that particular project has been cancelled. The reasons, according to acompany press release:

The utility said it was cancelling the new clean coal plant project because of the same market factors that led it to defer development of the project in May 2010.  Those primarily are reduced customer demand for electricity due to the recession and slow economic recovery, surplus generating capacity in the Midwest market, and lower natural gas prices linked to expanded shale gas supplies.  Lower natural gas prices make new coal-fired power plants less economically attractive.

I wonder if it also had anything to do with this recent announcement out of Minnesota?

Minneapolis Star-Tribune:

Minnesota’s second-largest electric company has spent $437 million on a recently completed coal-burning power plant 85 miles west of Fargo.

Built with the encouragement of North Dakota’s political leaders, the plant burns lignite mined in that state. It has best-available pollution controls and draws city wastewater instead of fresh water. At full power, the new plant could supply about 63,000 homes.

Instead, owner Great River Energy is shutting it down.

While investing hundreds of millions of dollars in power plants always carries risks, the tale of the Spiritwood Station is an extreme case. The head of an industry trade group couldn’t remember another new U.S. coal plant built to supply power all the time that was immediately mothballed.

A combination of factors made Spiritwood a financial drag on Great River Energy (GRE), a Maple Grove-based wholesale cooperative serving 650,000 customers from the Iowa state line to the Canadian border. These included slower-than-expected growth in electricity demand, lower prices on power sales to the grid and the loss of a key industrial customer for some of the plant’s steam.

“We could run it, and lose money half the time,” said Rick Lancaster, vice president for generation at GRE.

A soft economy is certainly a factor in this situation. But soft or not, the economic fundamentals don’t change. And the dynamic is the same, whether the new facility is coal, nuclear, or gas. The advantage that gas turbines have over coal and nukes is that they are quicker to build, meaning cost of capital is lower.

And, a quicker build means you don’t have as distant a time horizon to project electrical demand and economic conditions. Renewables, particularly, at this stage, wind, are even much quicker to build, and can be built incrementally – 10, or 50, or 200 MW at a time, instead of betting the farm on a 5 or 10 billion dollar project, you can plan, and build within your means, in a time frame you can see much more clearly.

Making it even more interesting is the emerging economics of solar photovoltaics, which have only come into sharper focus in the last year. You can argue the time frame, but at some point, in most parts of the country, over the next 3, or 5, or 10 years, photovoltaics become cheaper to install than buying power from a coal burning utility.  That’s when the paradigm shift begins, with unpredictable results — but a coal project starting today might well be nearing completion just in time for its obsolescence.

A lot of the ideas we’ve had about power generation for the last 80 years or so are about to go out the window, in an industrial revolution that’s going to make the internet seem like a minor speed bump.  In fact, the new electrical grid will use the technology of the internet, and look a lot more like the internet than the current centralized arrangement.  This will be a time of creative destruction for utilities – some of whom won’t make it.

There’s no guarantee for anyone, but those that tie themselves up with enormous financial commitments to centralized projects that do not support the emerging paradigm are sure to have a tougher time surviving.

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Coal in your stocking: Guide details North American coal-burning emissions.

It’s that time of year when people compile Top 10 lists—10 best of this, 10 worst of that, 10 best funny cat videos, 10 worst campaign ads (which presupposes the questionable assumption that there are any good campaign ads).

Just in time for the coffee table book season, the North American Commission on Environmental Cooperation has published an online volume (Spanish and French versions also available) detailing the air emissions of some 3,000 power plants in the U.S., Canada, and Mexico—the three parties to the NAFTA trade deal that has a lesser-known environmental side agreement that spawned the commission.

The document, which details top 10 lists for power plants in each of the three countries, is a treasure trove for pollution voyeurism, although the data is of 2005 vintage, the most recent year the commission could pull together information from across the continent. Being parochial, we’ll let our Canadian and Mexican readers explore the emissions profiles of their countries’ champion power plants. Here in the U.S., the winners, all of them coal-fired, are:

Carbon dioxide – Top spot belongs to the mammoth Scherer facility near Macon, Ga., a 3,520-megawatt plant owned by a group of Southeastern utilities. Scherer emitted more than 23.4 million tons of CO2 in ’05. Going full blast, Scherer burns nearly 1,300 tons of coal per hour. But Scherer’s CO2 emissions rate—tons per megawatt-hour—was not the highest. Within the top 10 for CO2, that honor goes to Westar Energy’s 1,857-megawatt Jeffrey Energy Center, a plant burning Powder River Basin coal north of Topeka, Kansas, that powered out 1,086 kilograms of CO2 per megawatt-hour.

Mercury – The top emitter was Luminant’s 1,880-megawatt Monticello plant in northeast Texas, which burns mostly lignite, a low-grade coal variety, but also throws some higher quality Powder River Basin coal into the mix. A total of 977 kilograms of mercury went out Monticello’s stacks in ’05.

Sulfur dioxide – Georgia Power’s 3,500-megawatt Bowen plant, north of Atlanta, released more than 169,000 tons of SO2, an acid precipitation and particulate precursor, back in 2005. Scrubbers went operational at Bowen three years later with the goal of knocking SO2 emissions down by 95 percent, so the commission’s numbers don’t reflect the better news coming out of Bowen.

Nitrogen oxides – The 2,040-megawatt Four Corners coal plant, located on Navajo land in northwestern New Mexico and owned by a consortium of Arizona, California, New Mexico, and Texas utilities, released 37,870 tons of NOx, another acid precipitation and particulate precursor. Four Corners is the focus of a legal battle over its emissions; a coalition of tribal and environmental organizations filed suit two months ago under the Clean Air Act’s New Source Review provision to force plant owners to install NOx controls.

There’s more data for numbers junkies to trawl through in an interactive database here. Meanwhile, I’m going Christmas shopping. Don’t think I’ll be buying any books about coal for the kids’ stockings, however.

Read more: http://www.thedailygreen.com/environmental-news/blogs/republican/dirtiest-coal-plants-1211#ixzz1gUEWOpAU

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Coal-fired Spiritwood Station was built to serve electric co-ops. But it’s turned into a money drain.

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It’s now become de rigueur among the radical right wing rhetoricians to characterize any government support of America’s green energy sector as wasteful, fruitless, and scandalous. They greeted with glee the collapse of the government supported solar company, Solyndra, America’s first major casualty in our race with China to dominate the “new energy” economy. With Solyndra dying on the battlefield—its marketplace choking on inexpensive Chinese solar panels—the right wing’s response was to hoist the white flag and declare defeat in the war for global cleantech leadership. That brand of “Can’t Do” cowardice is a boon to the carbon and nuclear power incumbents who fund so much of the right wing’s activities—but it’s bad for America.

Leveraging the aberrant Solyndra bankruptcy, these groups have launched an orchestrated series of attacks against the renewables sector by trying to discredit other companies, even those that are driving America forward with innovative solutions that actually do compete on a global basis. For example, last month, Fox News ran a story insinuating that SunPower received a loan guarantee for its Central Valley Solar Ranch project because of its political connections Congressman George Miller. The story also suggested that SunPower was struggling financially and posed another risk to taxpayers—a la Solyndra. The truth is that SunPower is one of America’s strongest solar manufacturing companies and Mr. Miller had nothing to do with the company receiving a loan guarantee for its Central Valley Solar Ranch Project. To Fox News and other right wing media sources, the facts meant very little. Their intent is only to suggest wrong-doing in an attempt to undermine the Obama Administration and its clean energy goals.

Last week found the right wing echo chamber, from Fox News to the New York Post, and the conservative blogosphere in an anti-green frenzy based on faux facts from a new book, Throw Them All Out. The author of this far-fetched screed is Peter Schweizer, Sarah Palin’s foreign policy guru, currently employed by the Hoover Institution, a think tank funded largely by oil interests (e.g., Exxon, ARCO, Transamerica, and Richard Mellon Scaife’s oil and banking fortune) to craft the philosophical underpinnings for unregulated pollution, unrestricted corporate profit taking, and massive corporate welfare for the carbon/nuke incumbents.

Thanks to a mention in Schweizer’s far-fetched opus, I got a shout out, last week from most of these crackpot gas bags. The Daily Mailsummarized my supposed crimes in its headline: “JFK’s nephew received $1.4 billion dollar taxpayer bailout for his struggling green energy firm.”

All of the reported “facts” in this blogosphonic barrage were Schweizer’s inventions. Schweizer claims that BrightSource Energy received a government bailout due to political influence exerted on behalf of VantagePoint Capital Partners, where I am a partner and which is the largest institutional shareholder of BrightSource.

The actual facts do not support Schweizer’s claims. BrightSource Energy did not receive a bailout. Rather, the Ivanpah project, a 392 megawatt solar thermal project in the Mojave Desert that will provide clean power to 140,000 homes, received a loan guarantee from the Department of Energy (DOE). Ivanpah, which broke ground in October 2010, is majority owned by Google and energy giant NRG. BrightSource is a minority owner of and the technology supplier to the Ivanpah project. The underlying loan from private investors is fully secured, and pays interest that will earn a healthy return for U.S. taxpayers.

Unlike Solyndra which received corporate financing from DOE, and which had no assurance that it would be able to sell its product, Ivanpah and the Central Valley Solar Ranch projects have contractual commitments from California’s largest utilities to buy all of its power at fixed prices. This is comparable to building a new hotel with the guarantee that it will have 100% occupancy rates for 20+ years.

Schweizer’s claims that the loan guarantee works out to a cost to taxpayers of $1 million per job is also a canard.

The Ivanpah project is one of the largest infrastructure projects in the nation and the largest solar thermal plant under construction in the world. The project’s three year construction phase will create 1,400 highly-skilled trade, engineering and construction jobs at peak. These are high paying union jobs in a region plagued by one of America’s highest unemployment rates. The project will generate $250 million in earnings for these construction workers and, over its 30 year life, will produce $650 million in earnings for workers on the site, including the 90 permanent jobs required to operate the plant.

Finally, the $2.2 billion Ivanpah project is an investment in America’s future with substantial indirect economic benefits locally and across the nation. The majority of the project’s supply chain is being sourced domestically across 17 states, driving investments throughout the country and creating additional jobs in other areas of the United States that have been adversely affected by the economic downturn. The Ivanpah project is also generating $300 million in state and local tax revenues over its life.

The right wing’s campaign against the DOE’s support of renewable energy is not in our national interest. The DOE loan guarantee program has been extremely successful in providing debt financing to innovative energy projects in the wake of the 2008 credit market challenges. Access to capital is a crucial component of building innovative energy infrastructure and creating economic benefit. The DOE loan guarantee program has also been very successful at attracting private capital to these projects. Each dollar appropriated for the program leverages $13 dollars in private sector investment. As of August 2011, DOE had made commitments to 37 clean energy projects, leveraging private investment of more than $40 billion. This includes more than 10 utility-scale solar power projects in the Southwest, including SunPower’s Central Valley Solar Ranch and BrightSource’s Ivanpah. These projects are estimated to create tens of thousands of jobs across the country.

Where is the Right Wing Opposition to the Obscene Subsidies to Carbon and Nuke?

The frenzy against government support for green energy is ironic considering the silence from those same quarters regarding the hundreds of billions of dollars in annual subsidies and externalized costs flowing from government and the American public to the carbon and nuke companies that fund the right wing think tanks and the conservative blogosphere.

The same DOE loan guarantee program that supported the solar projects gave an astonishing $8.3 billion loan guarantee—many times the size of the solar projects—to Southern Company to build two nuclear power plants. Nuclear power is an industry with a product so expensive it cannot compete in any version of free market capitalism. Big nuke is totally dependent on massive, monstrous public and government subsidies at every stage of its life. Oil is a close second. A comprehensive inventory of oil subsidies by former California EPA Chief Terry Tamminen, in his acclaimed book Lives Per Gallon, calculates U.S. subsidies to the oil industry at upward of one trillion dollars annually!

The Rise of Green Energy

This blogosphere wrangling is part of a larger struggle pitting disruptive technologies like LED lights, electric cars, and renewable energy such as wind and solar—the clean, green democratic, abundant, and patriotic fuels from heaven—against the powerful incumbents of coal, oil, and nuke—the destructive, plutocratic, largely foreign owned, addictive, poisonous, destructive, and war breeding fuels from hell.

The green fuels are winning. Solar power is now at or near grid parity in many U.S. states. That means that solar generators can deliver electricity to consumers at or below the cost of coal or oil, without even considering the catastrophic health and environmental costs that these dirty sources create. Energy industry giants like NRG, which owns coal and nuke fleets, are moving aggressively into solar. “Solar is the future,” says NRG CEO David Crane. “Over the long term, solar won’t need the government to drive adaptation—the pace of innovation is so rapid and the costs are dropping so quickly that the marketplace will ultimately force the transition. Government incentives are important in that they will drive a quicker adaptation and keep American companies in the game.”

Crane points out that his vendors are already offering solar panels at slightly less than $1.00 per watt, leading to an all-in cost of installed solar on a distributed basis of $2.50/watt. This, according to Crane, translates into 12¢/kilowatt hour, making home grown solar energy cheaper than the grid in 20 states.

Experience shows that these industries are demonstrated jobs producers. There are already more Americans employed by the solar industry (110,000) than there are coal miners (90,000), and the wind industry (75,000) is rapidly expanding its workforce.

The only questions now are: How fast will the transition occur? Which nations will lead the way and reap the financial rewards of that leadership?

Unfortunately, due to the outsized influence of big coal, oil, and nuke on our Congress, America is lagging.

China’s Leadership

China’s bold strategy is to dominate the new energy economy with giant investments in wind, solar, LED light bulbs, smart grid systems, and electric cars. Despite our strong lead among entrepreneurs, the American government’s willingness to compete with the Chinese in these domains has been anemic. The Waxman-Markey bill, which passed the House and then died under pressure from the carbon cronies in the Senate, would have increased solar deployment in America by a mere 37% by 2020. The Chinese have already committed to increase their solar development by 20,000% during that period and wind development by 1200%. While the right wing whines about a $1.6 billion loan guarantee to a solar project, the Chinese are funneling $758 billion to their solar and wind industry over 5 years.

I commend the Chinese for their commitment to transition to a green energy economy. But I refuse to accept the right wing narrative that America can no longer compete in the world marketplace. Americans still lead the world in patents filed and the other indicia of entrepreneurship. The promising new technologies and young green tech companies that I see daily are challenged principally by a lack of capital available from our banks and government. This is more than an issue of national wealth and prosperity—our national security is also at stake. The war by America’s carbon and nuclear energy industries and their right wing allies, against our country’s burgeoning cleantech industry is damaging our economy and subverting our national security, just as it has in the past led us into oil wars. When I was a boy, America owned half the wealth on Earth. We lost that advantage mainly due to our carbon addiction, which still causes us to hemorrhage nearly $750 billion annually in American wealth—the cost of importing foreign oil. The Chinese would naturally like us to spend what’s left of our national wealth purchasing Chinese solar panels, Chinese LED lights, and Chinese wind turbines and electric cars.

Democrats and Republicans in Congress, many in the thrall of Big Carbon, are sitting on their hands as the hemorrhage continues. The incumbents are able to control the political process in Washington with the support of their right wing media flacks, and with hundreds of millions in annual contributions and lobbying. Such investments allow the incumbents to reap hundreds of billions in annual subsidies from U.S. taxpayers, artificially ballooning their profits. These are self-destructive policies for America. With the same resolve that established America’s industrial and technological greatness in the 20th century, leading the transition to a new energy economy is America’s best hope for true national security, prosperity, and restoring our global leadership and moral authority.

——–

Robert F. Kennedy, Jr. is President of Waterkeeper Alliance, Senior Attorney for the Natural Resources Defense Council and a Partner in VantagePoint Capital Partners.

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But Companies Have Ample Cash Reserves to Cushion Reductions

Download complete list of ACCCE companies’ cash reserves (.xls)

By December 16 the Environmental Protection Agency will promulgate its final rule requiring coal-fired power plants to reduce their emissions of mercury, arsenic, acid gases, and other toxic chemicals. The EPA notes that these safeguards will reduce premature deaths by 17,000 people annually as well as prevent 12,000 hospital visits and 120,000 cases of aggravated asthma. The economic benefits could outweigh the costs by up to $14-to-$1.

Yet a concerted cadre of big dirty utilities and coal companies are doing everything in their power to scuttle or delay these essential safeguards 21 years after the Clean Air Act required them.

The American Coalition for Clean Coal Electricity, or ACCCE, is a coal industry coalition leading the charge to block the mercury and air toxics reduction rules. These efforts includespending $35 million on misleading television ads. Its members include major utilities such as Southern Company and DTE Energy. Huge coal companies are also major ACCCE supporters, including Arch Coal and Peabody. Other members include railroads that haul coal.

ACCCE is a vocal opponent of the air toxics rule for utilities. They even have a “countdown clock” for the days until the safeguards are issued. Its members are primarily concerned that the air toxics rule “is the most expensive rule the EPA has ever written for coal-fueled power plants.”

But this claim ignores the fact that the 22 ACCCE companies have nearly $18 billion in cash reserves, which should substantially ease their ability to withstand any economic impact of cleanup.

A Federal Reserve report released this month documented the massive cash reserves held by American corporations. The Wall Street Journal reported:

Corporations have a higher share of cash on their balance sheets than at any time in nearly half a century, as businesses build up buffers rather than invest in new plants or hiring.

The ACCCE companies are part of this cash-rich phenomenon. An analysis of the ACCCE member companies’ 10K forms filed with the Securities and Exchange Commission determined that they had $17.8 billion in “cash and cash equivalents” on hand at the end of the last reporting period on September 30, 2011. (Two companies’ last reports were from earlier dates.)

The nine ACCCE utilities that would have to reduce their emission of mercury, arsenic, and other cancer-causing pollutants have combined cash reserves of nearly $7 billion. The cash reserves of these nine companies is not much less than the $11 billion that the EPA estimates that all coal-fired power plants will spend to meet these new pollution-reduction standards. Seven of these companies are just a small portion of the 220 investor-owned utilities that produce nearly three-quarters of America’s electricity. The other two companies are cooperatives.

Companies hold cash for various purposes. But whatever the reason these companies hold large reserves, they strongly suggest that the utilities possess ample financial resources available to invest in pollution-reduction equipment essential to protect public health.

And investing cash in pollution control will create jobs. An analysis by the University of Massachusetts determined that the air toxics utility rule combined with reductions of acid rain and smog pollutants from power plants under the cross-state air pollution rule would create 1.5 million jobs over five years.

Coal producers and railroads, too, are sitting on mountains of cash reserves to cushion any dip in coal consumption as some utilities rely more on cleaner fuels after the mercury rules take effect. Our analysis found that the ACCCE companies in these industries held a total of $5.4 billion and $5 billion in cash reserves, respectively. These resources are from seven coal companies and four railroads.

Coal-fired power plants are one of the largest sources of uncontrolled harmful air pollution in the United States. The EPA determined that:

Power plants are the largest source of several harmful pollutants. They are responsible for 50 percent of mercury emissions, over 50 percent of acid gas emissions, and about 25 percent of toxic metal emissions in the United States.

Yet ACCCE’s member companies want to continue jeopardizing the public’s health with this unfettered pollution. They have ample cash reserves to easily withstand any economic impact of pollution reductions. ACCCE and its companies are furiously pressuring Congress to block or delay the air toxics reduction rules. Congress must ignore their pleadings and allow these long-overdue health protections to take effect next month.

Download complete list of ACCCE companies’ cash reserves (.xls)

Daniel J. Weiss is a Senior Fellow and the Director of Climate Strategy and Matthew Kasper is an Energy intern at American Progress.

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A big part of what saved the freight rail industry from disaster lies not far beneath the rolling grasslands of eastern Wyoming.

Larry Kaufman, a transportation expert and author who worked in public affairs at BNSF predecessor Burlington Northern when it first tapped the vast coalfields of Wyoming’s Powder River Basin in the 1970s, said coal is a great business for railroads. They’ve been hauling it for more than a century, and they invested billions of dollars on track and locomotives to move it.

Coal still generates half the country’s electricity, and BNSF Chief Executive Matt Rose makes no apologies for it. BNSF runs dozens of mile-and-a-half-long coal trains every day from mines in Wyoming to power plants as distant as Georgia and Texas, and it’s looking to expand its export coal business to serve growing demand overseas.

“We could eliminate all of our coal assets in this country, and it would be a disaster,” Rose said in a recent interview. “We’re going to need coal for a long time.”

While freight railroads have aggressively pitched their environmental friendliness, many environmentalists don’t like the fact that railroads haul half a billion tons of the fossil fuel a year, and that an increasing amount of it is fueling the growth of U.S. competitors such as China.

“We’re supporters of rail as a mode of transport, but we do believe that what’s being shipped is important,” said Ross Macfarlane, a senior adviser at Climate Solutions, a Seattle-based environmental group. “Coal is a dirty and polluting commodity.”

Some residents and environmentalists in Bellingham, Wash., oppose a proposed export terminal that could handle 24 million tons of coal a year from the Powder River Basin, brought there by BNSF trains to load onto Asia-bound ships.

“We believe as developing countries develop, they are going to need enormous amounts of energy,” Rose said. “People are building coal plants all over the world.”

But environmental concerns might not be what sends coal trains into the history books along with the steam locomotive or the telegraph operator. Railroads can make money hauling other goods, too, and they aren’t spending hundreds of millions of dollars on new facilities to run more coal trains.

For one thing, they’re hauling turbines for wind farms. They’re also moving the heavy equipment used in unconventional natural gas drilling. As natural gas becomes more abundant and less expensive, it could displace coal at power plants nationwide.

But the big bet is intermodal service, picking up containers that also travel aboard ships and truck trailers. Rose’s railroad recently spent $85 million to eliminate a major bottleneck in New Mexico on its busy Chicago-Los Angeles corridor. This improvement was meant to speed up dozens of daily trains of containers and trailers.

BNSF also is building a $250 million intermodal terminal in Edgerton, Kan., about 40 miles southwest of Kansas City, and a $500 million terminal is planned for Southern California, the primary gateway for manufactured goods from overseas to consumer markets throughout the U.S.

While the coal business now accounts for a quarter of railroad revenues, Kaufman said that coal’s future boils down to simple economics, and industry leaders know it.

“They understand what’s happening to coal, and they understand they’re not able to change it,” Kaufman said.

Read more: http://journalstar.com/business/local/article_3041fa2c-1a90-59f0-9fb9-e68ebebfea15.html#ixzz1d9IKsmqs

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The shale-gas revolution has not served John W. Rowe’s best economic interests. Nevertheless, the chief executive of Exelon Corp. has become an evangelist.

Rowe, whose Chicago company owns Peco Energy Co., said in an interview Friday that before shale gas came along, Exelon made so much money generating power in high-priced electricity markets that one of his company’s main concerns was “how to keep people from taking [the profits] away from us.”

Fast forward three years. An abundance of gas produced from formations like Pennsylvania’s Marcellus Shale has driven down gas commodity prices and, by extension, the price Exelon gets for generating electricity. Exelon’s stock today is trading at half its 2008 peak.

“You watch next year our earnings will be down compared to this year, and the principal reason for that will be low natural gas prices,” said Rowe, who was visiting Philadelphia to speak to Wharton Energy Conference 2011 at the Union League.

“Low gas prices are good for America, not quite so good for Exelon,” said Rowe, who is retiring next year after his company completes a planned merger with Constellation Energy Group of Baltimore.

Rather than erecting barriers to natural gas, Rowe believes government should embrace the newfound domestic fuel source that produces less pollution than other fossil fuels such as coal or petroleum.

“What we have today in Pennsylvania, in the whole Northeast, is the great domestic blessing of cheap natural gas,” he told the Wharton audience. “It gives us a bridge, at least a 10-year bridge, maybe a 20-year bridge, in which we can produce much cleaner energy at a low cost. That’s a unique blessing.”

Lower gas costs are suppressing more than electricity prices, said Denis P. O’Brien, Peco’s chief executive, who joined Rowe at the Wharton event. O’Brien said that the utility’s half-million natural gas customers in suburban Philadelphia are spending $300 million less a year – a 50 percent reduction – than when gas prices peaked in 2008.

“That’s a significant energy savings,” he said.

The rapid emergence of shale-gas in recent years – it now accounts for about a quarter of the nation’s natural gas supply – has forced government officials and corporate planners to recalibrate their outlooks.

Exelon, the nation’s largest producer of nuclear power, is no longer looking at building new reactors because of shale gas and this year’s disaster of Japan’s Fukushima reactors, Rowe said.

“I cannot build a new nuclear plant to compete with gas.” Rowe, 65, told the Wharton audience. “I cannot build a new nuclear plant to compete with what China can build. . . . But I can build gas-fired capacity in ways that allow Pennsylvania to compete with China.”

Rowe’s visit was part of what Exelon officials are calling his “farewell tour” before his retirement after 14 years at the company’s helm. He says his greatest achievement was engineering the merger in 2000 of Chicago’s Unicom with Peco to form Exelon, a Fortune 100 company that will become the nation’s largest utility if regulators approve the Constellation merger.

He was a strong advocate for climate legislation, which failed in Congress in 2008 and now appears to have little political support. The proposal would have created a market-based structure to penalize utilities that produce greenhouse gases, and reward those, like Exelon, that have jettisoned dirty power plants.

“While our society continues to debate the climate change question, our conviction remains that the science is clear – climate change is real and our modern, industrial world is a significant contributing factor,” Rowe wrote in an update this week of Exelon 2020, the company’s strategic plan on reducing carbon emissions.

Now Rowe, as part of his closing act, is campaigning to persuade Congress and the Obama administration to stay the course on proposed rules to limit ozone pollution or toxins such as mercury and arsenic.

He said the Chicago utility he ran, ComEd, decided in 1999 to sell its coal-fired power plants to concentrate on cleaner energy sources to prepare for stricter regulations it knew were coming. Some managers of coal-dependent utilities, who are now lobbying to relax the rules, made different bets.

“They knew the new regs were coming, they didn’t work on getting ready to comply and now they’re saying ‘We didn’t have time to comply,’ ” said Rowe. “We knew they were coming when we sold the ComEd coal fleet 11 years ago. This is no great shock. You’re supposed to be preparing for these things.

“They would say with some justification that some of their utilities are lower-cost than ours,” he said. “Well they won’t be when they do the cleanup they’re going to have to do.”

A major part of the message he delivered in Philadelphia is that government should allow market-based incentives to work along with enforcing the Clean Air Act to find the cleanest, cheapest solution.

He dismisses the arguments that regulators butt out altogether – government has a role to establish rules to keep the market honest, and to protect the environment and public safety.

“Hardly any real business person believes you have either all government or no government,” he said.

But government attempts to dictate which energy source should prevail inevitably produce costly results, he said. While political interests promote expensive solutions ranging from solar power to clean-coal technology to generate green jobs, the most cost-effective solution, natural gas, is staring the country in the face, he said.

“We’ve got one party that always wants wind and solar, we’ve got another party that wants coal and nuclear,” he said. “They’re all well intentioned in their way, but the market is telling them, ‘Oops, we just came up with something that both of you want, and it’s domestic and it’s cheaper.’ ”

He acknowledges that natural gas is imperfect. He said the industry must still improve controls to reduce methane escaping into the atmosphere from well sites and pipelines, and regulators must be vigilant to maintain best practices to reduce the risk of contaminating groundwater supplies.

But he said he believes most fears about hydraulic fracturing, the technique that drillers are using to unlock natural gas from tight shale formations, “will mostly prove untrue.”

And he acknowledges that the greenhouse-gas benefits of natural gas begin to recede at some point in the future. Though more efficient and cleaner than coal, natural gas still produces greenhouse gases. But for now, he says that cleaner alternatives are not as competitive.

“Somebody who really believes that the climate problem is the biggest problem we face will correctly point out that gas only deals with it for 20 years, and then the carbon in gas becomes a major impediment,” he said. “Well, 20 years is a long time. Better that we should do something now than wait for a perfect solution 20 years down the road.”

Contact staff writer Andrew Maykuth at 215-854-2947, @Maykuth on Twitter oramaykuth@phillynews.com

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The chairman of a panel scrutinizing economic incentives on Wednesday called transferable tax credits given to those who produce and buy coal the poster child for what is wrong with the system.

But coal producers and users say the transferable tax credits create jobs and contribute to a reduction in the cost of electricity.

Rep. David Dank, R-Oklahoma City, is chairman of the task force on State Tax Credits and Economic Incentives. The panel is reviewing tax credits and incentives that amount to an estimated $500 million to determine if any can be eliminated.

Entities receiving transferable tax credits can sell them to raise money or use them to reduce tax liability.

“I want to discuss the coal tax credit in some depth because I think it is a poster child for just about everything that is wrong with this system,” Dank said during the panel’s meeting Wednesday.

He said the state grants a transferable tax credit to those who produce the coal and those who buy it.

“Basically, we are giving not one but two tax credits for each lump of coal,” Dank said. “That’s sort of like allowing an individual taxpayer to claim his home mortgage deduction twice.”

Dank was critical of the lobbying efforts of the industry and the passage of last-minute bills to benefit it.

“Our goal here is not to assure profits but to protect and create jobs,” Dank said.

Clay Hartley, vice president of Phoenix Coal Company based in Vinita, said the tax credits result in good-paying jobs in Oklahoma. Without them, his company would have to close a coal mine in Oklahoma due to lack of sales, Hartley said.

“The revenue from tax credits we earned was plowed right back into the company to buy newer and better equipment, to give pay raises to employees and to help absorb rapidly rising fuel prices,” Hartley said. “The tax credit money was never used to increase any executive compensation as some on this committee have inferred.”

Bob Cooper, vice president of Farrell Cooper Mining based in Fort Smith, Ark., said the coal industry provides $146 million in economic activity, generates $42 million in income and supports 1,153 full-time jobs.

Dank said the transferable tax credits have no accountability or controls in place. He said lawmakers have no way of knowing if coal producers and buyers would be making a profit without the tax credit.

Dank said it is not possible for taxpayers to subsidize every industry.

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Across the nation, old coal-fired power plants are gasping for their last breath, having survived long past their prime because of political favors and weak government regulations. They would have died decades ago if not for a fateful policy compromise in the late 1970s that exempted existing power plants from new air quality standards in the Clean Air Act.

The compromise was based on a prediction that the plants would be retired soon, but instead it gave them a whole new lease on life, with a free pass to pollute for another 30 plus years. And until recently, there was no end in sight.

These plants continue to cough up toxic pollutants like mercury, lead and arsenic into the air. They are by far the biggest producers of the power sector’s pollution, forcing millions of Americans to seek their own life support – in the form of respirators and inhalers – just to get through each day without an asthma attack.

Earthjustice litigation is taking steps to close the loopholes and retire dozens of the old plants, while cleaning up those that continue to operate. We are employing a multi-prong strategy to compel the Environmental Protection Agency to strengthen pollution standards based on the best available science and technology.

National environmental laws like the Clean Air and Clean Water acts are meant to be updated regularly to reflect the current science. Thanks to our litigation, the EPA has recently begun to deliver on the promise of our nation’s environmental laws by taking long overdue action on limiting mercury from coal, cleaning up the air in our national parks that is obscured by power plant haze, and setting national standards on water pollution. In addition, the EPA is currently on the hook for enforcing greenhouse gas emission standards, updating national standards for smog and soot.
Our goal is to end what amounts to government subsidizing of the coal power industry, and to invigorate the clean energy economy. That’s good for the climate, for our health—and for jobs. Early this year, a report by Ceres showed that the EPA’s two new air quality rules would create nearly 1.5 million jobs over the next five years because of pollution control equipment and jobs from clean energy development.

As EPA does its job and these new regulations are adopted, dirty coal plants are being forced to decide whether to pay the price of significant pollution upgrades – or shut down and replace that power with cleaner choices.

Of course, coal plant owners and their allies don’t want to have to make that choice. Even now, instead of focusing on ways to fix the economy, the coal industry is waging an all-out defensive attack on environmental protections that are good for the nation but threaten their industry’s bottom line.

Some coal plant operators have seen the writing on the wall. Since many plants are already past their prime, some are choosing to retire—a hard decision made all the easier by our litigation. For example, this spring the owner of the Trans Alta coal plant, Washington state’s largest source single source of air pollution, agreed to shut down the plant by 2025 after coming to the realization that installing the air pollution controls necessary to comply with air and water pollution standards was not a profitable venture. Currently we’re also stepping up efforts to shut down dirty, outdated coal plants in New York, Pennsylvania, Florida, Montana, Nevada, Texas, Tennessee, and the Midwest.

We’re also working to encourage clean energy alternatives. Our clean energy program includes preventing construction of transmission lines that favor coal over renewable energy sources and encouraging smart grid developments that rely on clean energy sources like wind and solar, strengthening efficiency standards for appliances and buildings, and pushing full implementation of state-level climate and renewable energy policies.

The nation is at an energy crossroads. One path cuts old ties and moves on to a clean energy future powered by a mix of next generation power sources. The other path prolongs our dependence on an energy source that is cooking the planet and making us sick. The choice is clear. Thank you for joining with us as we help build the clean energy path.

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In Central Appalachia, coal’s potential troubles are running much deeper than the proposed environmental regulations. Both public and private reviews note a reduction in production, citing not just pending federal rules but also increased competition and the depletion of the most recoverable deposits.

The coal companies concur, saying that development could migrate to regions with more accessible reserves and a lower cost of production. And while the easy target is the U.S. Environmental Protection Agency that wants to cut toxic emissions, all are acknowledging that the process is more labor intensive and therefore less profitable. That’s because the coal there is much harder dig out, leaving surface mining as the only other possibility — an even more controversial technique.

“Based on historical trend, most of the supply reduction is likely to be permanent,” says Arch Coal in a quarterly assessment. “The 2008-2010 drop is shaping up to be the largest fall-off in production yet,” in reference to Central Appalachia. That production is shifting westward, it says, citing statistics that Central Appalachia annual coal development could fall from around 200 million tons today to 99 million tons by 2035; a decade ago it was 300 million tons.

The U.S. Energy Information Administration agrees, saying that Central Appalachian coal has “higher cost reserves” that have already been “extensively mined.” That will result in more production from western states, and potentially 1 percent more a year between 2015-2035.

In this country, most of the coal comes from Wyoming, West Virginia and Kentucky. Wyoming provides about 41 percent of U.S. coal production, which is an increase from 18 percent two decades earlier. Today, the roughly 443 million tons of coal mined from the Wyoming Powder River Basin is shipped to 34 states, including those in the east. With an expanding rail transportation network, coal emanating from that area could flourish. It’s also easier to mine.

Underground mining is one issue. Surface mining, or mountaintop mining, is another that comes with regulatory impediments. Specifically, proposed EPA rules would restrict the ability of mining companies to toss aside debris by setting tougher water quality standards. It would require buffer zones around the streams while requesting mining enterprises to move in phases so that they can better monitor their environmental footprints.

Economic Diversification

What to do? U.S. senators from coal-producing states are trying to stop the EPA in its tracks, saying that the livelihoods of the affected citizens would be harmed. But perhaps the longer range view would be the diversification of the economies there, and for them to become net exporters of other fuels.

In fact, the Marcellus Region that stretches down the east coast is estimated to hold as much as 500 trillion cubic feet of shale gas. Penn State University says that such assets would create 200,000 jobs and the American Chemical Council says that 12,000 chemical-related jobs would be formed in West Virginia alone.

By comparison, the coal mining industry in all of Appalachia employs 31,000 people, says the National Mining Association. As production falls there and as EPA regs kick in, that number will decline.

“The increased competition from other sources of coal and energy has negatively impacted production in Central Appalachia, illustrating that the existence of coal reserves does not guarantee that the coal will be economical to produce or competitive with other regions,” says a report by Downstream Strategies. “The declining competitiveness is due in large part to the increased cost of producing coal in Central Appalachia, for both surface and underground mining.”

The Morgantown, WV-based consulting firm goes on to say that if West Virginia and other Central Appalachian states are to cope with a perpetual decline in coal production, policy makers will need to ensure that new jobs and fresh sources of tax revenue become available.

It is cautioning against an over-reliance on shale gas, noting the associated water quality issues surrounding it as well as a history of volatile natural gas prices. The firm is therefore concluding that the region needs to promote renewable energy. It is suggesting a renewable portfolio standard whereby utilities would have to supply a quarter of their power from green sources by 2025.

Blaming coal’s woes on the proposed environmental regulations tells only a fraction of the story. The rest can be explained by competition from other coal states as well as from cheaper and cleaner fuels. That makes the labor-intensive pursuit for coal in Central Appalachia a tougher sell and the need for fuel diversity there more essential than ever.

EnergyBiz Insider has been been nominated in 2010 and 2011 for Best Online Column by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Follow Ken on  www.twitter.com/ken_silverstein

energybizinsider@energycentral.com

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