Stepping Off the Path Paved with Coal

1
Stepping Off the Path Paved with Coal

• Barbara Freese
• Consultant for
• Union of Concerned Scientists
• presentation to the
• Wisconsin League of Women Voters
• June 15, 2007

2
New coal plants in the works

• Huge wave of new coal plants announced across US
• federal list of 151 proposed or recently-built
  plants
• majority using subbituminous and lignite
• represent a 25 increase in US power sector CO2
  emissions, and 10 increase in US CO2 emissions
• Source US PIRG, Making Sense of the Coal
  Rush The Consequence of Expanding Americas
  Dependence on Coal, July 2006.

3
Climate Science
Arctic sea ice in 1979
Arctic sea ice in 2003

• Powerful scientific consensus on global warming
• Damage already occurring
• Much worse lies ahead, including risk of abrupt
  changes
• Steep emission reductions (60-80 by 2050) needed
  to avoid dangerous warming

4
Climate policy response - global

• Kyoto and beyond US isolated and under
  increasing pressure to act
• G8 just agreed to
• work toward substantial global emission cuts
• consider seriously halving global emissions by
  2050

5
Policy response states

• Regional cap and trade systems emerging in
  Northeast (10 states), the West (6 states), and
  under consideration in Midwest
• Reduction targets of 60-80 by mid-century in
  many states, with interim targets
• require wholesale changes in energy systems,
  starting ASAP
• Renewable electricity standards in 23 states plus
  DC
• covering over 40 of US electricity

6
Policy response - federal

• in 2005 Senate passed resolution calling for
  market-based emission limits
• climate much higher priority of
  Democratic-controlled 110th Congress
• Multiple cap-and-trade proposals already
• Sens. McCain/Lieberman/Obama (S.280)
• Sens. Sanders/Boxer (S.309)
• Sens. Feinstein/Carper (S.317)
• Sens. Kerry/Snowe (S.485)
• Sen. Bingaman
• Rep Waxman (H.1590)
• Hearings in House Senate in January
• Supreme Court ruling in Massachusetts v. EPA
  increases pressure to limit CO2

7
Climate proposals in 110th Congress
8
What is cap-and-trade?

• Caps aggregate emissions from group of sources
  instead of source-by-source limits
• Regulator issues an allowance (permit) for each
  ton of CO2 allowed under cap
• Sources must own an allowance for each ton
  emitted market develops
• Price depends on supply and demand
• Can work well if
• cap set in right place
• loopholes/offsets limited
• allowances auctioned, not allocated

9
Cap-and-trade has widespread support

• Many major US corporations
• Five of the nations ten biggest power companies
  (and 3 others oppose law but admit its coming)
• Dozens of evangelical Christian leaders
• US Climate Action Partnership

10
Coal plants targeted by all bills
11
Why Is CO2 Risk Being Ignored?

• Investor owned utilities believe they can pass
  costs on to ratepayers?
• Not if regulators find the investment is
  imprudent, as ignoring future regulatory costs
  surely is
• Utilities believe new plants will be
  grandfathered into cap-and-trade i.e.,
  allocated allowances for free
• Creates perverse incentive to hurry up and
  increase emissions

12
A dangerous gamble

• Strong and growing opposition to allocating
  allowances to new plants among state and federal
  policymakers and private sector
• Assuming grandfathering is flawed thinking and
  a dangerous business strategy for the utilities
  investors and shareholders...
• Senators Jeff Bingaman and Barbara Boxer, Chairs
  of Senate Energy and Environment Committees
  (Dallas Morning News, Jan. 19, 2007)
• Northeastern states many are opting for 100
  auction of allowances (i.e., no allocations at
  all)
• US Climate Action Partnership calls for
  cap-and-trade with no grandfathering

13
What is the costof future CO2 limits in the US?

• Mid-range CO2 costs will add about 2 cents/kWh to
  coal power costs
• increases coal plant costs by one quarter to one
  third
• risk of even higher increases

Source Synapse Energy Economics, Climate Change
and Power Carbon Dioxide Emissions Costs and
Electricity Resource Planning, May 2006.
14
Costs for new pulverized coalplants are on the
rise

• US and global coal rush creating supply
  constraints for equipment and skilled labor
• At least 4 plants have announced 30-80 capital
  cost increases in the past year

15
Construction costs on the rise
16
Renewable energy costs are falling
Levelized cost of energy in constant 20051
Source NREL Energy Analysis Office
(www.nrel.gov/analysis/docs/cost_curves_2005.ppt)
1These graphs are reflections of historical cost
trends NOT precise annual historical data. DRAFT
November 2005
17
Coal Polluting and Costly

• Big Stone IIs backers estimate costs at 70/MWh
  for investor-owned utilities (not counting
  additional 19/MWh CO2 cost)
• Conservation/efficiency energy savings have cost
  on average 10/MWh in Minnesota over last ten
  years
• savings measures have 13-year average life
• Wind power in Minnesota (including an extra
  charge to integrate up to 25 wind into the power
  grid) would be 51/MWh (with Production Tax
  Credit) or 64/MWh (without it)

18
EIA Reducing carbon in electricity means
replacing or decarbonising coal

• National Commission Case 4 (2x rate of
  reductions 49/ton ceiling)
• Only scenario with overall carbon reductions
• 44 by 2030
• Coal makes the difference

Source EIA, Energy Market Impacts of Alternative
Greenhouse Gas Intensity Reduction Goals, March
2006. http//www.eia.doe.gov/oiaf/servicerpt/agg/p
df/sroiaf(2006)01.pdf
19
Regional policy developments

• WI, MN, IL and IA stakeholder panels planning
  global warming strategies
• MN 2007 global warming legislation
• Aggressive goals 80 cuts by 2050, interim goals
• Stakeholders plan must study cap-and-trade
• Midwest regional consultation required
• PUC must factor CO2 costs into decisions
• MN RES Strongest in nation in
• MN efficiency goals double performance of best
  utilities

20
Conclusions

• we are now making a major new commitment to the
  path paved with coal, with enormous environmental
  and financial risks
• alternative paths are not only cleaner and safer,
  but will be cheaper than coal
• that message is just beginning to penetrate
  through to regulators, utilities, ratepayers, and
  Wall Street
• were at a leverage point in history, where a
  little pressure can have a major impact

21
Contact information

• Union of Concerned Scientists website at
  www.ucsusa.org (search for Gambling with Coal)
• barbarafreese_at_comcast.net