New Coal: The Definition of Insanity

Last week, ESource held its annual forum at the St. Julien Hotel in Boulder, Colorado. The Wednesday morning plenary titled, “Wall Street and Congregations Tackle Climate Change,” brought together Marc Brammer, Director of Research for Innovest Strategic Value Advisors, and Calvin DeWitt, President of the Academy of Evangelical Scientists and Ethicists. (I was there to present later in the day on behalf of Colorado Interfaith Power & Light.)

After the two presented their respective responses to climate change and stewardship of the planet, Dan Friedlander, Executive Director of Clean Energy Action in Colorado, posed this question: there are over 100 coal-fired plants on the drawing board; how do we address climate change with those coal plants going online?*

Marc Brammer responded that construction of new coal plants at this time is ‘the definition of insanity.’ The moderator, Michael Shephard of ESource, responded that there is the very real possibility that utilities will build plants in a flurry, before regulations and risks set in. I had heard this same concern from Joel Swisher, Managing Director of the Rocky Mountain Institute, who was standing in the back of the room on Wednesday.

I caught up with Marc Brammer and Dan Friedlander after the plenary. In lieu of a follow-up phone call to talk about his presentation, Marc handed me the 37-page printout of his PowerPoint: “Climate Risk: Wall Street’s Perspective.” (He was heading to the mountains. I was heading east in the brae bio-bus. I’m writing this blog entry from the bio-bus, in Mt. Pleasant, Iowa.)

Marc’s strategic profit opportunities of cleantech/carbon go like this:

  • Sustainability” issues such as climate change are creating major risks – and opportunities – for investors worldwide
  • There is a growing demand among institutional investors for solutions and action: e.g., Carbon Disclosure Project ($31 trillion); Investors Network on Climate Risk; unprecedented shareholder resolutions in the US
  • Regulatory pressures and consumer concerns are driving accelerating demand for “clean technologies”
  • Royal Dutch/Shell predicts that renewables will account for 15% of all OECD energy production by 2020
  • World Energy Council estimates global market for renewables as up to $625 billion by 2010, and $1.9 trillion by 2020
  • Currently generating a 30% compound annual growth rate

Of climate change, Marc believes this is what we have learned so far:

Financial impact of climate change extend well beyond the ‘obvious’ industry sectors

  • Same-risk – and awareness – varies widely from company to company
  • Financial risks – and opportunities – certain to intensify
  • Early movers are already gaining competitive advantage
  • Aggressive, pro-active climate change responses need NOT be costly; in fact they can generate net revenues

*The September/October 2006 issue of Energy Central’s Energy Biz magazine records an assembly of chief executive officers from eight power companies to discuss the power picture. A few of the CEOs – including Dick Kelly of Xcel Energy but excluding the only woman, Peggy Fowler of Portland General Electric – are ecstatic about building new plants. That, even though the sidebar to the article “Co-Ops on a Building Tear” reads: “Electricity demand could be cut 19 percent nationally by 2025 with an investment of $137 billion in energy efficiency, according to a report by a Michigan research outfit. At the same time, utilities plan to build more than 150 coal-fired generation plants in the next decade, according to the Detroit Free Press.”

Here’s Walter Higgins of Sierra Pacific Resources on “what excites him”: “I never thought I’d be in the building business again, but boy am I in the building business. It’s a lot of fun to be building power plants and hooking up 60,000 customers a year.”

Here’s Dick Kelly on his “top-of-mind issue”: “You’ve got to get the regulatory approval up front. We have gone to the regulators and the state legislative body and have it written in law that we’re going to recover our investment before we spend a dime. We’ve got about $5 billion worth of projects that we’re going to recover before we actually start spending the money. If you have that kind of up-front support, then you can go to investors and they’ll lend you the money.” (Translation: Xcel’s bad credit rating has limited its financing options, so Xcel requested that ratepayers assume the risk of the coal-fired plant which Xcel freely admits in filings is being built to satisfy Wall Street; regulators like COPUC Chairman Greg Sopkin attend utility meetings where he learns, according to the Denver press, “how utilities can win a rate case.” Sopkin’s shindigging in fancy hotels with the utilities clearly worked for Xcel.)

A more enlightened CEO is Michael Chesser of Great Plains Energy: “The least appreciated opportunity is energy efficiency and demand side management. For the 2010 to 2015 timeframe, it’s going to be the most cost-effective, least-risky investment we can make.”

1 reply
  1. Marc Brammer
    Marc Brammer says:

    Thanks for blogging this Heather…although I will add one small correction. I believe my response was that building new coal plants at this time is the definition of FISCAL insanity. Although both versions apply when you consider the fact that our climate system is destablizing. Wind power is cost competative, or nearly so in most of the country and the cost/efficiency curves for solar will be low enough for the average consumer to begin buying systems well before the pay back period is over for a new coal plant. All this implies that coal-based electricty will face much more competition in a more open market than it has historically faced in the past and is, therefore, a much worse investment risk now. And we haven't even begun to address the cost of carbon (probably around $20 per ton if the EU is any guide).

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