Renewables That Even Coal-Based Utilities Can Love

by Richard T. Stuebi

Generalizations are always tricky, but it’s safe to say that many employees of many electric utilities whose generation plants are mainly coal-fired have a hard time feeling very enthusiastic about renewable energy. You can imagine the rants: renewables are tiny and negligible, renewables aren’t baseload, renewables are for wimps.

So, it’s interesting to me when coal-based utilities can find something nice to say about renewables. Last week, the Electric Power Research Institute (EPRI) — the U.S. R&D organization funded by companies in the electricity industry — announced its efforts to test the addition of solar thermal collectors to fossil-fueled powerplants, in an effort to reduce the amount of fuel that these plants need to burn for generating electricity.

The test project involves powerplants operated by Progress Energy (NYSE: PGN) and Tri-State Generation & Transmission Association, and is co-sponsored by The Southern Company (NYSE: SO) — all sizable coal-based utilities.

Of course, these utilities are motivated by practical considerations more than they are by being viewed as “green”. For them, the important green is money: the use of solar thermal can reduce per-kilowatt-hour variable costs, which can increase plant profitability in wholesale power markets. And, the use of solar thermal will reduce the per-kilowatt-hour emission rates of fossil powerplants, which will reduce compliance costs under a likely future cap-and-trade program for carbon emissions.

Not to mention, the installation of solar thermal at existing fossil powerplants may qualify for compliance with renewable portfolio standards that now exist in many states — and that may come into law nationally under the Obama Administration.

It may not be as sexy as photovoltaics or wind turbines, but the economics of solar/fossil hybrid power generation should be pretty compelling. If so, solar thermal augmentation at fossil powerplants may become very widespread, perhaps unseen and out-of-mind, but nonetheless making sizable dents in the energy industry’s emissions footprint.

Thanks to Keith Johnson of the Wall Street Journal for making me aware of this EPRI study, and for quoting me in his post to the WSJ‘s Environmental Capital blog last Friday.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc. Later in 2009, he will also become a Managing Director of Early Stage Partners.

Wake Up Call

by Richard T. Stuebi

Last week, three financial titans — Citigroup (NYSE: C), J.P. Morgan Chase (NYSE: JPM), and Morgan Stanley (NYSE: MS) — announced “The Carbon Principles” to provide guidance to energy companies in managing carbon risks. The upshot of The Carbon Principles is that these big banks are stating explicitly that, going forward, they will only provide debt financing to new power projects if proponents can prove that the proposed plants will remain economically viable under future climate change policies. (Read Citigroup release on The Carbon Principles.)

Put another way, Wall Street sees federal carbon legislation as imminent, and doesn’t want power sector executives to try to “sneak in” any last coal plants before the legislation whose economics might be threatened in a carbon-constrained world. The banks’ interest is not necessarily environmentally-motivated — they simply don’t want to see any more loans go bad — but the effect of this announcement is likely to be positive.

The energy sector can’t claim they weren’t at the table. The Principles were developed by the banks in consultation with a who’s-who of power industry giants: American Electric Power (NYSE: AEP), CMS Energy (NYSE: CMS), DTE Energy (NYSE: DTE), NRG Energy (NYSE: NRG), PSEG (NYSE: PEG), Sempra Energy (NYSE: SRE), and Southern Company (NYSE: SO).

But, apparently, the willingness of these utilities to participate in the process of developing The Carbon Principles doesn’t mean that everyone in the energy sector is reading yet the writing on the wall regarding climate change. In the February 4 Wall Street Journal, reporter Jeffrey Ball quoted Jeffrey Holzschuh, Vice Chairman of institutional securities at Morgan Stanley, as saying “We have to wake up some people who are asleep.”

If a remarkable July 2006 letter from Stanley Lewandowski, the General Manager of Intermountain Rural Electric Association in Colorado is any indication, it would seem that there’s still a number of Rip Van Winkels out there in the electric utility world.

Rise and shine! Climate change is a real phenomenon, and carbon legislation is coming — let’s begin to deal with it!

Given how Wall Street didn’t seemingly exercise any leadership whatsoever on the subprime mortgage debacles, it’s refreshing to see that they’re actually out in front (at least a little bit) on the climate change issue.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

To Coal or Not To Coal?

by Richard T. Stuebi

A number of people recently have contacted me for my perspective on a large new coal powerplant being considered here in Ohio.

The plant is proposed by American Municipal Power of Ohio (AMP-Ohio), a nonprofit wholesale power supplier that provides electricity to several municipal utilities in Ohio, including Cleveland Public Power (CPP).

The implicit question is whether it’s a prudent course of action for AMP-Ohio, and for its clients such as CPP, to commit to building a new coal plant in a world in which climate change appears to be accelerating, and in which future constraints on carbon emissions to combat climate change will be relatively more burdensome for utilities that rely upon coal for power generation. Many environmental advocates clearly think that this proposed coal plant is just plain a bad idea.

I lunched last week with CPP Commissioner Ivan Henderson to get a more detailed view of CPP’s plans for subscribing to a portion of AMP-Ohio’s new coal plant. And, from my discussions with Commissioner Henderson, it appears as if there are two underreported aspects of CPP’s plan that merit consideration before objections are lodged.

First, CPP’s go-ahead to their share of the AMP-Ohio coal plant is contingent upon the results of an independent assessment by an engineering consultant (to be selected) of the viability of implementing the ECO2 CO2 carbon capture technology developed by Powerspan Corporation of New Hampshire. This technology, essentially a CO2 scrubber, is designed to remove 90% of CO2 emissions from the plant’s flue stream, and is being tested in pilot scale at the R.E. Burger powerplant owned and operated by First Energy (NYSE: FE). If the assessment indicates that the Powerspan ECO2 CO2 scrubber technology is not-ready-for-primetime, CPP is out of the deal.

Second, assuming the new coal plant is built, AMP-Ohio is committed to retiring its 1950’s vintage Gorsuch coal powerplant. Clearly, replacing an old relic with a new plant benefitting from 90% CO2 capture will lead to substantial CO2 emission reductions, relative to the status quo.

Thus, there is more to the story than might initially appear to the casual reader. Assuming that both of the above conditions apply, the construction of this new coal plant is actually a good idea, not a bad idea. The moral of the story is that environmental advocates need not have a rabid knee-jerk reaction against new coal plants, if new coal plant construction results in substantial CO2 emission reductions.

Make no mistake: I love wind energy and photovoltaics. However, they only provide intermittent sources of generation. On the electricity grid, lacking truly economic large-scale electricity storage, wind and PV cannot fulfill the role of dispatchable (a.k.a. “firm”) power.

I also love energy efficiency, and we should all do more of it. Energy efficiency can reduce our electricity generation requirements considerably. Ultimately, though, in our current society, we still will need some form of firm generation.

Coal power with 90% CO2 capture fits that bill pretty darn well. If the Powerspan technology works as advertised at reasonable economics, it might be a whole lot cheaper and more quickly available than zero-emission baseload technologies, such as IGCC with carbon sequestration or advanced nuclear designs. In which case, Powerspan is a company to watch.

Richard T. Stuebi is the BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, and is also the Founder and President of NextWave Energy, Inc.

Cleantech or Status quo Jobs?

by Nick Bruse

One of the most exciting aspects of the cleantech/sustainability sector are the opportunities presented to create completely new industries over the coming years. Transforming the way we approach housing, feeding and powering our society. Whilst at the same time attempting to maintain the quality of life, and I emphasis ‘quality’ not gluttony, and improve the standard of life for the developing world.

As an optimist I believe that humanity can take on this challenge, with a realistic understanding that its going to take a lot of hard work, innovation and leadership. What frustrates me is when conservative governments stand up and expouse that by leaving our old industries behind we will force our economies to suffer and jobs to be lost.

This is the mantra that we have heard in Australia time and time again under the Howard Government. What i would like to hear in Australia is that with our high quality research institutions, and plethora of cleantech startups we are now putting our hand up to be a leader in clean technology.

So my next question is, how many jobs is the cleantech sector including the jobs that will be created through carbon emissions trading, for auditing and assessment, and how does this compare with and emission intensive industry like coal mining.

I hunted down some information on the Australian Coal Industries employment statistics and here’s what i found.

Around 30,000 people were employed at Australian black coal mines at the end of 2005. This represents a return to levels not previously seen since the mid 1990’s – the most recent peak being around 26,000 in 1996. Along with the decline in the number of underground mines, employment at underground mines declined significantly over the past decade – from around 11,000 in 1996 to just over 9,000 in 2005 – a drop of about 20 per cent. Employment in open-cut mines on the other hand increased from just under 15,000 to over 19,000 (30%) in the same period. 2006 statistics Australian Coal Association

Now I assuming that these figures don’t include all the jobs in processing and handling. Possibly another 20-50% the figure. Now at this point the data on cleantech jobs is fairly hard to find, as we are talking about multi-industry analysis, and new industries sectors like emissions trading. But i have found some stats from a Sustainable Energy Industries Report 2000

Total direct employment in the sustainable energy industry [in Australia] is in the order of 22,800 in 1999-2000 and 25,600 in 2000-2001. This represents an annual growth rate of 12%. The total employment effect of the sustainable energy industry on the economy is in the order of 64,000 in 1999-2000 and 72,000 in 2000-2001.

Now there is 6 years between these reports but i think we can assume that the sector in renewable energy has increased somewhat. Now theres not a huge amount of difference between these figures, So when the government talks about jobs what really is it talking about. My guess is that its talking not purely about economic losses from reducing the mining of carbon and our exports, but what its actually worried about is due to the nature of the way in which the coal mining industry differs from the renewables industry.

Centralised vs distributed. Fuel intensive vs Technology Intensive.

My gut feeling is that with coal mining being centralised around mines and distribution routes that means you make policy decisions on coal mining that you affect centralised populations of voters, all in one electorate. When you make decisions about the renewable energy industry you are actually talking about a broad range of technologies associated with many different services providers spread over a broad number of electorates.

Hence decisions on coal mining can flip an electorate to the opposition very quickly, whereas decisions to renewables have only until now had a marginal effect on individual electorates. Sentiment is changing substantially that the federal government can no longer hide behind this dynamic much longer. I don’t wish job losses on coal mining towns, but i do wish for the correct decisions to be made to not sell out the future of all Australians for short term political favour.

I’m interested in comments on this article, what’s the status in Europe, India, China or the United States. How do other issues of energy security and economic security bear out regarding job creation in these regions.

Nick Bruse runs Strike Consulting, a growth venture consultancy specialising in the cleantech sector and hosts the cleantech show, a weekly podcast of interviews with leaders involved in clean technology research, entrepreneurship, commentary and investment.