July 1, 2009

Power Industry Needs to Do a Better Job of Educating and Messaging

Gail Reitenbach

Cap-and-Trade Stances

Most of the roundtable panelists generally expressed support for the Edison Electric Institute’s position on cap and trade (which recommends that 50% of the initial allowances be allocated free and that the power sector should be given 40% of the allowances) but said that the initial allocation of carbon allowances should be completely free. They also offered some individual thoughts about carbon regulation.

To some extent, these executives seem to welcome a decision on climate change legislation for its ability to remove at least one layer of uncertainty. By taking on climate change, "you do get some clarity," said Litzinger. Exelon’s president and COO, Chris Crane, added that "we lack clarity on a national energy policy. We’ve never looked at it holistically in terms of what the country needs."

Morris, whose company is undertaking a test of carbon capture and sequestration (CCS) at its Mountaineer Plant in West Virginia, said, "I respect Congressman Waxman and Congressman Markey. They’re tackling a very difficult issue." Yet he called for greater honesty in defining the terms of the issue. Of cap and trade, Morris said, if you auction off carbon allowances, "it’s a carbon tax. So don’t call it cap and trade; call it a carbon tax."

Williamson took up the baton by addressing the question of who would benefit from the revenue generated by carbon allowances: "Let’s do it for the climate and the environment — not for revenue generation [for some unrelated purpose]."

Michael P. Gallagher, VP of asset management for Sempra Generation, concurred and called for any cap-and-trade revenues to be reinvested in energy infrastructure and renewables.

Although these executives back the notion of cap and trade, they made note of the devilish details to be worked out in any carbon mitigation program.

Litzinger believes cost will be the big driver, and Williamson expressed the hope that any carbon regulatory system would be transparent so that "there’s not an Enron of carbon cap and trade."

Litzinger said he thinks there should be free allowances, as there were under the SO₂ program, especially because there is no proven removal technology for CO₂ now — as there was for SO₂ when that program was initiated.

In the Q&A session, when asked what would be the most important issue for CCS by 2025, Morris said, "we know capture works," but he said he’s worried about parasitic impacts, and the systems need to be demonstrated on a large enough scale. He also hopes we’ll find a use for CO₂ that could avoid the need to sequester it underground. Williamson mentioned a company in California (Calera, funded by venture capitalist Vinod Khosla) that’s using CO₂ in cement, though that process has significant hurdles to overcome before the product is commercially accepted.

With its only visible action consisting of the hyperbolic efforts of the coal lobby to promote undefined "clean coal" as a currently available option for counteracting the climate effects of CO₂, the power generation industry has essentially ceded the rhetorical battle to those pushing for more renewables and swifter action on carbon controls. Morris mentioned a company (ecoAmerica) that, in the company’s words, "uses psychographic research, strategic partnerships, and engagement marketing to shift personal and civic choices of environmentally agnostic Americans."

"If it’s a scam, it’s a scam. Let’s have an honest debate about [CO ₂ and credit auctions]," Morris concluded.