Change is coming

An historic election is over and the people have spoken. President-elect Obama and an expanded congressional majority will now rebalance the economic and environmental importance of coal-fired generation in this country differently than ever before, and that change is unsettling to many. When the expected costs of the anticipated new policies are counted, I predict many voters will experience a severe case of buyer’s remorse.

I realize that campaign promises are ethereal, and actual policies will surely morph in reaction to the political realities facing a new president and a Congress with its own agenda. Regardless, I believe President-elect Obama was serious about his energy campaign promises and their high priority in the first year of his administration. We’ll soon see if these policies will pass muster with the electorate, given our lackluster economy, already pinched consumer spending, and a Congress that has the lowest approval rating in history. If voters were loath to approve school bonds nationwide, then wait until they get a good look at the following coal-fired power policy proposals.

We’ll soon see if Obama’s policies will pass muster with the electorate, given our lackluster economy, already pinched consumer spending, and a Congress that has the lowest approval rating in history.

King Coal’s castle is under siege

During an interview with the San Francisco Chronicle on January 17 of this year, Senator Obama said, "Let me sort of describe my overall policy. If somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted. That will also generate billions of dollars that we can invest in solar, wind, biodiesel, and other alternative energy approaches."

Vice President – elect Biden also chimed in on this topic during the campaign. When asked about his support of clean coal technologies, he responded, "We’re not supporting clean coal." I actually think this pithy statement was a gaff. But with Biden, you can never be sure.

Cap and trade, Part II is inevitable

I spoke out strongly against the cap-and-trade legislation proposed by the Lieberman-Warner Climate Security Act in this column in July, and the Senate wisely deferred further consideration rather than facing a thumbs-down vote. I also noted at the time that L-W Part II was inevitable with the next Congress, and it still is. The problem faced by the power industry and, therefore, electricity consumers, is that Part II will surely be even more onerous than the failed version that was estimated to cost the economy $6 trillion through 2030. A trillion here, a trillion there — it’s the congressional equivalent of eating potato chips.

In the Chronicle interview, Obama also said, "What I’ve said is that we would put a cap-and-trade system in place that is as aggressive, if not more aggressive, than anybody else’s out there. I was the first to call for a 100 percent auction on the cap-and-trade system, which means that every unit of carbon or greenhouse gases emitted would be charged to the polluter. That will create a market in which whatever technologies are out there that are being presented, whatever power plants that are being built, that they would have to meet the rigors of that market and the ratcheted down caps that are being placed, imposed every year."

Sen. James Inhofe (R-OK), an outspoken opponent of climate change legislation, recently commented, "I believe the current financial difficulties will only reinforce the public’s concerns about any climate-change bill that attempts to increase the costs of energy and jeopardizes jobs in the near term."

The cost of carbon credits paid for by utilities will simply flow down to consumers, thereby giving the average price of electricity in the U.S. unnecessary shock therapy. Average electricity prices in the U.S. have increased at less than 3% a year (from 8.4 cents per kilowatt-hour in 1995 to 10.4 cents in 2006, per the Energy Information Administration). Compare that modest increase with any other consumer commodity price increase, and you see how coal is the bedrock of America’s reasonably priced electricity.

Carbon technologies are expensive, unproven

The Government Accountability Office recently released its analysis of the status of carbon capture and sequestration technology and the development challenges it faces (GAO Report 10-1080, dated September 30, 2008). The report gives an evenhanded review of the technology and its development status and then explores the myriad risk, political, and technology hurdles that must be cleared before a commercial and reliable system enters the marketplace.

In addition to noting that the technology is years from maturity, the report goes on to state that, "The cost of electricity production would increase by 35% for newly constructed IGCC plants with CO 2 capture, compared to a 77% increase for newly constructed pulverized coal power plants equipped with CO 2 capture."

I believe President-elect Obama is serious in his opposition to coal-fired generation, but I also believe he is a pragmatist. When these policies are publicly debated and their high costs at last get the attention of stressed consumers, then all those newly elected representatives may well learn an important truth: Voters are the real agents of change in this country.