Coal: money talks, or at least mumbles

Posted by William M. Connolley on February 5, 2008
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A very interesting report by the Wall Street Journal reporting that “Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley say they have concluded that the U.S. government will cap greenhouse-gas emissions from power plants sometime in the next few years. The banks will require utilities seeking financing for plants before then to prove the plants will be economically viable even under potentially stringent federal caps on carbon dioxide, the main man-made greenhouse gas.”

If true, this is big news.

But is it true?

The linked article Leading Wall Street Banks Establish The Carbon Principles is rather more wurbley. Its also about the same as the MS press release. This says “Due to evolving climate policy, investing in CO2-emitting fossil fuel generation entails uncertain financial, regulatory and certain environmental liability risks. It is the purpose of the Enhanced Diligence process to assess and reflect these risks in the financing considerations for certain fossil fuel generation. We will encourage regulatory and legislative changes that facilitate carbon capture and storage (CCS) to further reduce CO2 emissions from the electric sector.” which is much weaker than the initial WSJ report.

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Comments

  1. #1 John Mashey
    2008/02/05

    If the other states would get their act together, and reward utilities for increasing efficiency, rather than just generating megawatts, there would be far less need for building coal power plants for a while.

    http://www.energy.ca.gov/electricity/us_per_capita_electricity_2005.html
    gives per capita electricity consumption by US state.

    From that chart, if every state above 10,000 KWh/person had gotten down to 10,000 [like UT, CO, NM, MI, not even like CA, RI, or NY’s 7-8,000), the US total would have gone from 3,660,969 to 2,256,118M KWh’s, a 39% reduction.

    Of course, states differ in their needs, but the most efficient states differ widely in climate & industry and density, so it isn’t just CA’s mild climate. The biggest difference is state PUC rules.

  2. #2 Eli Rabett
    2008/02/05

    If forget where I read it but the electric utilities are begging the government to mandate the most efficient pole transformers. If this is not a mandate, they fear that if they don’t use the cheapest some stockholder will sue them. So much for the free market fairy.

  3. #3 Hank Roberts
    2008/02/06

    You rang?

    That transformer ruling exemplified the jerk* reaction to any “consensus statement” on climate change and efficiency:

    http://www.csmonitor.com/2007/1017/p02s03-usec.html

    “New efficiency standards are usually welcomed when environmental, efficiency, and industry groups reach a “consensus standard.” In this case, however, the DOE rejected it and adopted a standard that will yield one-third less energy savings.”

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/12/BA1FTSBR2.DTL&hw=transformer+utility&sn=002&sc=903

    Bob Egelko, San Francisco Chronicle, 12/12/07
    Environmental groups and state Attorney General Jerry Brown have sued the Bush administration over the U.S. Energy Department’s new efficiency standards for the 40 million electric transformers on utility poles around the nation …

    http://www.earthjustice.org/news/press/007/california-ag-environmental-groups-challenge-weak-energy-efficiency-standards.html

    DOE estimates, requiring all new transformers to achieve the same efficiency levels as the best units currently on the market would eliminate the need for nearly 20 large new power plants by 2038…. Utility companies, the primary purchasers of these transformers, have also called for more efficient standards, citing the more than $11.1 billion the industry could save.

    http://www.eere.energy.gov/femp/pdfs/dist_transformers.pdf

    How to Buy an Energy-Efficient Distribution Transformer DOE’s Federal Energy Management Program’s procurement guide for transformers.

    ————–
    *Third derivative.
    Nixon: the rate of increase of inflation is decreasing.
    Bush2: the rate of increase of energy-related carbon dioxide emissions per unit of economic output is decreasing.

  4. #4 John Mashey
    2008/02/06

    Eli: I haven’t seen that, but maybe that’s a transmogrification of a true story:

    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/12/BA1FTSBR2.DTL

    Given the PUC rules here, I’d guess CA utilities been using the more efficient ones, but maybe other utilities are asking.

  5. #5 Hank Roberts
    2008/02/23

    I’d like to see more serious attention being paid to what the banks, other investors, and business and legal advisors are using as their assumptions.

    Over the past year I’ve seen business advice with assumptions like:
    – it will take a whole generation for the climate to return to normal after humans quit making it worse
    – the effects of excess CO2 may last as long as 100 years

    Seems to me this is advice like telling someone their specially selected home mortgage terms are guaranteed to give them an affordable low monthly payment right now but it’s possible that later on their total debt might increase if rates change later.

    Or that building in a flood plain isn’t likely to be a problem because the 100-year-flood is very unlikely during the lifetime of their business.

    Or, I suppose, that smoking doesn’t cause cancer in everybody, and, hey, most people are lucky most of the time.

    Or — there are probably much better analogies.

    The spin put into business plans stands out like a sore, much-hammered thumb on an incompetent carpenter to me. But I see the same blind will to believe what they want in the readers of this kind of thing that I see in mortgage brokers and home buyers during that bubble.

    How is what business is doing now _not_ a guaranteed bubble?

    Maybe we should start referring to it as the “Climate Bubble” — eh?
    Or telling