Carbon Risk, Coal, and Higher Electricity Prices
Why coal-generated electricity will cost more than utilities claim
How UCS is succeeding in documenting that coal-generated electricity will cost more than utilities claim
With over 100 new coal power plants proposed nationwide, the Union of Concerned Scientists has expanded its efforts to heighten awareness of the true costs of coal. Our report, Gambling with Coal, shows how investment in conventional coal plants is a reckless financial gamble given coming climate regulation. UCS’s testimony about the risks of investing in coal power plants in Minnesota and South Dakota may have already contributed to changing the way that three major utilities plan to meet future power needs. In the coming months, we will expand our call for truer accounting wherever utilities are gambling with coal, identifying additional financial risks of investing in coal, and working for better energy and climate policies at the state and federal levels.
Coal power plants release the most global warming emissions of any source of electricity. A growing consensus, which even includes business and utility executives, expects that Congress will regulate global warming emissions in the next few years. Utilities that ignore these coming regulations are heedlessly subjecting their investors and customers to the financial risk that comes with burning coal—which will be much more expensive in the future. Today, utility companies have a choice between investing in outmoded pulverized coal technology or investing in new, cleaner, and innovative efficiency and renewable energy technologies that don’t face increasing fuel costs or pollution charges. Those that choose to ignore the coming regulation on global warming emissions will face higher costs in the future and will likely try to pass that extra cost onto customers through higher rates.
Although a number of forward-thinking utilities have recognized the coming costs of carbon regulation, many have not. Because this carbon risk is not included into their planning, their estimated costs for future coal-generated electricity are deceptively low. In fact, once the global warming pollution costs of coal are taken into account, clean energy alternatives, especially wind power and energy efficiency, become an even more appealing option.
In this thoroughly researched and documented report, UCS discusses the very real threat of global warming, shows how the necessary policy response will inevitably impose new costs on new coal plants, and makes quantified estimates of those new costs.
- Gambling with Coal: Full Report, September 2006 (.pdf)
- Gambling with Coal: Power Point Presentation, October 2006 (.pdf)
Midwest
In the fall of 2006, UCS helped sponsor an analysis of the financial risks associated with one such proposed pulverized coal-fired power plant, Big Stone II, which would be built in South Dakota to serve states in the region, particularly Minnesota. The testimony before the South Dakota Public Utilities Commission based on this analysis is a case-study in the high costs of coal and the viability of clean alternatives.
In the summer of 2006, the Minnesota Public Utilities Commission recognized the increasing importance of factoring CO2 regulatory risks in resource decisions, warning that “it is widely believed that the growing need to control carbon emissions . . . will make [coal] very expensive in the future” and ordered the state’s largest utility, Xcel Energy, to work with UCS and other environmental advocates in devising an expanded and improved global warming emissions risk analysis. Xcel has already begun examining cleaner alternatives to coal plants by proposing to meet future energy needs with a mix of wind energy and existing hydroelectric dams.
Downloads:
- UCS and Joint Intervenors request that carbon risk be included in utility resource planning, August 2005
- MN PUC Staff Recommendations, June 2006
- MN PUC Order requiring XCEL Energy to work with UCS and other environmental advocates to incorporate carbon risk into resource planning, July 2006
California
The California Public Utilities Commission, on December 16, 2004, decided that the state’s electric utilities were required to account for the future cost of reducing carbon emissions in choosing energy sources.
Lists of Proposed Coal-Fired Power Plants:
- U.S. Public Interest Research Group: Making Sense of the “Coal Rush”: The Consequences of Expanding America's Dependence on Coal
- National Energy Technology Laboratory: Tracking New Coal Fired Power Plants; Coal's Resurgence in Electric Power Generation (.pdf)
