Inter Press Service (February 28, 2008)
WASHINGTON, Feb 27, 2008, 2008 (IPS/GIN via COMTEX) -- Prospects for coal-fired power plants
have dimmed amid soaring construction costs, regulatory uncertainty and concern about global warming,
according to energy economists.
Dozens of proposed plants have been dumped or put on hold in the past year, and U.S. utilities still
seeking to build new coal-fired generators face risks comparable to those that derailed the U.S. nuclear
power industry in the 1970s, according to a new report prepared by researchers at Synapse Energy
Economics for the Interfaith Center on Corporate Responsibility.
"This history of nuclear investments is important because investments in companies that are now
proposing to build new coal-fired power plants face comparable risks and uncertainties," the report said.
After providing more than half the U.S. electric supply for decades, "coal is losing its appeal as a
predictable investment and is instead fraught with uncertainty," the report concluded.
The Interfaith Center on Corporate Responsibility, a coalition of 300 religious investors with a combined
portfolio of some $100 billion, unveiled the document this week to Wall Street security analysts in hopes
of promoting less ecologically damaging energy ventures.
"Until the 1970s, building new nuclear power plants appeared to be a relatively low-risk investment
because construction and operating costs were relatively stable and easy to predict. However, starting in
the 1970s, the costs of building new nuclear power plants began to spiral out of control. As a result, the
actual costs of new plants were two to three times higher than the costs that had been estimated during
licensing or at the start of construction," the report said.
It appears increasingly likely that the government will mandate reductions in greenhouse gas emissions,
which would drive up the cost of carbon emitted when coal and other fossil fuels are burned. Regulations
governing the release of other pollutants also will be tightened, adding to the cost of doing business.
Utilities face reduced demand for coal-based electricity, researchers say, as public policy is likely to
emphasize energy efficiency and renewable power sources such as the wind, tides and solar power.
Additionally, technical and economic difficulties bedevil efforts to minimize coal-fired power plants'
contribution to global warming, and new construction is dogged by runaway costs and delays as
competition for equipment and commodities intensifies. Some projects still confined to the drawing board
have seen their cost estimates more than double.
"More than 20 proposed coal-fired power plants were canceled in 2007, and three dozen more were
delayed," said Leslie Lowe, energy and environment program director at the Interfaith Center on
Corporate Responsibility. "An increasing number of companies have announced more generally that they
will not seek to build any new coal-fired power plants at this time, and some state regulators are
beginning to reject coal plant investments as too risky and ill-timed for current circumstances."
David Schlissel, the report's lead author, sees the signal for investors as having switched from green to
red.
"Investors in both regulated and merchant companies cannot be assured that they will recover and earn
reasonable returns," said Schlissel, a senior consultant at Synapse Energy Economics.
Lowe and Schlissel might be preaching to the converted.
Major investors have begun looking elsewhere amid rising concern that tougher regulations, widely
expected from the U.S. Congress, will turn up the financial heat on coal-fired power plants.
Citigroup, J.P. Morgan Chase & Co., and Morgan Stanley on Feb. 4 released new environmental
standards requiring utility companies to devise plans to minimize and mitigate carbon dioxide pollution
from any new power stations and prove their financial soundness even in the face of tighter regulatory
constraints.
In January, the U.S. Energy Department scrubbed a $1.8 billion "clean coal" project in the Midwest state
of Illinois. Officials cited rising construction costs. Their decision was seen as a major blow against
industry, which saw the project as a way of demonstrating that coal-fired power plants could be built to
emit little carbon dioxide.
Even so, coal's supporters say it is a local resource in abundant supply and as such should not be
dismissed in a time of surging energy demand and turmoil overseas.
Americans for Balanced Energy Choices, a lobby set up by businesses that mine, trade, burn and transport
coal, has taken to campaigning in key districts and over the airwaves in hopes of winning over politicians
and the citizens before the state and congressional elections in November.
Copyright (c) 2008 IPS-Inter Press Service. All Rights Reserved.
(C) 2008 Inter Press Service. All Rights Reserved
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