It isn’t too often that I turn to the pages of the Wall Street Journal for good news, but let today be a little different. As per Wall Street Shows Skepticism over Coal, major banks, working with some environmental organizations (including, the much maligned Environmental Defense),
are imposing new environmental standards that will make it harder for companies to get financing to build coal-fired power plants in the U.S.
The banks have made the judgment that CO2 emissions caps are inevitable and that the potential payment for pollution permits (note that both Senators Clinton and Obama support 100% auctioning of pollution permits) create a significant potential liability for coal-fired electricity plants. There are five key points to their new standards. Those seeking financing for coal fired-electricity plants will have to:
Explore energy efficiency as an option to new power;
Consider renewable energy;
Assess the potential for carbon capture and storage;
Provide “conservative” estimates as to how many free pollution permits the plant owner might receive;
Ensure that the plant can charge prices high enough to cover the cost of buying emissions allowance.
Now, imagine a serious cost to polluting. If solar PV (or other residential/distributed power generation) becomes competitive, would the average home owner buy PV or pay higher electricity prices? Hard to see how any utility owner can guarantee that last point with enough surety to convince a banker considering a 30-year loan.
The banks say they don’t want to be involved with debt that goes bad as a result of government emissions caps that require the power plants they finance to buy large numbers of extra pollution allowances.
The utilities are fighting this.
But several utilities that helped draft the standards say they shouldn’t have to pay for most of their allowances. Michael Morris, chief executive of American Electric Power Co., says his company believes it should get 90% to 95% free. Most big coal-fired utilities paying for their allowances would drive up their costs and consumers’ electric bills.
“90 to 95% free”? That would make a mockery of the entire concept of a cap on emissions. We cannot “grandfather in” existing polluters and expect to make a serious dent fast enough in GHG emissions.
Now, the Journal writes that “the banks are likely to continue to finance certain coal-fired power plants: those designed to capture greenhouse-gas emissions and shoot them underground if that technology became practical.” Note that this is a pretty big “if”.