Clean technology sticker shock

Sam Eaton Sep 14, 2006

BOB MOON: Who doesn’t like the idea of clean energy? Utility giant Xcel Energy recently announced it would build the first clean-coal power plant in the nation to capture its own CO2 emissions. The technology is hailed as a breakthrough in addressing global warming. Just don’t tell that to Colorado ratepayers who may be stuck with the $1 billion bill. From the Marketplace Sustainability Desk, Sam Eaton looks at clean energy’s next big hurdle.

SAM EATON: Attorney Mark Davidson is livid. His main client is a Colorado steel mill that consumes more electricity than any other company in the state. That means even a small rate increase could cost the steel plant millions of dollars. But Davidson says Xcel Energy’s plans for an innovative new power plant would go even further.

MARK DAVIDSON: The basic problem is that the company is asking customers to pay up front for an experiment. And a potentially very expensive experiment, up to a billion dollars for a 350-megawatt plant.

Because of a recently passed law in Colorado, Xcel Energy can begin collecting costs from its customers as soon as construction begins, instead of upon completion. The law is aimed at spurring climate friendly innovation in the electric utility industry. But Davidson says it achieves that goal by passing the costs, and thus the risk, on to ratepayersa€¦ even if the project fails.

DAVIDSON: And so the public service company is held harmless really from day one of this experiment and the ratepayers are on the hook for everything.

Davidson has been joined by a chorus of consumer advocates who are drawing a line in the sand opposing the project. On the other side of that line are environmental groups who say the technology is needed in order to avert a climate catastrophe.

VICKIE PATTON: Right now across the interior western US there are some two dozen new coal plants proposed.

Vickie Patton is with Environmental Defense.

PATTON: And if all of these new coal plants are built without addressing in any way the massive global warming pollution they will release we will be saddling both ourselves and future generations with 50 or 60 years of new coal based power that doesn’t account in any meaningful way for the global warming pollution.

Patton says it’s a little like driving your car without insurance even when you know a wreck is coming. David Victor directs the Stanford program on energy and sustainable development. He says this split between environmental and consumer groups may become the next major battleground in the debate over climate change.

DAVID VICTOR: The core issue is whose going to pay the cost for developing radical new technologies that are going to be needed to address the global warming problem.

The answer to that question comes easy to Xcel Energy. The publicly traded company is under pressure from Wall Street to churn out profits not take chances. Xcel’s Fred Stoffel says the new Colorado law allows the utility to have a longer term vision without sacrificing fiscal responsibility.

FRED STOFFEL: It’s going to permit us to take this technology that has this cost premium, to make a showing before the PUC that it’s in the public interest and to go forward with it. Without that kind of risk mitigation and without the legislation I doubt that we would be pushing it at this point.

Other utilities across the country are pursuing similar legislation. Stanford’s David Victor says ratepayers may be up in arms over the initial sticker shock. But he says in the long term the benefits of having clean power will eventually pay offa€¦

VICTOR: I think it’s inevitable that we’re going to have some kind of limit on carbon emissions in this country. When that happens, there’ll be some economic advantage to Colorado that it has figured out a technology and has some of these plants operating.

In the meantime, Victor says, the divide that’s forming between environmental groups and consumer advocates will only widen.

In Denver, I’m Sam Eaton for Marketplace.

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