Tess Vigeland: Delegates from around the world are in Cancun, Mexico, this week and next, talking climate change. Front and center: The industry that’s the largest polluter on the planet — electricity. It accounts for 40 percent of U.S. carbon pollution. But power companies can’t just wait around for diplomats and lawmakers to make up their minds about carbon. Old power plants need replacing and demand for electricity keeps going up.
From the Marketplace Sustainability Desk, Scott Tong has our story.
Sound of car starting
Scott Tong: I hop in the car and drive north of the Washington Beltway, in search of hot air from the real world. And it turns out electric utility companies are placing different bets on a clean-energy future might look like.
Sure, they might end up helping the planet. But that’s not why you or I or power companies bet on anything. You bet because you want to make money.
Stop one: A power plant in Delaware hosting a party.
Sound of chamber music
The occasion? New ownership. Power company Calpine bought the plant this summer and converted it right away from burning coal to gas, which spits out about half the carbon dioxide of coal.
Why the switch? Calpine CEO Jack Fusco.
Jack Fusco: Coal prices have continued to go up. And gas prices have continued to go down. If you actually look at the economics today, you would be burning gas, not coal.
Natural gas is cheap, Fusco says, domestic, and abundant, thanks to new drilling techniques. So its roughly 20 percent share of U.S. power generation stands to grow. Whereas coal, which is almost 50 percent, is getting pricier, thanks to demand from China. And new pollution rules coming from Washington might make it unaffordable for many coal plants to comply.
Fusco: I believe that the days of the older, smaller coal plants are really numbered, for a variety of reasons. They’re inefficient and they’re dirty.
It’s a self-serving statement for a natural gas guy. But Lena Hansen of the Rocky Mountain Institute think tank says he’s right.
Lena Hansen: Across the board, the trend is to a lower carbon electricity system. And utilities are taking a lot of actions towards that. With their increased investment in not only gas, but also renewables.
But gas isn’t a sure thing — energy prices are notoriously volatile and stiff environmental rules are a possibility. Still, Hansen says gas plants are relatively cheap. It’s a relatively small bet in uncertain times.
Hansen: We don’t know what will happen with climate legislation. We don’t know what’s happening with technology or even with demand.
Renewable energy is a different kind of energy, and a different kind of bet. For that, the evidence is up the toll road.
GPS: Prepare to enter highway on the right towards New Jersey Turnpike.
Steps away from exit 13, New Jersey workers are installing 15,000 solar panels at one of the largest solar farms in the state. They line up the units, one long row after the other. Worksite head Ed Cartlidge says solar panels are tough enough to withstand heat, cold and other stuff.
Ed Cartlidge: Folks have asked, what about bird droppings, things like that? I said, believe it or not, the good Lord takes care of that, ’cause we have a thing called rain.
Look up, and you see solar panels, too. New Jersey’s installing them on utility poles across the state.
Sound of hammering and drilling
Joe DeLuca is with the company Petrasolar, which makes the panels on utility poles. He attributes all this activity to state law. New Jersey is forcing solar power onto energy buyers.
Joe DeLuca: The buyers are utilities who have a mandate for specific amounts of renewables that they have to generate per year, which without using direct taxpayer dollars, enables a good and robust deployment of renewable energy.
This is a policy bet. New Jersey’s gambling on solar being a big part of the energy future and trying to get out in front. The state is now the number two generator of solar energy in the country, behind California. In all, more than 30 states have clean-energy mandates.
But there’s a risk here too. The states had assumed Congress would give a big boost to renewables through climate legislation, which didn’t pass this summer.
Ralph Izzo heads New Jersey’s largest utility, PSE & G.
Ralph Izzo: States now are asking themselves, “My goodness, I have a 10 percent unemployment problem. I was happy to be a leader, but I’ve just charged up this hill and the troops aren’t behind me. Can I afford to continue this?”
Solar power is still one of the most expensive ways to generate electricity.
Izzo: Can we build environmentally friendly generation that can compete in the marketplace? The answer to that comes back a resounding no.
In other words, for low-carbon electricity to become a long-term winning bet — and seriously displace coal — national and international policymakers may have to jump in.
Michael Greenstone is an economist at MIT.
Michael Greenstone: If we’re able to reduce our greenhouse gas emissions by 1 or 2 percent a year, that’s fine, it’ll be helpful. But it won’t substantially alter the planet’s path.
Either by pushing down the price of clean energy through research and development or jacking up the price of dirty energy. The odds on that happening right now are quite uncertain. So even though the big power plants are placing their wagers, it may be a while before we have a winner.
I’m Scott Tong for Marketplace.
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