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Guns, Butter, or Green?

Utilities will face stark tradeoffs in meeting the next round of emissions controls.

Fortnightly Magazine - April 2005

Some utility execs gasp at the shear breadth of environmental proposals being bandied about during the past few weeks. Even the environmentalists are calling "historical" the extent to which different kinds of emissions will be regulated.

No sooner had the "Rest of the World" at last enacted the Kyoto Protocol, but that U.S. lawmakers had begun to respond. For example, they slowed work on the Bush administration's "Clear Skies" multi-pollutant legislation so that, among other things, they could discuss adding a federal mandate on greenhouse-gas emissions (GHG). And while no agreement was reached, Congress came surprisingly close (the vote ended in a tie), prompting many to believe that a federal greenhouse mandate may well win passage within the next few years.

If anything, at least some utility execs have come to prefer a federal mandate over a hodge-podge of state-imposed plans. But that's just the tip of the proverbial environmental iceberg.

At press time, the Environmental Protection Agency (EPA) had finalized its Clean Air Interstate Rule, or CAIR, and its regulations on mercury emissions. CAIR reduces emissions of sulfur dioxide (SO 2), nitrogen oxides (NO X ), and mercury, and focuses on states whose SO 2 and NO X emissions still contribute significantly to fine-particle and ozone pollution problems in downwind states. CAIR covers 29 states in the eastern United States and the District of Columbia, and is viewed as the most substantial tightening of air-quality standards since the Clean Air Act was last amended in 1990.

Yet many utility executives believe the mercury ruling might become even more restrictive after it takes a turn through the appellate courts.

A spokesman from the Edison Electric Institute saw some benefit from litigation-driven delay, but not much:

"Stretch this process out another few years, we might be able to turn to some new mercury technologies—primarily activated carbon injection—but we'd be making these retrofits while also installing scrubbers to reduce sulfur dioxide and selective catalytic reduction (SCR) units to cut nitrogen oxides.

"Power companies would be forced to abandon significant existing coal-based electric generation in favor of natural gas, placing additional strains on natural gas supply and prices.

"Under this scenario, electric reliability becomes an area of genuine concern."

So much for mercury, but when it comes to controlling greenhouse gases, the ante is raised. The technology poses so many challenges that utilities are pushing a voluntary approach. In late December, the U.S. Department of Energy and seven organizations representing utilities signed a memorandum of understanding formalizing a voluntary agreement to cut GHGs. But that agreement may not mean much.

John Novak, executive director at the Electric Power Research Institute, told a Congressional audience recently that the current pace of innovation in today's power generation technologies—fossil, nuclear, renewable—will not be sufficient to meet either tomorrow's economic or greenhouse-gas reduction needs.

Of course, economists and utility experts say that new restrictions would force some somber discussions within the industry. Should government play a role, given the dearth of available technologies

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