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2007 CEO Forum: Greenhouse Gauntlet

Tackling climate change is a monumental challenge. Power-company CEOs discuss long-range plans for a climate-friendly energy economy.

Fortnightly Magazine - June 2007

de-carbonize our power supply? This leads to many other questions: How long will it take, what will it cost, and how will it affect rates, reliability and customer satisfaction? What will the investor community think as we move toward a de-carbonized power supply?

The biggest question is, What is the tech roadmap that allows us to do it? We are the third-largest consumer of coal in the United States. Clearly on our small coal units, almost 4,000 MW that we are not significantly retrofitting for SOx, NOx or mercury control, will be retired over time. On the other hand, we spent $3.5 billion on scrubbers at other plants, and those units will be candidates for carbon capture and storage. That technology isn’t with us today, and won’t be commercially available for probably 15 years.

Then we turn to our nuclear fleet. We are the fourth-largest operator of nuclear units, with seven reactors. They have been re-licensed for a further 20 years. We are on the road to building a new plant in Cherokee County. We will file for a construction and operating license and a South Carolina certificate of convenience and necessity in the fourth quarter of 2007. There’s more work to do on standardization of the technology, but these processes will put us on track.

Longer term, in 2033 the licenses on our existing units will begin to expire, and if we are planning to de-carbonize our fleet, we need to answer the question of whether to re-license these plants for a second time. And that brings up the question of whether we will build more nuclear units beyond Cherokee County. Our judgment is we must do so to meet growing demand, with a load growth through 2030 of 35 to 45 percent.

These are long-term questions, but the thing that is critical to work on today is to start conserving energy, and moving forward with a new regulatory model.

Cap-and-Trade War

Fortnightly: Assuming federal GHG regulation is coming, what approach do you think would be most effective and workable?

Rogers, Duke: We actively support the regulation of carbon as a policy position, and we are very active in Washington to shape legislation that makes sense. We support a mandatory, economy-wide cap-and-trade regime, where the government sets the cap and the market goes to work to find the cheapest way to comply. Also, because we are dependent on coal, we believe we need the type of allowance methodology we had for the 1990 Clean Air Act amendments, with allowances phased out over time.

We’re also moving in each state to put in regulatory models that incent us to improve energy efficiency.

Rowe, Exelon: The most effective way of dealing with an all-pervasive challenge like carbon is with a carbon tax. That is not popular politically, so the National Commission on Energy Policy (NCEP) proposed a cap-and-trade approach with a safety valve. I am convinced there should be some sort of safety valve because I don’t think the economy can tolerate the shock of imposing a cap on it and letting the

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