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"Transition from Coal to Clean Energy Makes Good Business Sense - Economic Study Demonstrates Profitability for Utilities"

Submitted by Kim Herb on Thu, 03/04/2010 - 12:24
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LONGMONT, Colo. – Utilities and other large-scale energy providers with significant percentages of coal in their generation portfolios can profitably transition toward more flexible and less capital intensive efficiency and renewables technologies using a business approach outlined in a new economic study released today. http://www.natcapsolutions.org/CoalPlantsinTransition.pdf

The report, “Coal Plants in Transition: An Economic Case Study,” provides a “proof of concept” for utilities to consider as they evaluate investments in new generation capacity and upgrades to existing facilities. It was developed by Natural Capitalism Solutions, a Colorado nonprofit research firm specializing in sustainable business strategies. 
 
“We are quickly entering a water- and carbon-constrained world, and we wanted to look at what options might be available to utility managers and other energy providers,” said Paul Sheldon, a senior consultant at Natural Capitalism Solutions and the report’s main author. “We believe that these findings represent a business approach for energy managers to consider as they are faced with difficult decisions regarding the future of their facilities. We’ve shown that this approach allows them to maintain reliability and still profit in their transition to 21 st  century energy technologies.” 
 
Using the 35-year old, 2,250-megawatt Navajo Generating Station near Page, Ariz. as a case study, the analysis examines the costs and benefits of the plant’s future. As with many aging power plants nationwide, Navajo is due for upgrades necessary for it to comply with pollution and air quality regulations. Such retrofits can entail substantial costs, running into the hundreds of millions of dollars. 
 
As they weigh their business options, the Coal Plant in Transition report concludes, there is a strong case to be made for shifting generation capacity to a full range of clean energy resources, including wind, photovoltaic and concentrated solar, geothermal, and biomass, combined with large-scale supply and demand-side efficiency measures. 
 
While such technologies represent significant investments, the Natural Capitalism Solutions study shows that those expenditures can not only be offset, but that significant revenue streams can be generated through the sale of pollution credits, carbon credits, water rights and fuel savings.  
 
In the Navajo case study, the authors ran a number of iterations of their model, testing low, medium and high market pricing for all of the variables. They calculated that when average or “medium” values were applied to the variables, the generating capacity from Navajo could reliably and profitably be replaced, with the result being an estimated revenue surplus of $157.6 million annually. 
 
“It’s profitable for utilities to be investing in cleaner energy sources right now,” said Hunter Lovins, the founder of Natural Capitalism Solutions. “Replacing sunset technologies with more of the same – repeating the mistakes of the past – may feel more comfortable, but it makes no economic sense. Clean energy is more than just clean. It’s more profitable than dirty power for utilities and better for communities and consumers. This report highlights one of the aspects of how we can prosper by unleashing the new energy economy.”
 
In order to make the model allow utility managers to test data to see firsthand how different scenarios play out, Natural Capital Solutions developed an online calculator version of the model, which is available at www.natcapsolutions.org/coal/calculator.xls. 
 
“Obviously, the circumstances and data will be different for every utility,” said Sheldon. “A business plan based on our ideas may work for some utilities and not for others, depending on their specific situation. But we have shown that the concept is sound and that it is possible for utilities to continue meeting their demand while at the same time investing in new clean energy technologies to replace aging coal-burning facilities.”
 
Sheldon said although the Transition report includes a discussion of additional benefits that might accrue in transitioning to clean energy – including job creation, economic development and externalities such as improved air quality and decreased public health costs – such variables are not factored into the model. 
 
Craig Cox, executive director of Interwest Energy Alliance, a nonprofit trade association representing leading wind and utility-scale solar energy companies, said the study will provide utilities with quantitative tools that will help them navigate business decisions in the 21 st  century.  
“In my home state of Colorado, the clean energy industries are providing a significant boost to our economy at a time when we really need it,” Cox said. “We’re seeing significant interest in these technologies throughout the Southwest, so from the perspective of utility managers, this study should give them a new approach to decision-making at a critical time when they are faced with many uncertainties.” 
 
Source: Natural Capital Solutions press release, 4 May 2010