Natural gas has gotten a ringing endorsement from an unusual source. In a policy address at the American Enterprise Institute, John W. Rowe, chairman and CEO of Exelon, operator of the largest fleet of nuclear power plants, urged lawmakers to "do nothing" and let the markets dictate and the nation rely on "a clean, competitive and inexpensive windfall," natural gas.
Neither new nuclear, clean coal, wind nor solar energy are economic, Rowe said, and the government should stop trying to influence the market through subsidies and taxes that, either way, consumers will end up paying for.
Rowe, once an avid supporter of cap-and-trade, cautioned legislators to "do no harm....We are at a unique time in energy policy. Congress and the administration need not do anything to drive the transition to a clean energy economy. The energy markets have begun the transition already."
The Exelon CEO, the longest-serving electricity industry chief, urged Congress and the states to get out of the business of picking winners with subsidies for nuclear, cleaner coal, gas, wind, solar and other renewables. "Cheap natural gas allows the energy market to work and technologies to compete without introducing new market distortions.
"Natural gas is queen. It is domestically abundant and inexpensive and is the bridge to the future. Because of natural gas there is no need for expensive mandates and subsidies," said Rowe, advocating natural gas use for power generation and for heavy-duty vehicles.
It won't require a heavy investment in new gas-fired plants, just increased use of existing ones, many of which in the past have been used mainly for peaking and sit idle much of the time, he said. "The existing natural gas fleet can cheaply accommodate the majority of coal retirements."
The Exelon CEO sees cheap natural gas as enabling the United States to compete with China and India. "The '59 Cadillac couldn't compete with efficient Japanese car makers, and these coal plants won't compete with China. But market-driven gas plants will."
In terms of adding to the U.S. energy supply, efficiency measures, including increased gas use and uprates at existing nuclear plants, are the best bet in Rowe's view. After that, new gas plants and coal to gas switching are the next cheapest options at $69 per MWh and $82 per MWh respectively, but they will not be needed until demand improves.
Rowe put the price of new nuclear, clean coal, wind and solar at well over $100 per MWh, whether consumers pay for it or taxpayers take a hit as the government foots some of the bill through subsidies.
"Chairman [Fred] Upton, [R-MI, of the House Committee on Energy and Commerce] has stated that renewable energy subsidies have cost the taxpayer $100 billion over the past 10 years. Yet, even with this high level of government support, wind and solar are still not cost competitive."
And to double or triple the size of the existing nuclear fleet, as some propose, would cost the government $300-600 billion in subsidies to build them.
Once a cap-and-trade proponent, Rowe now takes the "do no harm" stance, saying the Congress should not expand the nuclear loan guarantee program beyond current levels, nor should it extend tax credits to renewable projects. "And I say this not just as a nuke, but also as a new owner of 735 MW of wind and the largest urban solar facility in the United States."
The time for wind and solar is "not just yet."
He acknowledged that "carbon legislation is not going anywhere anytime soon -- certainly not in this Congress." He urged legislators to let the Environmental Protection Agency (EPA) "do its work on the transport and toxics rules.
"EPA's rules will level the playing field by putting a price on the cost of air pollution, which will put those companies that have not modernized their plants on par with those who have. By reflecting these costs, the market will pick the most inexpensive technologies to clean up the stack," Rowe said.
"The rules will affect only the smallest, oldest and most inefficient coal plants because they will no longer be able to compete with today's newer, cleaner electricity generation.
"The costs of pollution have been borne by society -- in health care costs and environmental damages..." Those hidden costs of damages from sulfur dioxide, nitrogen dioxide and particulate matter alone adds $32 per MWh, Rowe said. "For most polluting plants, this cost rises to $120 per MWh on top of the existing average generation price of electricity from coal of around $30 per MWh."
You don't have to espouse global warming theories to know that the pollutants in the air and water sicken and kill human beings, Rowe said.
"The rules EPA is proposing are neither new, nor unexpected." The agency has been working on them for more than 10 years under the 1990 update of the Clean Air Act that was overwhelmingly supported by about 90% of Congress. And they won't kill off coal as an energy source, he said. Smaller, older more polluting coal plants will be eliminated, but newer plants have already installed emission-reducing equipment, and those will continue to operate under the new rules.
Besides its power generation fleet, Chicago-based Exelon also operates large electric and gas utilities in northern Illinois and the Philadelphia area. The company is moving forward with its own efforts to achieve a clean energy future through Exelon 2020, its plan to effectively eliminate the equivalent of the company's entire 2001 carbon footprint by 2020. Exelon is now halfway to the goal, equal to taking about 1.5 million cars off the road every year.
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