Here's a new pitch for comprehensive federal climate change legislation— from John Rowe, chief executive of Exelon, the largest nuclear power generator in the United States. Rowe has long been out front in the utility industry on the climate change issue, and one obvious reason is that his company is so much better positioned to thrive in a carbon-constrained world than its coal-burning brethren in the power business. But no matter your view on nukes, he made some points worth noting in his speech for the Brookings Institution's energy security initiative program:
1) The $400 billion that the Energy Information Administration says the utility industry—source of one third of carbon emissions—will have to invest by 2030 to address climate change is almost as much as today's market capitalization for the entire investor-owned utility sector.
2) That figure is likely a gross underestimate, because a recent Citigroup analysis found that just since 2005, the cost estimate for building a new nuclear power plant increased 45 percent. And for either traditional coal or for a next-generation, Integrated Gasification Combined Cycle coal plant—one that theoretically would allow carbon capture—the cost increase has been 60 percent in those two years.
3) Rowe estimates that a national greenhouse gas reduction target could be met by 2030 with an increase in electricity costs of 3 to 5 cents per kilowatt hour. That amounts to a 30 to 50 percent increase over the current national average. However, Rowe says if government and industry get the approach wrong, it could end up costing customers 10 cents per kilowatt hour more.
Rowe advocates a "competitive market system," allowing markets to choose the most cost-effective solutions for reducing electricity demand or increasing supply. I won't belabor the point that he also is calling for a strong helping government hand in those markets, in the form, for example, of federal loan guarantees for the first new nuclear plants. Without those loan guarantees, how likely is it that the market would choose nuclear, with costs growing at 45 percent in two years? But I think what's most significant about Rowe's speech is the echo of Sir Nicholas Stern's warning, in his review on the economics of climate change for the British government, that the ultimate costs of grappling with the problem will be either manageable or quite high, depending on the decisions made now.