Battered by the financial crisis and under pressure from the Sierra Club and other environmental groups, the Houston-based energy giant Dynegy announced that it is abandoning plans to construct six coal-fired power plants.
The company announced that it would be dissolving the 50-50 joint venture with LS Power, a New York-based energy company. That venture, launched in 2007, sought to build coal-fired plants in Arkansas, Georgia, Iowa, Michigan, Nevada, and Texas.
But now it's not going to happen. Here's what Dynegy's CEO said in a press release:
"The development landscape has changed significantly since we agreed to enter into the development joint venture with LS Power in the fall of 2006," said Bruce A. Williamson, Chairman, President and Chief Executive Officer of Dynegy Inc. "Today, the development of new generation is increasingly marked by barriers to entry including external credit and regulatory factors that make development much more uncertain. In light of these market circumstances, Dynegy has elected to focus development activities and investments around our own portfolio where we control the option to develop and can manage the costs being incurred more closely."
Writing in the online sustainability magazine, Worldchanging, Adam Stein unpacks Mr. Williamson's statement. Mr. Stein, who co-founded TerraPass, a for-profit purveyor of carbon offsets, explains that "regulatory factors" refer to the likelihood of a federal carbon cap-and-trade bill in the coming years, which would raise the price of coal, the most carbon-intensive fossil fuel.
"External credit factors," means the current credit crisis. Stein notes that banks are particularly reluctant to lend money to ventures with a "massive carbon exposure" like Dynegy's, again because of the prospects for a federal cap-and-trade scheme. He writes:
Needless to say, many factors may have played into the decision to shut down those coal plants: grassroots pressure, lawsuits (real or threatened), disastrous publicity from the [Tennessee] sludge spill, the imminent changing of the guard at the EPA, state-level permitting difficulties, etc. But as long as we’re handing out credit, let’s not forget the most obvious and compelling factor. In a carbon-constrained economy, no one wants to double down on coal.
Needless to say, environmentalists are delighted. The Sierra Club, which in February 2008 launched its "Clean Up Dynegy" campaign to pressure the corporation into ditching the proposed power plants is calling Dynegy's decision "a victory for public health." Bruce Nilles , the conservation group's national coal campaign director, estimated that the six plants would have spewed 30 million tons of greenhouse gasses into the atmosphere each year (by comparison, the average American is responsible for about 20 tons annually):
"This is a major victory in Sierra Club's efforts to stop the construction of dirty coal-fired power plants. Dynegy had been the largest developer of new coal-fired power plants in the country, and it seems like the company has recognized our efforts to move to a clean energy future. We applaud them for taking this major step forward.
"LS Power has not developed or operated coal plants, and as they stand alone now we encourage them to shift their investments into cleaner alternatives like wind, solar, and efficiency that can create new jobs and economic opportunity while cutting pollution, improving public health, and helping solve global warming."