Government poised to allow nuclear power generators to put atomic waste in ordinary sites to cut cost of decommissioning old reactors
Terry Macalister
guardian.co.uk, Monday 19 October 2009 20.33 BST
The government is poised to allow nuclear power generators to use ordinary landfill sites for dumping "hundreds of thousands of tons" of waste in an attempt to reduce the £73bn cost of decommissioning old reactors.
The move has triggered a swath of applications around the country from big corporations trying to cash in on this potential new business, but infuriated local councils and campaign groups.
The issue of waste is critical to the government as the stockpile is potentially much greater than previously thought and ministers are keen to encourage the power industry to build a new generation of reactors. Actions being considered by the Department of Energy and Climate Change (DECC) and its Nuclear Decommissioning Authority include:
• Allowing the nuclear industry to use ordinary landfill sites for disposing of radioactive waste in a more extensive way.
• Allowing the main independent nuclear waste dump at Drigg in Cumbria to reduce its costs by scaling back the level of containment.
• Building a £1.5bn radioactive liquid-waste processing plant at Sellafield, Britain's biggest atomic site, despite a history of project cost overruns and wider safety concerns there.
• Extending a blueprint for dealing with existing high-level waste to cover that created by future nuclear stations – an "unjustifiable" step, according to the chair of the committee that created the blueprint.
Cumbria county council, regarded as the most pro-nuclear authority in the country, is among those trying to stop at least two landfill sites from being used for dumping radioactive waste.
The council's frustration threatens to undermine the government's attempts to persuade it to host the country's first high-level radioactive waste repository.
Tim Knowles, cabinet member for the environment on the council, said: "A tiny amount of nuclear waste went into the Lillyhall landfill site in the past but now they are trying to vastly expand that and use a former open-cast mine at Keekle Head.
"We are talking about moving from a few tons to hundreds of thousands of tons," he said.
The cost of dealing with existing waste has risen to £73bn and been made worse by the discovery that there is 13m cubic metres of "potentially contaminated land" around sites such as Sellafield. This is as well as the existing 3.2m cubic metres of low-level waste and a smaller amount of more radioactive, high-level waste.
A report seen by the Guardian, dated October 2008, from the Nuclear Decommissioning Authority (NDA), says: "In a worst-case scenario, this supplementary volume could increase the volume of land as waste to the point that it dwarfs the current baseline for UK low-level waste. This uncertainty presents significant challenges to the development of a national low-level waste strategy."
The NDA recently completed a 14-week consultation on low-level waste and said it was close to finalising a new strategy. Extending landfill is clearly part of that.
Martin Forwood, of Cumbrians Opposed to a Nuclear Environment, said he was "appalled" by moves to spread the waste around the county. "This is all being done because the Treasury wants to cut the cost, while the one proper licensed waste site at Drigg is almost full up. People seem willing to bend over backwards to help nuclear in a way they don't for anyone else."
Waste management firms have moved swiftly to apply for permission to dispose of nuclear material. A French-owned company, Sita (through its Endecom subsidiary), is applying to the Environment Agency for authorisation for a Radioactive Substances Act disposal unit for its Clifton Marsh landfill site near Preston.
Sita has also presented local councillors and industry professionals with plans to convert a former open-cast mine at Keekle Head, near Whitehaven, Cumbria.
A rival waste company, Augean, is trying to convince locals it should be allowed to dump nuclear waste at the East Northants Management Facility at Kings Cliffe village, near Peterborough. And EnergySolutions, a firm with deep roots in the nuclear industry, wants to extend the use of a landfill site at Lillyhall in Cumbria.
Rob Scott, from Sita's nuclear consultants, Nuvia, said: "Planned decommissioning of nuclear installations will generate significant quantities of low-level waste and very low-level waste, such as building rubble and soil.
"It is now clear that the continued disposal of this low-level waste to the highly engineered national Low-Level Waste Repository, near Drigg in west Cumbria, is not sustainable and is very expensive for the taxpayer. This means alternative solutions have to be found."
The energy department said last night it expected a decision on low-level waste from the NDA within "months" but said this would not affect the timing of its wider nuclear programme. It said a policy dating back to 2007 allowed landfill to be used for the disposal of very low-level waste "subject to appropriate regulatory authorisations" though it is unclear if any waste has been disposed of in this way.
But Melanie McCall, one of the campaigners opposing the Augean move near Peterborough, said: "People don't want to be guinea pigs. The dump is completely inappropriate for this waste."
Augean said it was satisfied there would be no "harm to our employees, the public or the environment".
Low-level waste is made up of a wide range of materials used in the atomic industry, including plastic and clothing as well as metal and building rubble. It makes up approximately 90% of the total volume of the UK's radioactive waste but, the NDA argues, it contains "less than 0.0003%" of the total radioactivity.
The government expects high-level waste to be buried in a deep repository and two local councils in Cumbria have made "expressions of interest" about housing the dump, although discussions remain at a very early stage. The waste from future reactors will be lower in volume but highly radioactive.
Monday, 19 October 2009
Obama envoy warns of 'no deal' summit
Negotiations for the Copenhagen meeting are going 'too slow'
By Jonathan Owen
Sunday, 18 October 2009
Talks to save the world from the catastrophic effects of global warming may fail, President Obama's climate change envoy said last night.
Todd Stern said pre-summit negotiations had been "too slow" and warned that it was "certainly possible" there will be no deal at December's Summit on Climate Change in Copenhagen.
"This is a tough negotiation. What we need to have happen is for China and India and Brazil and South Africa, and others, to be willing to take what they're doing, boost it up some, and then put it into an international agreement – where they're standing behind what they say, just the way we're standing behind what we say we're going to do," he added. He was speaking on the eve of crucial talks in London at the Major Economies Forum, which represents some of the world's biggest polluting nations and which today begins trying to resolve disagreements ahead of Copenhagen.
A major stumbling block preventing an agreement is about where the money will come from to pay to help developing countries go low-carbon – which could cost $100bn (£61bn) a year by 2020.
Months of talks have failed to break a deadlock between developing nations, which blame the West for creating the problem, and richer countries uneasy at the prospect of footing the bill to help poorer nations go green.
Much is at stake. Unless a deal can be reached, many millions could go short on food and water, or find themselves battered by storms and floods on an unprecedented scale. Rising sea levels would submerge entire islands, such as the Maldives; with the death toll from climate change approaching hundreds of thousands a year.
Speaking to the IoS yesterday, the Secretary of State for Climate Change, Ed Miliband, echoed Mr Stern's fears: "We are very close to a deal not being done at Copenhagen. But it will be a tragedy if the world fails to act." He has urged delegates at today's talks to put their differences to one side: "With only 50 days to go before the final talks at Copenhagen, we have to up our game. Britain is determined to throw everything at this because the stakes are so high."
But the deal is already surrounded by red tape – negotiators at Copenhagen will have just five days to try and cut through 200 pages littered with around 2,000 disputed sections.
While governments continue to talk over the details, there was little sign of hesitation among hundreds of climate camp demonstrators, who began a weekend of protests yesterday in an attempt to shut down a coal-fired power station at Ratcliffe-on-Soar, near Nottingham. Police held more than 20 people prior to the protest on suspicion of conspiracy to commit aggravated trespass. Further arrests were made when a perimeter fence was breached.
Goals – results of failure
1. Developed countries to cut emissions of greenhouse gases, failure will take the world into dangerous and catastrophic climate change.
2. Developing countries to limit growth of carbon emissions or face famine, droughts or flooding.
3. Fund to help developing countries create low-carbon economies, with no aid, some will have little chance.
4. Make the latest green technologies available in poorer parts of the world to help reduce pollution.
5. Reduce deforestation, responsible for a fifth of the world's carbon emissions, otherwise 85 per cent of the Amazon rainforest could be lost.
By Jonathan Owen
Sunday, 18 October 2009
Talks to save the world from the catastrophic effects of global warming may fail, President Obama's climate change envoy said last night.
Todd Stern said pre-summit negotiations had been "too slow" and warned that it was "certainly possible" there will be no deal at December's Summit on Climate Change in Copenhagen.
"This is a tough negotiation. What we need to have happen is for China and India and Brazil and South Africa, and others, to be willing to take what they're doing, boost it up some, and then put it into an international agreement – where they're standing behind what they say, just the way we're standing behind what we say we're going to do," he added. He was speaking on the eve of crucial talks in London at the Major Economies Forum, which represents some of the world's biggest polluting nations and which today begins trying to resolve disagreements ahead of Copenhagen.
A major stumbling block preventing an agreement is about where the money will come from to pay to help developing countries go low-carbon – which could cost $100bn (£61bn) a year by 2020.
Months of talks have failed to break a deadlock between developing nations, which blame the West for creating the problem, and richer countries uneasy at the prospect of footing the bill to help poorer nations go green.
Much is at stake. Unless a deal can be reached, many millions could go short on food and water, or find themselves battered by storms and floods on an unprecedented scale. Rising sea levels would submerge entire islands, such as the Maldives; with the death toll from climate change approaching hundreds of thousands a year.
Speaking to the IoS yesterday, the Secretary of State for Climate Change, Ed Miliband, echoed Mr Stern's fears: "We are very close to a deal not being done at Copenhagen. But it will be a tragedy if the world fails to act." He has urged delegates at today's talks to put their differences to one side: "With only 50 days to go before the final talks at Copenhagen, we have to up our game. Britain is determined to throw everything at this because the stakes are so high."
But the deal is already surrounded by red tape – negotiators at Copenhagen will have just five days to try and cut through 200 pages littered with around 2,000 disputed sections.
While governments continue to talk over the details, there was little sign of hesitation among hundreds of climate camp demonstrators, who began a weekend of protests yesterday in an attempt to shut down a coal-fired power station at Ratcliffe-on-Soar, near Nottingham. Police held more than 20 people prior to the protest on suspicion of conspiracy to commit aggravated trespass. Further arrests were made when a perimeter fence was breached.
Goals – results of failure
1. Developed countries to cut emissions of greenhouse gases, failure will take the world into dangerous and catastrophic climate change.
2. Developing countries to limit growth of carbon emissions or face famine, droughts or flooding.
3. Fund to help developing countries create low-carbon economies, with no aid, some will have little chance.
4. Make the latest green technologies available in poorer parts of the world to help reduce pollution.
5. Reduce deforestation, responsible for a fifth of the world's carbon emissions, otherwise 85 per cent of the Amazon rainforest could be lost.
Copenhagen climate talks are last chance, says Gordon Brown
Patrick Wintour
guardian.co.uk, Monday 19 October 2009
Gordon Brown will warn today that the world is on the brink of a "catastrophic" future of killer heatwaves, floods and droughts unless governments speed up negotiations on climate change before vital talks in Copenhagen in December.
This applies to the US as much as anyone, he will say, adding that "there is no plan B", and that agreement cannot be deferred beyond the UN-sponsored Copenhagen conference.
There are fears that Barack Obama does not have the political capital to reach a deal in Copenhagen and will instead use a visit to China next month to reach a bilateral deal that circumvents the UN.
Downing Street is also concerned that there is no agreement on how to finance a climate change package in developing countries.
The prime minister will deliver his warning to a meeting of environment ministers brought together under the umbrella of the Major Economies Forum. The 17 countries in the forum are responsible for 80% of greenhouse gas emissions.
Brown will tell them: "In every era there are only one or two moments when nations come together and reach agreements that make history, because they change the course of history. Copenhagen must be such a time. There are now fewer than 50 days to set the course of the next 50 years and more.
"If we do not reach a deal at this time, let us be in no doubt: once the damage from unchecked emissions growth is done, no retrospective global agreement in some future period can undo that choice. By then it will be irretrievably too late."
Ed Miliband, the climate change secretary yesterday highlighted signs of movement pointing out that last month India said it was ready to set itself non-binding targets for cutting carbon emissions, while China said it would curb the growth of its emissions by a "notable margin" by 2020, although it did not specify further.
The US special envoy for climate change, Todd Stern, said developing economies must boost their efforts to curb emissions, warning it was "certainly possible" that no deal would be agreed in Copenhagen."What we need to have happen is for China and India and Brazil and South Africa and others to be willing to take what they're doing, boost it up some, and then be willing to put it into an international agreement," he said.
guardian.co.uk, Monday 19 October 2009
Gordon Brown will warn today that the world is on the brink of a "catastrophic" future of killer heatwaves, floods and droughts unless governments speed up negotiations on climate change before vital talks in Copenhagen in December.
This applies to the US as much as anyone, he will say, adding that "there is no plan B", and that agreement cannot be deferred beyond the UN-sponsored Copenhagen conference.
There are fears that Barack Obama does not have the political capital to reach a deal in Copenhagen and will instead use a visit to China next month to reach a bilateral deal that circumvents the UN.
Downing Street is also concerned that there is no agreement on how to finance a climate change package in developing countries.
The prime minister will deliver his warning to a meeting of environment ministers brought together under the umbrella of the Major Economies Forum. The 17 countries in the forum are responsible for 80% of greenhouse gas emissions.
Brown will tell them: "In every era there are only one or two moments when nations come together and reach agreements that make history, because they change the course of history. Copenhagen must be such a time. There are now fewer than 50 days to set the course of the next 50 years and more.
"If we do not reach a deal at this time, let us be in no doubt: once the damage from unchecked emissions growth is done, no retrospective global agreement in some future period can undo that choice. By then it will be irretrievably too late."
Ed Miliband, the climate change secretary yesterday highlighted signs of movement pointing out that last month India said it was ready to set itself non-binding targets for cutting carbon emissions, while China said it would curb the growth of its emissions by a "notable margin" by 2020, although it did not specify further.
The US special envoy for climate change, Todd Stern, said developing economies must boost their efforts to curb emissions, warning it was "certainly possible" that no deal would be agreed in Copenhagen."What we need to have happen is for China and India and Brazil and South Africa and others to be willing to take what they're doing, boost it up some, and then be willing to put it into an international agreement," he said.
'Britain an ideal location for new nuclear power'
Lord Hunt, a minister in the Department of Energy and Climate Change, gives his verdict on Britain's nuclear power projects
guardian.co.uk, Monday 19 October 2009
A nuclear renaissance in the UK presents a tremendous opportunity. It has the potential to supply us with substantial amounts of home-grown, low-carbon, reliable and relatively cheap energy. That is why the government is facilitating a new generation of nuclear power: removing regulatory barriers, making the planning system fairer and faster, and creating more certainty for communities and industry.
Climate change and the need to replace ageing power stations mean this is the right thing to do. It is in our long-term national interest. We need to transform our energy sector, replacing old infrastructure with high-tech, low-carbon energy sources. Nuclear energy, alongside a tenfold increase in renewables and investing in clean coal, will be central.
Already the energy industry has announced plans for new reactors to generate 12GW of new nuclear power, more than currently exists. The first of these new plants is on course to start feeding into the grid by 2018, which would usher in a new era of secure clean energy, driven by a rejuvenated industry and workforce.
The civil nuclear industry currently generates 11GW of power from 10 nuclear power stations and provides employment for 44,000 people in the core industry and the direct supply chain. We estimate that a new nuclear power station has the potential to provide 9,000 jobs during construction and 1,000 jobs during operation, with many more created across the supply chain. The estimated economic benefit would be £2.8bn for each new plant.
While the government fully supports a new generation of new nuclear power, we recognise that there are legitimate concerns amongst the public. We are the first administration to take serious action to address Britain's nuclear legacy. I recently visited the site at Dounreay, where workers are completing, ahead of schedule, the decommissioning of the site.
It's exactly this sort of achievement that makes Britain an ideal location for new nuclear power. We have the skills, ingenuity and experience needed, coupled with a strong safety record. Ours is a world-class, rigorous, and transparent regulatory system, ensuring we maintain the highest standards of safety.
The government will announce shortly a rigorously assessed list of sites suitable for new nuclear development, alongside a clear statement of national need. We are determined that this entire process is conducted in partnership with local communities. We have already conducted extensive consultation to hear people's views and address their concerns and will continue to do so.
Putting nuclear energy at the very heart of our low-carbon economy is part of our credibility going into the climate summit in Copenhagen. We need to demonstrate how we intend to reduce our emissions by 80% by 2050. We need to show real action and real leadership, and that is why we need new nuclear energy.
Lord Hunt is a minister in the Department of Energy and Climate Change
guardian.co.uk, Monday 19 October 2009
A nuclear renaissance in the UK presents a tremendous opportunity. It has the potential to supply us with substantial amounts of home-grown, low-carbon, reliable and relatively cheap energy. That is why the government is facilitating a new generation of nuclear power: removing regulatory barriers, making the planning system fairer and faster, and creating more certainty for communities and industry.
Climate change and the need to replace ageing power stations mean this is the right thing to do. It is in our long-term national interest. We need to transform our energy sector, replacing old infrastructure with high-tech, low-carbon energy sources. Nuclear energy, alongside a tenfold increase in renewables and investing in clean coal, will be central.
Already the energy industry has announced plans for new reactors to generate 12GW of new nuclear power, more than currently exists. The first of these new plants is on course to start feeding into the grid by 2018, which would usher in a new era of secure clean energy, driven by a rejuvenated industry and workforce.
The civil nuclear industry currently generates 11GW of power from 10 nuclear power stations and provides employment for 44,000 people in the core industry and the direct supply chain. We estimate that a new nuclear power station has the potential to provide 9,000 jobs during construction and 1,000 jobs during operation, with many more created across the supply chain. The estimated economic benefit would be £2.8bn for each new plant.
While the government fully supports a new generation of new nuclear power, we recognise that there are legitimate concerns amongst the public. We are the first administration to take serious action to address Britain's nuclear legacy. I recently visited the site at Dounreay, where workers are completing, ahead of schedule, the decommissioning of the site.
It's exactly this sort of achievement that makes Britain an ideal location for new nuclear power. We have the skills, ingenuity and experience needed, coupled with a strong safety record. Ours is a world-class, rigorous, and transparent regulatory system, ensuring we maintain the highest standards of safety.
The government will announce shortly a rigorously assessed list of sites suitable for new nuclear development, alongside a clear statement of national need. We are determined that this entire process is conducted in partnership with local communities. We have already conducted extensive consultation to hear people's views and address their concerns and will continue to do so.
Putting nuclear energy at the very heart of our low-carbon economy is part of our credibility going into the climate summit in Copenhagen. We need to demonstrate how we intend to reduce our emissions by 80% by 2050. We need to show real action and real leadership, and that is why we need new nuclear energy.
Lord Hunt is a minister in the Department of Energy and Climate Change
Executives Keep Low Profile at CEO Convention on Energy
By BOB TITA
While the swank Umstead in North Carolina won't ever be confused with a bunker, the siege atmosphere was inescapable when a hundred or so chief executives, chairmen and former executives convened last week for a meeting of the exclusive Business Council, an association of business leaders who discuss policy issues.
Most chief executives attending the meeting at the resort near Raleigh kept low profiles, avoiding the hotel's bar, restaurant and other public areas.
A detail of corporate security guards kept reporters and anybody else not credentialed to participate in the two-day discussion of energy issues far away from the council's forums, dinners and social gatherings.
The gloomy, wet and unseasonably cool weather provided little incentive for members to even venture outside of the luxury resort to a nearby golf course or for a stroll through Umstead's wooded trails.
Many members, including Business Council Chairman James Owens, chairman and CEO of Caterpillar Inc., declined interview requests, citing securities regulations that restrict them from commenting about their companies in the days leading up to quarterly earnings reports.
Executives who made the rounds of business-news networks' remote studios or participated in the Council's lone press briefing made sure their comments were mostly of the vanilla variety.
"I think this country is an amazing, vibrant place and it's raring to go," said JPMorgan Chase & Co. Chairman and Chief Executive Jamie Dimon when asked to comment about the Dow Jones Industrial Average breaking the 10,000 level on Wednesday.
However, at dinner, one CEO said that executives chewed over the news that one of their brethren, Bank of America CEO Kenneth Lewis, agreed Thursday to forfeit his $1.5-million salary for 2009 under pressure from the U.S. government's executive pay czar for companies that received the most federal aid during the credit market crackup.
Some complained the government's pursuit of Mr. Lewis's pay and scrutiny of his decision to purchase crumbling investment bank Merrill Lynch & Co. Inc. last fall merely reinforces the public's negative perception of CEOs as reckless managers concerned more about their own compensation than the fates of their companies.
"It's a false representation of who we are and what we're about," said Wick Moorman, chairman and CEO of railroad Norfolk Southern Corp. "The people who run these companies are concerned about the United States and want to do the right thing not only for their companies but for their country."
Mr. Moorman maintains Mr. Lewis's critics are forgetting that Bank of America purchased Merrill Lynch last fall at the urging of the federal government as it scrambled to keep large financial institutions from collapsing and providing momentum to the financial crisis.
The deal was later blamed for huge losses by Bank of America. Mr. Lewis recently announced he will retire at the end of the year.
"Here's a guy who was told by the government essentially what to do and he did it," Mr. Moorman said. "He had things happen that were completely out of his control and then he was vilified and told: 'You don't deserve any money. You did a bad job.' "
Council members made no secret of their growing anxiety about the federal government's elevated level of intervention in the U.S. economy amid signs that the recession is close to ending.
In a survey of 115 Business Council executives released last week, 46% of them said the federal government's should begin dismantling its credit- market supports to avoid a spike in inflation. In the council's previous survey, which was released in May, just 15% of the executives supported unwinding federal credit supports.
Despite executives' usual preference for free-market solutions, many appear willing to accept a government-mandated structure for energy use and climate-change policy.
The Business Council survey showed that 34% of the respondents disagreed that market-based approaches are a better way to address energy conservation and reduce carbon emissions, while 38% agreed and 28% were neutral.
The meeting was attended by several executives and former executives for companies that have broken ranks with companies and business groups opposed to pending legislation to regulate carbon emissions by industrial companies. Most of them opted to avoid airing their differences in public.
Write to Bob Tita at robert.tita@dowjones.com
While the swank Umstead in North Carolina won't ever be confused with a bunker, the siege atmosphere was inescapable when a hundred or so chief executives, chairmen and former executives convened last week for a meeting of the exclusive Business Council, an association of business leaders who discuss policy issues.
Most chief executives attending the meeting at the resort near Raleigh kept low profiles, avoiding the hotel's bar, restaurant and other public areas.
A detail of corporate security guards kept reporters and anybody else not credentialed to participate in the two-day discussion of energy issues far away from the council's forums, dinners and social gatherings.
The gloomy, wet and unseasonably cool weather provided little incentive for members to even venture outside of the luxury resort to a nearby golf course or for a stroll through Umstead's wooded trails.
Many members, including Business Council Chairman James Owens, chairman and CEO of Caterpillar Inc., declined interview requests, citing securities regulations that restrict them from commenting about their companies in the days leading up to quarterly earnings reports.
Executives who made the rounds of business-news networks' remote studios or participated in the Council's lone press briefing made sure their comments were mostly of the vanilla variety.
"I think this country is an amazing, vibrant place and it's raring to go," said JPMorgan Chase & Co. Chairman and Chief Executive Jamie Dimon when asked to comment about the Dow Jones Industrial Average breaking the 10,000 level on Wednesday.
However, at dinner, one CEO said that executives chewed over the news that one of their brethren, Bank of America CEO Kenneth Lewis, agreed Thursday to forfeit his $1.5-million salary for 2009 under pressure from the U.S. government's executive pay czar for companies that received the most federal aid during the credit market crackup.
Some complained the government's pursuit of Mr. Lewis's pay and scrutiny of his decision to purchase crumbling investment bank Merrill Lynch & Co. Inc. last fall merely reinforces the public's negative perception of CEOs as reckless managers concerned more about their own compensation than the fates of their companies.
"It's a false representation of who we are and what we're about," said Wick Moorman, chairman and CEO of railroad Norfolk Southern Corp. "The people who run these companies are concerned about the United States and want to do the right thing not only for their companies but for their country."
Mr. Moorman maintains Mr. Lewis's critics are forgetting that Bank of America purchased Merrill Lynch last fall at the urging of the federal government as it scrambled to keep large financial institutions from collapsing and providing momentum to the financial crisis.
The deal was later blamed for huge losses by Bank of America. Mr. Lewis recently announced he will retire at the end of the year.
"Here's a guy who was told by the government essentially what to do and he did it," Mr. Moorman said. "He had things happen that were completely out of his control and then he was vilified and told: 'You don't deserve any money. You did a bad job.' "
Council members made no secret of their growing anxiety about the federal government's elevated level of intervention in the U.S. economy amid signs that the recession is close to ending.
In a survey of 115 Business Council executives released last week, 46% of them said the federal government's should begin dismantling its credit- market supports to avoid a spike in inflation. In the council's previous survey, which was released in May, just 15% of the executives supported unwinding federal credit supports.
Despite executives' usual preference for free-market solutions, many appear willing to accept a government-mandated structure for energy use and climate-change policy.
The Business Council survey showed that 34% of the respondents disagreed that market-based approaches are a better way to address energy conservation and reduce carbon emissions, while 38% agreed and 28% were neutral.
The meeting was attended by several executives and former executives for companies that have broken ranks with companies and business groups opposed to pending legislation to regulate carbon emissions by industrial companies. Most of them opted to avoid airing their differences in public.
Write to Bob Tita at robert.tita@dowjones.com
UK renewable energy target 'naive' says Wulf Bernotat
Robin Pagnamenta
Wulf Bernotat looks cold — and sceptical. “Are you sure we are making any money out of this?” the chief executive of E.ON, the world’s largest utility company, asks one of his employees. “This is a business, you know.”
Mr Bernotat is in the gritty Swedish city of Malmö, standing in a windswept former dockyard that E.ON has helped to convert into a “zero-carbon city”.
Hands thrust deep into his overcoat pockets and with his collar turned up against the biting air, he is being lectured on the merits of a solar-powered district heating system that pumps hot water to hundreds of local homes. “You tell me later — in private,” he says, one bushy eyebrow raised ever so slightly.
One of Europe’s most powerful energy barons, Mr Bernotat, who presides over a global behemoth with nearly 88,000 employees and revenues of €87 billion (£79 billion) last year, has an equally blunt message for Britain’s politicians.
Through its subsidiary E.ON UK, the Düsseldorf-based group wields huge influence over British energy policy. It was to invest nearly £1 billion a year in wind and nuclear-generated electricity in the UK “for the foreseeable future”, so its decision this month to freeze plans for a new coal-fired power plant at Kingsnorth in Kent for up to three years sent shockwaves through Britain’s energy industry.
Mr Bernotat seems genuinely exasperated by what he regards as fanciful policymaking that bears little relation to the realities of running a business. Above all, he believes that Britain’s target of generating one third of its electricity from renewable sources, such as wind and wave energy, by 2020 is naive and he says that politicians need to do far more to “adjust expectations . . . There is a big mismatch with what is achievable. I think it is even bigger in the UK than in Germany. Politicians need to be more realistic.”
His argument is that without bigger state subsidies or a higher price for carbon emissions, E.ON cannot afford to make the investment necessary to meet such ambitious targets. “The carbon price is too low to support any accelerated investment in carbon abatement. Every investment must deliver an acceptable return.”
The same focus on pure economics over ideology is behind E.ON’s decision to put the Kingsnorth development on hold. The announcement exposed divisions within Britain’s environmental movement. While many hailed it as a victory, others saw it as a disaster, warning that it would delay E.ON’s plans to invest in new carbon capture and storage (CCS) equipment — key technology in the battle against climate change, a battle in which the Government wants Britain to be a world leader. Mr Bernotat quickly brushes aside any suggestion that E.ON yielded to outside pressure from green groups. “It was simply a reaction to market developments,” he says, adding that the recession has pushed back the need for new plants in the UK to about 2016 because of plummeting electricity demand. “Demand is not developing at the same speed and we just felt we had to adjust our investment programme.” Kingsnorth, he says, is only one of a string of investments that E.ON is deferring because of the recession, which he says will leave depressed demand for electricity across Europe for another two years.
Certainly, Mr Bernotat, a powerfully built German with a taste for afternoon cigars, does not come across as the kind of executive to bow easily to the demands of a few protesters, which might be a disappointment to those environmentalists responsible for violent protests at E.ON’s coal-fired power station at Ratcliffe-on-Soar in Nottinghamshire over the weekend. A spokesman said that the company was “incredibly disappointed” that the protest had not remained peaceful: “It’s clear that there are no winners or losers here.
“While the power station continued to run over the weekend, many protesters seemed more interested in pulling down fences than in having a debate about the vital energy issues that we face today — how to keep the lights on while ensuring energy is affordable and low-carbon.”
Mr Bernotat is keen to emphasise that E.ON, whose UK subsidiary has eight million customers and generates 10 per cent of the nation’s electricity, is no laggard when it comes to green investment. For example, the company is a key backer of London Array, the world’s largest wind farm, which is being built in the Thames Estuary at an estimated cost of £3 billion. Indeed, Mr Bernotat is in Malmö to promote E.ON’s plan to increase the proportion of renewable energy in its portfolio of global power stations from 13 per cent to 18 per cent by 2015 and 36 per cent in the longer term.
The company expects to pour €8 billion into renewable energy projects in the five years to 2011. But the former Shell executive, who is due to retire next year, is under no illusions about the difficulty and cost of doing so. “Even in times of climate change, energy is not only an ecological but also still an economical and social matter. [It] needs a balanced consideration of security of supply and affordability for consumers.”
Later, Mr Bernotat gazes out across the grey seas that separate Malmö from the Danish capital only 10km to the west, a stunning view framed by the spinning turbines of the Lillgrund offshore wind farm and the soaring heights of the Öresund Bridge that connects Malmö with Copenhagen. It is here, in just over two months, that ministers from around the globe will converge for a United Nations meeting on climate change that will address many of the concerns that Mr Bernotat expresses and could determine some answers.
Mr Bernotat says that he is an optimist, but he offers what seems to be a gloomy assessment of the prospects for a global deal on climate change in December. “Copenhagen cannot set higher carbon prices, it can only create a framework to do so,” he says.
“One should always be an optimist, but realistically the expectations for Copenhagen should not fly too high. The Americans will pay some lip service to climate control but not much more. We will see some nice words but less content.”
Johannes Teyssen, E.ON’s chief operating officer, takes over from Mr Bernotat in nine months. It will be up to him to steer a course for E.ON in the world beyond Copenhagen — however different that may be.
E.ON
— World’s largest utility company by sales (not by market value or profits)
— Based in Düsseldorf
— Formed in June 2000 by the merger of VEBA and VIAG, two of Germany’s largest industrial groups, dating from the 1920s
— Employs 88,000 people globally, of whom 17,000 work for E.ON UK (formerly Powergen)
— Group earnings before interest and taxes of ¤5.7 billion (£5.18 billion) in first half of 2009
— Owns power generation, gas and electricity distribution businesses across Europe, Scandinavia, Russia, and in North America
Wulf Bernotat looks cold — and sceptical. “Are you sure we are making any money out of this?” the chief executive of E.ON, the world’s largest utility company, asks one of his employees. “This is a business, you know.”
Mr Bernotat is in the gritty Swedish city of Malmö, standing in a windswept former dockyard that E.ON has helped to convert into a “zero-carbon city”.
Hands thrust deep into his overcoat pockets and with his collar turned up against the biting air, he is being lectured on the merits of a solar-powered district heating system that pumps hot water to hundreds of local homes. “You tell me later — in private,” he says, one bushy eyebrow raised ever so slightly.
One of Europe’s most powerful energy barons, Mr Bernotat, who presides over a global behemoth with nearly 88,000 employees and revenues of €87 billion (£79 billion) last year, has an equally blunt message for Britain’s politicians.
Through its subsidiary E.ON UK, the Düsseldorf-based group wields huge influence over British energy policy. It was to invest nearly £1 billion a year in wind and nuclear-generated electricity in the UK “for the foreseeable future”, so its decision this month to freeze plans for a new coal-fired power plant at Kingsnorth in Kent for up to three years sent shockwaves through Britain’s energy industry.
Mr Bernotat seems genuinely exasperated by what he regards as fanciful policymaking that bears little relation to the realities of running a business. Above all, he believes that Britain’s target of generating one third of its electricity from renewable sources, such as wind and wave energy, by 2020 is naive and he says that politicians need to do far more to “adjust expectations . . . There is a big mismatch with what is achievable. I think it is even bigger in the UK than in Germany. Politicians need to be more realistic.”
His argument is that without bigger state subsidies or a higher price for carbon emissions, E.ON cannot afford to make the investment necessary to meet such ambitious targets. “The carbon price is too low to support any accelerated investment in carbon abatement. Every investment must deliver an acceptable return.”
The same focus on pure economics over ideology is behind E.ON’s decision to put the Kingsnorth development on hold. The announcement exposed divisions within Britain’s environmental movement. While many hailed it as a victory, others saw it as a disaster, warning that it would delay E.ON’s plans to invest in new carbon capture and storage (CCS) equipment — key technology in the battle against climate change, a battle in which the Government wants Britain to be a world leader. Mr Bernotat quickly brushes aside any suggestion that E.ON yielded to outside pressure from green groups. “It was simply a reaction to market developments,” he says, adding that the recession has pushed back the need for new plants in the UK to about 2016 because of plummeting electricity demand. “Demand is not developing at the same speed and we just felt we had to adjust our investment programme.” Kingsnorth, he says, is only one of a string of investments that E.ON is deferring because of the recession, which he says will leave depressed demand for electricity across Europe for another two years.
Certainly, Mr Bernotat, a powerfully built German with a taste for afternoon cigars, does not come across as the kind of executive to bow easily to the demands of a few protesters, which might be a disappointment to those environmentalists responsible for violent protests at E.ON’s coal-fired power station at Ratcliffe-on-Soar in Nottinghamshire over the weekend. A spokesman said that the company was “incredibly disappointed” that the protest had not remained peaceful: “It’s clear that there are no winners or losers here.
“While the power station continued to run over the weekend, many protesters seemed more interested in pulling down fences than in having a debate about the vital energy issues that we face today — how to keep the lights on while ensuring energy is affordable and low-carbon.”
Mr Bernotat is keen to emphasise that E.ON, whose UK subsidiary has eight million customers and generates 10 per cent of the nation’s electricity, is no laggard when it comes to green investment. For example, the company is a key backer of London Array, the world’s largest wind farm, which is being built in the Thames Estuary at an estimated cost of £3 billion. Indeed, Mr Bernotat is in Malmö to promote E.ON’s plan to increase the proportion of renewable energy in its portfolio of global power stations from 13 per cent to 18 per cent by 2015 and 36 per cent in the longer term.
The company expects to pour €8 billion into renewable energy projects in the five years to 2011. But the former Shell executive, who is due to retire next year, is under no illusions about the difficulty and cost of doing so. “Even in times of climate change, energy is not only an ecological but also still an economical and social matter. [It] needs a balanced consideration of security of supply and affordability for consumers.”
Later, Mr Bernotat gazes out across the grey seas that separate Malmö from the Danish capital only 10km to the west, a stunning view framed by the spinning turbines of the Lillgrund offshore wind farm and the soaring heights of the Öresund Bridge that connects Malmö with Copenhagen. It is here, in just over two months, that ministers from around the globe will converge for a United Nations meeting on climate change that will address many of the concerns that Mr Bernotat expresses and could determine some answers.
Mr Bernotat says that he is an optimist, but he offers what seems to be a gloomy assessment of the prospects for a global deal on climate change in December. “Copenhagen cannot set higher carbon prices, it can only create a framework to do so,” he says.
“One should always be an optimist, but realistically the expectations for Copenhagen should not fly too high. The Americans will pay some lip service to climate control but not much more. We will see some nice words but less content.”
Johannes Teyssen, E.ON’s chief operating officer, takes over from Mr Bernotat in nine months. It will be up to him to steer a course for E.ON in the world beyond Copenhagen — however different that may be.
E.ON
— World’s largest utility company by sales (not by market value or profits)
— Based in Düsseldorf
— Formed in June 2000 by the merger of VEBA and VIAG, two of Germany’s largest industrial groups, dating from the 1920s
— Employs 88,000 people globally, of whom 17,000 work for E.ON UK (formerly Powergen)
— Group earnings before interest and taxes of ¤5.7 billion (£5.18 billion) in first half of 2009
— Owns power generation, gas and electricity distribution businesses across Europe, Scandinavia, Russia, and in North America
For Exelon, Carbon Reductions Solve a Problem, Make Money
By REBECCA SMITH
John Rowe, the 64-year-old chief executive of Exelon Corp., has pledged that his utility will drastically reduce its "carbon footprint," including emissions from power plants, vehicles and other sources. Recently, the company retrofitted the 10 stories it occupies in a high-rise Chicago office building, cutting its energy use there in half.
His support of carbon-emission reductions recently led him to clash with the U.S. Chamber of Commerce, and he pulled Exelon out of the group last month. That won him praise from some and enmity from others.
Certainly, as the country's largest operator of nuclear power plants, which don't spew carbon dioxide, Exelon could potentially emerge as a winner if Congress passes legislation to reduce carbon emissions.
John Rowe, CEO of Exelon Corp., discusses managing time horizons, his biggest mistakes and corporate responsibility.
However, his company has hit some bumps recently as it attempted to expand. Industry pundits say the best way for utilities to achieve growth is through consolidation, but Exelon has failed in its attempts to acquire Illinois Power Co., Public Service Enterprise Group Inc. of New Jersey and most recently NRG Energy Inc.
In a recent interview, Mr. Rowe discussed nuclear power, the likelihood of future acquisitions, and leaving smart-grid inventions to tech companies.
Excerpts:
WSJ: You're outspoken about the need for carbon-emission reductions. You dropped out of the U.S. Chamber of Commerce because it opposed legislation. But you own 17 nuclear reactors that would benefit.
Mr. Rowe: We don't flinch from the charge that, yes, some of our motivation and enthusiasm comes from the fact that we should make money on it if it happens. I started dealing with this problem more than a decade ago, long before I had a sense of how much money I could make for Exelon. A good solution to a societal problem is one where the winners help solve the problem.
WSJ: Years ago you were skeptical about the prospects for new nuclear reactors. Now you've proposed a big project for Texas, and you're looking at small reactor technology. What changed your mind?
Mr. Rowe: You're now talking 11 years ago. Well, first, we went from being a company with a bad record to one with a superb record, arguably the best nuclear operator in the country. [Exelon greatly increased the productivity of plants it inherited and ones it bought at distressed prices so they run more than 95% of the time now.]
As of three to four years ago, I had both officers and board members saying, 'We've got to try to do this.' I said, 'Look, give it a try, but we can't do it without the federal loan guarantee money, and we can't do it unless we think gas prices are going to stay up.'
WSJ: What are your biggest challenges right now?
Mr. Rowe: Cutting costs to try to make up for some of the drop in power prices [in the wholesale electricty market, where lower gas prices have put pressure on overall pricing]. Finding some new kinds of businesses that may give us a little growth until power prices recover. And trying to make certain our investors understand how much upside there is when power prices do recover.
Exelon is doing fine right now because our power sales were largely hedged [presold] into next year. But with low power prices and low natural gas prices, the longer the economy stays down, the more we will hurt
WSJ: Would you try again to acquire another utility?
Mr. Rowe: Our investors are sending us a very clear message: Don't try again unless you have a really high probability of succeeding. And don't abandon your financial discipline. We don't have investors who want growth at the price of near-term profits. Our investors want us to pay attention to earnings first.
And so, at the present time, we'll keep our eyes open, but I don't expect to move on another acquisition unless I think I have an extraordinarily high chance of getting it done.
WSJ:Have you considered acquiring a non-utility business?
Mr. Rowe: Well, we don't know how to do anything except generating, transmitting and delivering electricity. You know, we did, 10 years ago, make acquisitions in service companies and things like that. We didn't prove very good at it. Now we'll stick to our knitting.
WSJ: How about acquiring something in the smart grid?
Mr. Rowe: We would look, but we tend to think the people most likely to do that are the Apples and the Microsofts.
To us, the more interesting question is whether there is a way utilities could get together and joint venture with an Apple or a Microsoft?
No one really knows what they want to do with a smart grid. One of my executives calls it "a scratch for whatever itch you happen to have."
We all know it will be able to do a number of things. It can help replace meter readers and shift electricity demand from day to night. It can help restore service more rapidly. It can give you interesting marketing information on what a customer wants. It can help the customer reduce energy consumption.
Somebody's going to come along and invent the toy that's going to revolutionize how you manage stuff in your house. Steve Jobs is going to be a lot better at that than I am.
WSJ: The Egyptian mummy case you donated to the Field Museum is back in your office.
Mr. Rowe: It's on indefinite loan to me. My attorney asked how we could be sure it was on indefinite loan. They said, 'First, your company is very generous to the Field. Second, John is a director and very generous to the Field. And third, we don't want it.' It wasn't for a pharaoh. It was for a minor official—the equivalent of a utility executive.
John Rowe, the 64-year-old chief executive of Exelon Corp., has pledged that his utility will drastically reduce its "carbon footprint," including emissions from power plants, vehicles and other sources. Recently, the company retrofitted the 10 stories it occupies in a high-rise Chicago office building, cutting its energy use there in half.
His support of carbon-emission reductions recently led him to clash with the U.S. Chamber of Commerce, and he pulled Exelon out of the group last month. That won him praise from some and enmity from others.
Certainly, as the country's largest operator of nuclear power plants, which don't spew carbon dioxide, Exelon could potentially emerge as a winner if Congress passes legislation to reduce carbon emissions.
John Rowe, CEO of Exelon Corp., discusses managing time horizons, his biggest mistakes and corporate responsibility.
However, his company has hit some bumps recently as it attempted to expand. Industry pundits say the best way for utilities to achieve growth is through consolidation, but Exelon has failed in its attempts to acquire Illinois Power Co., Public Service Enterprise Group Inc. of New Jersey and most recently NRG Energy Inc.
In a recent interview, Mr. Rowe discussed nuclear power, the likelihood of future acquisitions, and leaving smart-grid inventions to tech companies.
Excerpts:
WSJ: You're outspoken about the need for carbon-emission reductions. You dropped out of the U.S. Chamber of Commerce because it opposed legislation. But you own 17 nuclear reactors that would benefit.
Mr. Rowe: We don't flinch from the charge that, yes, some of our motivation and enthusiasm comes from the fact that we should make money on it if it happens. I started dealing with this problem more than a decade ago, long before I had a sense of how much money I could make for Exelon. A good solution to a societal problem is one where the winners help solve the problem.
WSJ: Years ago you were skeptical about the prospects for new nuclear reactors. Now you've proposed a big project for Texas, and you're looking at small reactor technology. What changed your mind?
Mr. Rowe: You're now talking 11 years ago. Well, first, we went from being a company with a bad record to one with a superb record, arguably the best nuclear operator in the country. [Exelon greatly increased the productivity of plants it inherited and ones it bought at distressed prices so they run more than 95% of the time now.]
As of three to four years ago, I had both officers and board members saying, 'We've got to try to do this.' I said, 'Look, give it a try, but we can't do it without the federal loan guarantee money, and we can't do it unless we think gas prices are going to stay up.'
WSJ: What are your biggest challenges right now?
Mr. Rowe: Cutting costs to try to make up for some of the drop in power prices [in the wholesale electricty market, where lower gas prices have put pressure on overall pricing]. Finding some new kinds of businesses that may give us a little growth until power prices recover. And trying to make certain our investors understand how much upside there is when power prices do recover.
Exelon is doing fine right now because our power sales were largely hedged [presold] into next year. But with low power prices and low natural gas prices, the longer the economy stays down, the more we will hurt
WSJ: Would you try again to acquire another utility?
Mr. Rowe: Our investors are sending us a very clear message: Don't try again unless you have a really high probability of succeeding. And don't abandon your financial discipline. We don't have investors who want growth at the price of near-term profits. Our investors want us to pay attention to earnings first.
And so, at the present time, we'll keep our eyes open, but I don't expect to move on another acquisition unless I think I have an extraordinarily high chance of getting it done.
WSJ:Have you considered acquiring a non-utility business?
Mr. Rowe: Well, we don't know how to do anything except generating, transmitting and delivering electricity. You know, we did, 10 years ago, make acquisitions in service companies and things like that. We didn't prove very good at it. Now we'll stick to our knitting.
WSJ: How about acquiring something in the smart grid?
Mr. Rowe: We would look, but we tend to think the people most likely to do that are the Apples and the Microsofts.
To us, the more interesting question is whether there is a way utilities could get together and joint venture with an Apple or a Microsoft?
No one really knows what they want to do with a smart grid. One of my executives calls it "a scratch for whatever itch you happen to have."
We all know it will be able to do a number of things. It can help replace meter readers and shift electricity demand from day to night. It can help restore service more rapidly. It can give you interesting marketing information on what a customer wants. It can help the customer reduce energy consumption.
Somebody's going to come along and invent the toy that's going to revolutionize how you manage stuff in your house. Steve Jobs is going to be a lot better at that than I am.
WSJ: The Egyptian mummy case you donated to the Field Museum is back in your office.
Mr. Rowe: It's on indefinite loan to me. My attorney asked how we could be sure it was on indefinite loan. They said, 'First, your company is very generous to the Field. Second, John is a director and very generous to the Field. And third, we don't want it.' It wasn't for a pharaoh. It was for a minor official—the equivalent of a utility executive.
Going Clean
The head of General Electric's venture-capital arm talks about what the company hopes to accomplish
By MARA LEMOS STEIN
It's well known as a major investor in wind- and solar-energy projects. But General Electric Co. also hopes its growing role as a venture capitalist will give it an edge in a broader spectrum of emerging green technologies.
The Journal Report
See the complete Energy report.
Since its first investment, in lithium-ion battery maker A123Systems Inc. in January 2006, the venture-capital group at GE Energy Financial Services has put $160 million into a portfolio of 20 companies focused on renewable energy, power-grid and energy-efficiency improvements, and, to a lesser extent, advanced oil and gas technologies.
GE sees these later-stage, clean-energy start-ups as a way to get a sneak peek at emerging technologies. Through its venture arm, it also gets a piece of the ones it believes will be ahead of the pack in the global shift to a reduced-carbon economy.
Kevin Skillern, the VC group's managing director, says it's too early "to tell if we've turned one dollar into two or three dollars." But at GE, there's another key metric: technology. Mr. Skillern says GE is also interested in how the portfolio companies can help its businesses.
"This is a vehicle that provides our larger company with a window into what could be a $15 billion to $20 billion industry in emerging energy technologies," he says.
Mr. Skillern, who grew up in Houston and worked for more than a decade in the oil industry, got his M.B.A. at Stanford University in Palo Alto, Calif. He went back to the oil patch after he graduated, at a time when many of his classmates were pursuing Internet start-ups. But the seed of venture investing had been planted, and GE Energy Financial Services' venture capital was the perfect new patch to let it grow.
We met with Mr. Skillern at GE Energy Financial Services' offices in Stamford, Conn., to discuss how the large conglomerate is influencing the clean- technology industry through its venture investing. Excerpts from that conversation follow.
Seeking Relationships
THE WALL STREET JOURNAL: Were there any particular challenges for GE to get into clean-technology venture-capital investing?
Julian Puckett
Kevin Skillern of GE Energy Financial
KEVIN SKILLERN: We've had to upgrade the relationships with the major investment firms. In this type of investing, we're doing it as a group of investors, as a syndicate, so relationships are paramount. Only about 5% to 10% of the investments make the vast bulk of the profits, ultimately, so clearly you want to be having relationships with the best investors, the best firms.
When we started this endeavor, we were not well known as an investor in this domain, and the big companies are not always perceived positively by other financial investors. There's a lot of suspicion and concern, and we certainly didn't have a reputation of being a world-class partner. Another aspect to that is, as one investor at a top-three firm told me, "Aren't you the ones we're trying to beat? Aren't we trying to disrupt GE?"
There's been a change in philosophy toward GE and other large companies from the investment community, as well as the companies, as they realize the challenges of scaling up these businesses into very large, challenging markets. And I don't think it's just the market environment that has been the catalyst for this change.
WSJ: What is your investment selection process?
MR. SKILLERN: We see probably 1,000 to 1,500 business plans a year, and the selection process is similar to other financial investors. There are three simple factors that are the drivers of valuation: Is the market large and compelling? Is the technology transformational? And are there an adequate number of A-players in the management team that will build an enduring business?
The extra factors that matter for GE have to do more with the scope [of the technology] and how strong a fit it is with different aspects of GE. Ideally we'd love to see both a technical collaboration opportunity, where there is some value to be added beyond the capital, as well as a commercial collaboration opportunity in markets that matter to us.
Adding Value
WSJ: What value is added by GE?
MR. SKILLERN: There's a commercial value that we add, of trying to sell their products to GE and to GE customers. There's getting access to senior decision-makers. There are joint going-to-market programs.
On a technical basis, we have what's considered one of the world's leading corporate research centers that really is our secret weapon in valuation of companies. Then, on the expertise side, these companies are scaling up, looking for project finance, looking for how to fund themselves, to access government grants. So we're pretty smart advisers on some areas where conventional investors wouldn't have that kind of expertise.
As an example, there's a company in California called Soliant Energy. They're an emerging leader in rooftop concentrated photovoltaic systems. When you put the system together, you have to solder, and whiskers [stringy threads resulting from the heat] come up. That causes a problem, because too many of them could lead the unit to short circuit. We were able to go to our appliances business that has the exact same issue, but had already studied it. So we saved [Soliant] months of work and thousands of dollars to provide a quick insight because we are connected within our company.
WSJ: With GE being such a vast company, it's hard to imagine that there aren't silos that prevent the collaboration you talk about with the portfolio companies.
MR. SKILLERN: GE is a very progressive company and very thoughtful about what's going on in the world. If there's a better mousetrap, we want to know about it, and we want to work with the people who have the better mousetrap.
People are interested in trying to be involved and seeing what's happening at the leading edge of these areas. What that enthusiasm has enabled, is that through our vehicle, we fostered relationships with what we call the top 100 emerging technologies stakeholders across GE in all these different areas that matter—from carbon capture, to biomass, to wind and solar, even biofuels and water.
Battery Bet
WSJ: One of your group's major investments has been in the lithium-ion battery maker A123Systems—a $70 million investment. Is that a bet in the electrification of transportation?
MR. SKILLERN: Our view is that this electrification trend is obviously a significant and enduring one.
Ultimately, the question for the electric vehicle is whether or not the capacity that's being installed and the technology development make the cost come down in a way that gets to that price point that allows very deep penetration. The magic number in the U.S. market: If it would end up with a price premium over conventional vehicles of $5,000 to $6,000 for the batteries, the uptake on that type of price premium, we think, would be very high. And our collective view has been that the likelihood of that panning out in the U.S. market is pretty high.
WSJ: How do you view the rise in government policies to regulate carbon emissions?
MR. SKILLERN: It is a driver of the macro opportunity but in very specific instances; it's almost never the individual driver of any of these technologies today. I'd predict that over the next several years you'll see more opportunities that are driven specifically by the carbon policy.
We're starting to see some compelling technology in this area. You have companies that are developing alternative carbon-capture approaches, you have companies that are developing infrastructure that's designed to help move carbon dioxide around the world, you have companies that are developing services to account for carbon footprint.
It's not something that our group has made an investment in to this point, but I'd be surprised if we didn't make an investment or several investments in this area over the next 12 to 24 months. —Ms. Lemos Stein is a reporter for Dow Jones Clean Technology Insight in New York. She can be reached at mara.lemos-stein@dowjones.com
Big Oil Looks to Biofuels
As low-carbon fuels get pushed, BP, Shell and others invest in alternatives
By GUY CHAZAN
The biofuels industry, hit hard by the global credit crunch, is getting a shot in the arm from a new source–the oil majors.
The Journal Report
See the complete Energy report.
Among the oil companies, BP PLC and Royal Dutch Shell PLC have been the most active investors in the sector. But it's even beginning to attract more-conservative companies like Exxon Mobil Corp., whose chief executive, Rex Tillerson, once famously dismissed corn-based ethanol as "moonshine." Exxon announced in July it was investing $600 million in an algae-to-fuel start-up, Synthetic Genomics Inc.
"It was a major signal to the biofuels industry," says Bruce Jamerson, chief executive of Mascoma Corp., a producer of cellulosic ethanol, which is made from inedible plant materials.
Big Oil and biotech may seem an odd combination. Oil companies' profits are driven by traditional, fossil-based gasoline and diesel. Biofuels are alternatives that have a marginal market presence. So why switch to switchgrass?
The answer is the low-carbon policies now being put in place across the developed world. In the U.S., for example, the Renewable Fuels Standard mandates growth in annual sales of biofuels through 2022. The Department of Energy expects U.S. production of biofuels to increase from less than half a million barrels a day in 2007 to 2.3 million barrels a day in 2030. Inevitably, that will erode the oil majors' conventional business.
Choren Industries hopes to produce 18 million liters of biodiesel a year from wood residue.
"The oil companies…see a world of restrictions coming on high-carbon fuels, and they need alternatives," says Mr. Jamerson.
Making the Cut
The biofuels industry also is benefiting from a sharper investment focus among the big oil companies. For years, companies like BP and Shell had a scattershot approach, investing across the entire clean-energy spectrum. BP's chief executive, Tony Hayward, describes the company's initial policy as "a thousand flowers blooming all over the world." But last year, he says, the company began narrowing its investments down to those that it considers commercially viable and a good match with its existing business. Biofuels made the cut, in part because they fit nicely into the company's existing infrastructure of refineries, pipelines and distribution networks.
"Oil companies have a natural affinity for the biofuels business," says Katrina Landis, head of BP's Alternative Energy division. Combining their knowledge of how to produce and market transportation fuels with the potential of biotech start-ups creates a "very powerful partnership," she says.
Shell made a similar move, announcing in March that it wouldn't be expanding its wind and solar portfolio, and would concentrate instead on biofuels along with carbon capture and storage, or CCS, a technology to counter global warming by trapping carbon dioxide from the emissions of power plants and burying it deep underground.
Within biofuels, the majors have largely eschewed corn-based ethanol to focus on the next generation of fuels, which don't rely on food crops. They're mostly producing fuel from cellulose, the fibrous backbone of plants.
BP, for instance, has a joint venture with Verenium Corp., a maker of cellulosic ethanol. Chevron Corp. has one with lumber giant Weyerhaeuser Co. to make fuel from biomass such as switchgrass, a prairie grass native to the southeastern U.S. And Shell is working with Canada's Iogen Corp. to produce fuel from wheat straw, and with Choren Industries GmbH of Germany to make fuel from wood residue.
Peanuts or Seeds?
Some in the industry are dismissive of the funds the majors are committing. "It's less than peanuts for them, given the size of their investment budgets," says Steen Riisgaard, head of Novozymes AS, a Danish company that provides enzymes used in the production of bioethanol.
Shell, for example, has spent about $1.7 billion on alternative energy and carbon-emission-reducing technologies like CCS in the past five years, while its total capital investment budget last year was $32 billion. BP's investments in alternative energy totaled $1.4 billion last year, about 6% of its capital-expenditure budget for the year, and will fall to between $500 million and $1 billion this year as the global economic slowdown saps demand for energy.
But others think of the current level of investment as just the start of a long-term trend. "The bigger investments will come beginning next year, when commercial deployments start to gain pace," says Carlos Riva, chief executive of Verenium.
"The investment in dollar terms doesn't tell the whole story," adds Mr. Riva. Another key contribution is the "management skills [the oil majors] bring, in terms of design and engineering and the delivery of large-scale commercial projects."
"That's something the biofuels industry really needs," he says.
Ultimately, some industry insiders see a future of integrated biorefineries, where the majors will have a suite of low-carbon products they can blend at varying strengths for different markets.
For now, though, the majors are maintaining a cautious stance even as they invest in biofuels, a position shared by industry analysts. "It's an exciting area, but it's unproven," says Angus McCrone, senior analyst at New Energy Finance Ltd., an alternative-energy research firm. "We still don't know if you can produce them at a cost that's economic.…It's a gamble."— Mr. Chazan is a staff reporter in the London bureau of The Wall Street Journal. He can be reached at guy.chazan@wsj.com .
Chemical Solution
With demand for fuel falling, ethanol plants look for other products to sell
By ANA CAMPOY
Can green chemicals save the ethanol industry?
Ethanol producers, who focused on transforming corn into transportation fuel, got whipsawed by skyrocketing corn prices and collapsing demand as consumers cut back on driving.
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Now a group of biotechnology and chemical companies is proposing a different model: using the existing ethanol infrastructure to make higher-margin chemicals.
Worries about global warming and government efforts to make chemicals more environmentally friendly are pushing the industry to find alternatives to the building-block materials they make mostly out of oil and natural gas. Ethanol itself, and other chemicals that can be brewed at ethanol plants, are emerging as viable options.
The trend could give the nascent green-chemicals industry a big boost, and revive business for ailing ethanol producers, some of which are bankrupt and idle.
"The economics of current ethanol production are almost begging for improved processes," says David Gaskin, director of planning for Glycos Biotechnologies Inc., a Houston-based start-up company.
His firm is one among a handful that sees opportunities in retooling ethanol plants to produce chemicals. Others include San Diego-based Genomatica Inc., Englewood, Colo.-based Gevo Inc. and Myriant Technologies LLC, in Quincy, Mass.
An Algenol Biofuels test facility in Florida uses giant, cylindrical plastic bags to house ethanol-producing algae.
World-scale players are getting involved, too. Dow Chemical Co. has formed a partnership with Algenol Biofuels Inc., based in Bonita Springs, Fla., to develop algae-based ethanol.
To be sure, most of these projects are still in development. Many are still in the research stage and won't reach commercial production for years. Others have not yet secured funding.
Gradual Process
Still, analysts say, the ethanol industry will gradually move into bio-chemicals because they represent an intermediate step between corn-based ethanol and more-advanced, next-generation bio-fuels.
"We're not going to go from 1.0 to 2.0," says Matt Hartwig, a spokesman for the Renewable Fuels Association in Washington, D.C., likening ethanol's evolution to software versions. "There's going to be 1.2, 1.5, 1.7 in between."
By tying chemicals into the transportation-fuels business, biotech and ethanol companies are recreating oil refiners' strategy, says Doug Cameron, chief science adviser for the investment firm Piper Jaffray Cos. While refiners mainly produce diesel and gasoline, they are also the beginning of a long manufacturing chain that churns out myriad other products, from auto lubricants to plastics.
The main difference is that bio-chemical producers will rely on living bugs that have been biologically engineered to transform plant materials into other specific substances.
At GlycosBio the focus is on glycerin, a by-product of ethanol fermentation. The company is developing an add-on process for ethanol plants to transform glycerin into more fuels and chemicals used to make fabric, insulation and food, says Mr. Gaskin.
He says several companies have expressed interest in the process, but he doesn't have their authorization to provide their names.
Special Prices
Although the market for any particular chemical is dwarfed by the size of the fuel market, chemicals generally fetch higher prices—two to four times higher, according to Christophe Schilling, Genomatica's chief executive.
Production costs of bio-chemicals can be lower than for their hydrocarbon-based equivalents, he adds. The ideal organism can transform sugar into a chemical in one step, while making the same product at a chemical plant usually takes several, requiring more energy and equipment. Bio-chemicals also come with marketable green credentials.
His company is developing ways to make several chemicals, including methyl ethyl ketone or MEK, which is used as a paint solvent. Because it can be made with the same equipment as ethanol, MEK could be produced at an ethanol facility, says Mr. Schilling.
At least in the beginning, plant-based chemicals will likely be an easier sell for small start-up companies because "in order to be relevant to the fuel industry you have to have several million gallons available before they even look at it," says Jack Huttner, Gevo's executive vice president of commercial and public affairs.
Gevo recently started up an ethanol demonstration plant that it retrofitted to produce butanol, a substance that can be used as a fuel or as a raw material for plastics.
Given the state of the ethanol industry, plants can be had for a bargain, converted and launched faster than it takes to build a new one.
"The conversion of an existing ethanol plant can literally be done in a matter of weeks," compared with two years to launch a new one, says Samuel McConnell, senior vice president of corporate development at Myriant.
Myriant has identified several ethanol plants suitable for producing plant-based succinic acid, a chemical used in spandex fibers and plastics. The company expects commercial production to begin next year.
In the Bag
Dow Chemical and its partner Algenol are still interested in making ethanol, but they are stepping away from the corn-based model. Their proposed ethanol-processing plants: what amount to giant, cylindrical plastic bags to house ethanol-producing algae. The system would take carbon dioxide produced at Dow's Freeport, Texas, chemical plant, and turn it into ethanol. If it works in the pilot stage, Dow could use this method to produce ethanol as a feedstock to make more chemicals.
The system would serve two purposes: curbing global-warming emissions and producing cleaner raw materials. But making it a reality is still some time off.
The companies have to figure out how the different pieces of technology work together, from the high-tech plastic bags to the bio-engineered algae, Dow executives say.
The partners, which also include the National Renewable Energy Laboratory, Georgia Institute of Technology and Menlo Park, Calif.-based Membrane Technology & Research Inc., are also waiting to hear whether the project will get funding from the Department of Energy; the project as planned is contingent on a government subsidy, which could be as much as $25 million.
"We've got a long way to go," says Rich Wells, Dow's vice president of energy.— Ms. Campoy is a staff reporter for The Wall Street Journal in Dallas. She can be reached at ana.campoy@wsj.com .
Five Technologies That Could Change Everything
By MICHAEL TOTTY
It's a tall order: Over the next few decades, the world will need to wean itself from dependence on fossil fuels and drastically reduce greenhouse gases. Current technology will take us only so far; major breakthroughs are required.
What might those breakthroughs be? Here's a look at five technologies that, if successful, could radically change the world energy picture.
They present enormous opportunities. The ability to tap power from space, for instance, could jump-start whole new industries. Technology that can trap and store carbon dioxide from coal-fired plants would rejuvenate older ones.
The Journal Report
Success isn't assured, of course. The technologies present difficult engineering challenges, and some require big scientific leaps in lab-created materials or genetically modified plants. And innovations have to be delivered at a cost that doesn't make energy much more expensive. If all of that can be done, any one of these technologies could be a game-changer.
SPACE-BASED SOLAR POWER
For more than three decades, visionaries have imagined tapping solar power where the sun always shines—in space. If we could place giant solar panels in orbit around the Earth, and beam even a fraction of the available energy back to Earth, they could deliver nonstop electricity to any place on the planet.
Source: New Scientist
Sunlight is reflected off giant orbiting mirrors to an array of photovoltaic cells; the light is converted to electricity and then changed into microwaves, which are beamed to earth. Ground-based antennas capture the microwave energy and convert it back to electricity, which is sent to the grid.
The technology may sound like science fiction, but it's simple: Solar panels in orbit about 22,000 miles up beam energy in the form of microwaves to earth, where it's turned into electricity and plugged into the grid. (The low-powered beams are considered safe.) A ground receiving station a mile in diameter could deliver about 1,000 megawatts—enough to power on average about 1,000 U.S. homes.
The cost of sending solar collectors into space is the biggest obstacle, so it's necessary to design a system lightweight enough to require only a few launches. A handful of countries and companies aim to deliver space-based power as early as a decade from now.
ADVANCED CAR BATTERIES
Electrifying vehicles could slash petroleum use and help clean the air (if electric power shifts to low-carbon fuels like wind or nuclear). But it's going to take better batteries.
Source: EDSRC
In a lithium-air battery, oxygen flows through a porous carbon cathode and combines with lithium ions from a lithium-metal anode in the presence of an electrolyte, producing an electric charge. The reaction is aided by a catalyst, such as manganese oxide, to improve capacity.
Lithium-ion batteries, common in laptops, are favored for next-generation plug-in hybrids and electric vehicles. They're more powerful than other auto batteries, but they're expensive and still don't go far on a charge; the Chevy Volt, a plug-in hybrid coming next year, can run about 40 miles on batteries alone. Ideally, electric cars will get closer to 400 miles on a charge. While improvements are possible, lithium-ion's potential is limited.
One alternative, lithium-air, promises 10 times the performance of lithium-ion batteries and could deliver about the same amount of energy, pound for pound, as gasoline. A lithium-air battery pulls oxygen from the air for its charge, so the device can be smaller and more lightweight. A handful of labs are working on the technology, but scientists think that without a breakthrough they could be a decade away from commercialization.
UTILITY STORAGE
Everybody's rooting for wind and solar power. How could you not? But wind and solar are use-it-or-lose-it resources. To make any kind of difference, they need better storage.
Source: AEP
Battery packs located close to customers can store electricity from renewable wind or solar sources and supply power when the sun isn't shining or the wind isn't blowing. Energy is collected in the storage units and can be sent as needed directly to homes or businesses or out to the grid.
Scientists are attacking the problem from a host of angles—all of which are still problematic. One, for instance, uses power produced when the wind is blowing to compress air in underground chambers; the air is fed into gas-fired turbines to make them run more efficiently. One of the obstacles: finding big, usable, underground caverns.
Similarly, giant batteries can absorb wind energy for later use, but some existing technologies are expensive, and others aren't very efficient. While researchers are looking at new materials to improve performance, giant technical leaps aren't likely.
Lithium-ion technology may hold the greatest promise for grid storage, where it doesn't have as many limitations as for autos. As performance improves and prices come down, utilities could distribute small, powerful lithium-ion batteries around the edge of the grid, closer to customers. There, they could store excess power from renewables and help smooth small fluctuations in power, making the grid more efficient and reducing the need for backup fossil-fuel plants. And utilities can piggy-back on research efforts for vehicle batteries.
CARBON CAPTURE AND STORAGE
Keeping coal as an abundant source of power means slashing the amount of carbon dioxide it produces. That could mean new, more efficient power plants. But trapping C02 from existing plants—about two billion tons a year—would be the real game-changer.
Source: Vattenfall
Carbon dioxide is removed from smokestack gases and compressed. It's then pumped deep underground and stored in porous rock formations.
Techniques for modest-scale CO2 capture exist, but applying them to big power plants would reduce the plants' output by a third and double the cost of producing power. So scientists are looking into experimental technologies that could cut emissions by 90% while limiting cost increases.
Nearly all are in the early stages, and it's too early to tell which method will win out. One promising technique burns coal and purified oxygen in the form of a metal oxide, rather than air; this produces an easier-to-capture concentrated stream of CO2 with little loss of plant efficiency. The technology has been demonstrated in small-scale pilots, and will be tried in a one-megawatt test plant next year. But it might not be ready for commercial use until 2020.
NEXT-GENERATION BIOFUELS
One way to wean ourselves from oil is to come up with renewable sources of transportation fuel. That means a new generation of biofuels made from nonfood crops.
Researchers are devising ways to turn lumber and crop wastes, garbage and inedible perennials like switchgrass into competitively priced fuels. But the most promising next-generation biofuel comes from algae.
Source: Saferenviroment
Algae grow by taking in CO2, solar energy and other nutrients. They produce an oil that can be extracted and added into existing refining plants to make diesel, gasoline substitutes and other products.
Algae grow fast, consume carbon dioxide and can generate more than 5,000 gallons a year per acre of biofuel, compared with 350 gallons a year for corn-based ethanol. Algae-based fuel can be added directly into existing refining and distribution systems; in theory, the U.S. could produce enough of it to meet all of the nation's transportation needs.
But it's early. Dozens of companies have begun pilot projects and small-scale production. But producing algae biofuels in quantity means finding reliable sources of inexpensive nutrients and water, managing pathogens that could reduce yield, and developing and cultivating the most productive algae strains.— Mr. Totty is a news editor for The Journal Report in San Francisco. He can be reached at michael.totty@wsj.com .
It's a tall order: Over the next few decades, the world will need to wean itself from dependence on fossil fuels and drastically reduce greenhouse gases. Current technology will take us only so far; major breakthroughs are required.
What might those breakthroughs be? Here's a look at five technologies that, if successful, could radically change the world energy picture.
They present enormous opportunities. The ability to tap power from space, for instance, could jump-start whole new industries. Technology that can trap and store carbon dioxide from coal-fired plants would rejuvenate older ones.
The Journal Report
Success isn't assured, of course. The technologies present difficult engineering challenges, and some require big scientific leaps in lab-created materials or genetically modified plants. And innovations have to be delivered at a cost that doesn't make energy much more expensive. If all of that can be done, any one of these technologies could be a game-changer.
SPACE-BASED SOLAR POWER
For more than three decades, visionaries have imagined tapping solar power where the sun always shines—in space. If we could place giant solar panels in orbit around the Earth, and beam even a fraction of the available energy back to Earth, they could deliver nonstop electricity to any place on the planet.Source: New Scientist
Sunlight is reflected off giant orbiting mirrors to an array of photovoltaic cells; the light is converted to electricity and then changed into microwaves, which are beamed to earth. Ground-based antennas capture the microwave energy and convert it back to electricity, which is sent to the grid.
The technology may sound like science fiction, but it's simple: Solar panels in orbit about 22,000 miles up beam energy in the form of microwaves to earth, where it's turned into electricity and plugged into the grid. (The low-powered beams are considered safe.) A ground receiving station a mile in diameter could deliver about 1,000 megawatts—enough to power on average about 1,000 U.S. homes.
The cost of sending solar collectors into space is the biggest obstacle, so it's necessary to design a system lightweight enough to require only a few launches. A handful of countries and companies aim to deliver space-based power as early as a decade from now.
ADVANCED CAR BATTERIES
Electrifying vehicles could slash petroleum use and help clean the air (if electric power shifts to low-carbon fuels like wind or nuclear). But it's going to take better batteries.
Source: EDSRC
In a lithium-air battery, oxygen flows through a porous carbon cathode and combines with lithium ions from a lithium-metal anode in the presence of an electrolyte, producing an electric charge. The reaction is aided by a catalyst, such as manganese oxide, to improve capacity.
Lithium-ion batteries, common in laptops, are favored for next-generation plug-in hybrids and electric vehicles. They're more powerful than other auto batteries, but they're expensive and still don't go far on a charge; the Chevy Volt, a plug-in hybrid coming next year, can run about 40 miles on batteries alone. Ideally, electric cars will get closer to 400 miles on a charge. While improvements are possible, lithium-ion's potential is limited.
One alternative, lithium-air, promises 10 times the performance of lithium-ion batteries and could deliver about the same amount of energy, pound for pound, as gasoline. A lithium-air battery pulls oxygen from the air for its charge, so the device can be smaller and more lightweight. A handful of labs are working on the technology, but scientists think that without a breakthrough they could be a decade away from commercialization.
UTILITY STORAGE
Everybody's rooting for wind and solar power. How could you not? But wind and solar are use-it-or-lose-it resources. To make any kind of difference, they need better storage.
Source: AEP
Battery packs located close to customers can store electricity from renewable wind or solar sources and supply power when the sun isn't shining or the wind isn't blowing. Energy is collected in the storage units and can be sent as needed directly to homes or businesses or out to the grid.
Scientists are attacking the problem from a host of angles—all of which are still problematic. One, for instance, uses power produced when the wind is blowing to compress air in underground chambers; the air is fed into gas-fired turbines to make them run more efficiently. One of the obstacles: finding big, usable, underground caverns.
Similarly, giant batteries can absorb wind energy for later use, but some existing technologies are expensive, and others aren't very efficient. While researchers are looking at new materials to improve performance, giant technical leaps aren't likely.
Lithium-ion technology may hold the greatest promise for grid storage, where it doesn't have as many limitations as for autos. As performance improves and prices come down, utilities could distribute small, powerful lithium-ion batteries around the edge of the grid, closer to customers. There, they could store excess power from renewables and help smooth small fluctuations in power, making the grid more efficient and reducing the need for backup fossil-fuel plants. And utilities can piggy-back on research efforts for vehicle batteries.
CARBON CAPTURE AND STORAGE
Keeping coal as an abundant source of power means slashing the amount of carbon dioxide it produces. That could mean new, more efficient power plants. But trapping C02 from existing plants—about two billion tons a year—would be the real game-changer.
Source: Vattenfall
Carbon dioxide is removed from smokestack gases and compressed. It's then pumped deep underground and stored in porous rock formations.
Techniques for modest-scale CO2 capture exist, but applying them to big power plants would reduce the plants' output by a third and double the cost of producing power. So scientists are looking into experimental technologies that could cut emissions by 90% while limiting cost increases.
Nearly all are in the early stages, and it's too early to tell which method will win out. One promising technique burns coal and purified oxygen in the form of a metal oxide, rather than air; this produces an easier-to-capture concentrated stream of CO2 with little loss of plant efficiency. The technology has been demonstrated in small-scale pilots, and will be tried in a one-megawatt test plant next year. But it might not be ready for commercial use until 2020.
NEXT-GENERATION BIOFUELS
One way to wean ourselves from oil is to come up with renewable sources of transportation fuel. That means a new generation of biofuels made from nonfood crops.
Researchers are devising ways to turn lumber and crop wastes, garbage and inedible perennials like switchgrass into competitively priced fuels. But the most promising next-generation biofuel comes from algae.
Source: Saferenviroment
Algae grow by taking in CO2, solar energy and other nutrients. They produce an oil that can be extracted and added into existing refining plants to make diesel, gasoline substitutes and other products.
Algae grow fast, consume carbon dioxide and can generate more than 5,000 gallons a year per acre of biofuel, compared with 350 gallons a year for corn-based ethanol. Algae-based fuel can be added directly into existing refining and distribution systems; in theory, the U.S. could produce enough of it to meet all of the nation's transportation needs.
But it's early. Dozens of companies have begun pilot projects and small-scale production. But producing algae biofuels in quantity means finding reliable sources of inexpensive nutrients and water, managing pathogens that could reduce yield, and developing and cultivating the most productive algae strains.— Mr. Totty is a news editor for The Journal Report in San Francisco. He can be reached at michael.totty@wsj.com .
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