Monday, March 16, 2009
PNM looks to the future
By John Fleck
Copyright © 2009 Albuquerque Journal Journal Staff Writer
Climate change is a dollars and cents issue to Jeff Sterba, the head of New Mexico's largest electrical utility.
"There is no bigger risk that can impact you long term in our business than climate change," Sterba, chief executive officer of PNM, told the Journal in an interview.
Sterba explains the risk this way: If PNM needs a new long-term source of energy, it could build a coal plant that might generate electricity for 5 cents per kilowatt hour. That would make coal among the cheapest sources of power out there.
But climate change regulations, through some sort of a tax on emissions or "cap and trade" system, could drive that cost in the future to 10 or 15 cents for the same kilowatt hour of electricity, according to Sterba.
For a long-lived power plant, that creates enormous economic uncertainty. "What you put up stays for 60 years," Sterba said. "That is an enormous economic risk."
While some energy companies have responded to the political uncertainty by fighting climate change regulation, PNM Resources has joined with a national coalition of industry and environmental groups to push for regulations that would reduce greenhouse gas emissions while in the process creating policy certainty he and his industry colleagues can use to guide their long-term business decisions.
"I'd rather be at the table than on the menu," Sterba said.
PNM was one of the founders of the U.S. Climate Action Partnership, which now includes 30 members. Companies like Ford Motor Co. and Duke Energy and environmental groups like the Natural Resources Defense Council and the Nature Conservancy have signed on.
Sterba said his views are based on studying the science with an eye toward its economic implications. "I'm not a scientist by training," he said. "I'm an economist by training."
As such, Sterba said, he read work by mainstream scientists who think climate change is real and human-caused, as well as the work of those who question whether the potential for long-term damage is real. "Whatever you read," he said, "make sure you read the opposing view."
He concluded that the economic risk for his company was far greater if society followed the path advocated by skeptics and took no action.
The U.S. Climate Action Partnership, in its "Blueprint for Action," released in January, put it this way: "The science is sufficiently clear to justify prompt action," the document said. "Each year of delayed action to control emissions increases the risk of unavoidable consequences that could necessitate even steeper reductions in the future, with potentially greater economic cost and social disruption."
The document outlines proposed government actions to reduce greenhouse gas emissions, calling for establishment of a "cap and trade" system to regulate emissions of carbon dioxide and other greenhouse gases that have been linked by scientists to climate change.
The specifics of the proposal have struck some in the environmental movement as being too business-friendly. The National Wildlife Federation dropped out of the organization rather than sign on to a proposal the organizations said it does not think goes far enough.
The Climate Action Partnership's proposal would cap total emissions. Companies would at first be given a limited amount of emissions permits for free. Eventually, under the USCAP proposal, the companies would have to pay for them.
Companies could buy and sell emissions permits, an attempt to harness market mechanisms to find the most cost-effective ways of reducing greenhouse gases.
"There is no doubt that a 'cap and trade' regime will raise energy costs in Albuquerque and wherever it is enacted," said Paul Gessing of the Rio Grande Foundation, an Albuquerque free market advocacy group.
If greenhouse regulation is needed, Gessing said, a straight tax on carbon emissions rather than a complex cap and trade system would be more simple and transparent.