On June 2, the U.S. Environmental Protection Agency proposed a rule that grabbed the attention of anyone remotely interested in energy and climate change. The regulations, which would slash CO2 emissions from existing coal power plants by up to 30% by 2030, are perhaps the biggest move the Obama administration has made to directly tackle climate change.
David Crane, the CEO of NRG Energy, one of the country's largest power generation and retail electricity businesses, isn't thrilled about the regulations—but not for the reasons you might think an energy company CEO would be upset.
Crane, an honoree at the upcoming Global Green Millennium Awards, is not a typical energy company CEO. NRG has plenty of coal, oil, and natural gas assets. But it also champions renewable energy—the company is about to purchase the biggest wind farm in America. NRG has even moved into the distributed solar generation space, skipping its utility customers altogether to put solar panels on the roofs of homes and businesses.
"My big concern is that everyone in the environmental movement loves to hate conventional coal plants, but the average age of a conventional coal plant in the U.S. is [over] 43 years old. In some ways, it's firing a bunch of bullets at a fleet of assets on their last leg anyway," he says. "The EPA should be regulating coal plants from a carbon perspective. I think there are much more important things to be talking about in terms of how do we solve the problem of climate change."
Crane further explains his position on the future of energy generation in his recent shareholder letter:
Just a few years ago the prevailing wisdom was that the path to a clean energy economy depended on our collective willingness to build a nationwide, high voltage transmission system in order to transport electricity in vast quantities from the relentlessly windy and brutally sunny parts of the country, where people generally don't live, to the more moderate places where Americans tend to congregate. The folly of that idea thankfully was realized before anyone actually began to build such an expensive and pointless white elephant. Now we are headed for the same goal BUT in the opposite direction: down the path towards a distributed generation-centric, clean energy future featuring individual choice and the empowerment of the American energy consumer.
One of Crane's biggest concerns with the EPA regulations is the timeline: a 30% reduction in emissions by 2030, compared to 2005 levels. The regulations will naturally push energy providers towards natural gas, which has lower carbon emissions than coal, but is hardly emissions-free. An uptick in natural gas will succeed in reducing CO2 emissions in the short-term, Crane believes, but it will be counterproductive in terms of achieving an 80% reduction by 2050—the goal that the world's scientists are focused on.
"We need a source of baseload generation that doesn’t put carbon in the atmosphere. What I would have liked to see is not just a one-part plan of regulating conventional coal out of existence—let’s really figure out what comes next," he says.
So what does come next? A mix of solar, wind, better energy storage, and carbon capture technology attached to fossil fuel plants, Crane believes.
An NRG subsidiary called Petra Nova is investing in a $900 million carbon capture project that will be attached to the largest coal plant in the U.S. (which happens to be owned by NRG). "The only way we can make the project work commercially is by turning carbon into something valuable—using it for injections to recover oil, and then cover the cost of carbon by selling barrels of oil. That’s not ideal from an environmental perspective, either," Crane admits. "We have to get to deploying this technology at scale if it’s going to catch on in the U.S. and most importantly in China."
In Crane's opinion, the EPA regulations only deepen the traditional divide between anti-coal liberals and pro-coal conservatives. "One of the things I really like about distributed solar is that when you start talking about it as a fundamental property right—to harness solar power hitting your house into electricity—you're talking in terms that Tea Party people and libertarians love," he says. "I think to actually solve climate change, we have to build coalitions."
[Image: Smokestacks via Shutterstock]