John Rowe, 63, has been chief executive officer of Exelon since 2000. Based in Chicago, Exelon is one of the nation's largest utilities (2007 revenues: $19 billion), serving about 5.4 million electricity customers and 480,000 gas customers in Illinois and Pennsylvania. Its 10 nuclear plants constitute about 20 percent of the U.S. nuclear industry's generating capacity. This year Exelon came out with an ambitious plan to offset or displace its current carbon footprint—15 million metric tons of greenhouse emissions annually—by 2020. Rowe spoke with NEWSWEEK's Daniel Gross.
GROSS: What's the aim of this plan?
ROWE: One of the things we hoped to do is to show one utility could come up with a plan to displace its carbon footprint. We hoped that would be a dramatic step forward, as well as a teaching document.
In your plan, less than 10 percent of the reductions are expected to come from renewable energy. Why are you skeptical of the possibilities of wind and solar?
Renewables are a piece of the puzzle. But in the short run they're a very expensive piece. And neither brings capacity with it. When the wind isn't blowing, we still need coal and nuclear to keep the lights on.
You don't have faith that technology and engineering will solve some of these problems?
There will always be issues with the storage of energy. Just because sometimes technological advances deliver improvements truly beyond our dreams—i.e., the Web—doesn't mean it always does.
So what's the answer?
First, focus on energy efficiency—it's the cheapest thing to do upfront. Second, more-efficient use of natural gas. And in the longer run, we need bigger commitments to nuclear and clean coal with carbon sequestration.
Since 2002 you've cut energy consumption at Exelon facilities by 11 percent. How are your customers doing when it comes to efficiency and conservation?
A small portion, let's say 10 percent, of our residential customers are highly committed. A much larger portion, probably the bulk, would like to do things that are more efficient, but have very complex usage patterns for energy. Customers value a lot of things: ambience, simplicity, convenience and quality of life. Programs that subsidize customer energy efficiency can be effective. But a customer may use the rebate we provide for installing a more efficient new refrigerator to buy a plasma TV.
What's been surprising about your own company's efficiency efforts?
When we redid our corporate headquarters in Chicago, which occupies 10 floors in a 40-year-old building, we cut our energy use by 50 percent. One of the reasons we got such a big saving is that we capitalized on the work the building was doing on its own. Every building is different.
So if efficiency isn't the killer application, what else do we need to do?
While we talk about renewables and hem and haw about coal, what we're really going to be building is gas generation, which is not all bad. Gas is a very rational decade-or-two bridge to a more-economic package of other solutions. But it's not a free lunch. And unless we continue to be successful at expanding U.S. supplies, we'll have to acquire natural gas in the global liquefied-natural-gas market—which has some painful similarities to the world oil market.
Nuclear energy offers the ability to produce large quantities of emissions-free electricity. Is the climate is becoming more favorable for the construction of new nuclear plants?
People are much more open to new nuclear than they were: it's domestic, they've seen the costs of other technologies rise, and climate change is helping. But it's not enough yet. The issue of storage for spent fuel is still a large one. So is cost. We are absolutely committed to nuclear in terms of running our 17 units, which are doing our customers and shareholders a lot of good. We're looking at building a two-unit plant in Texas at the moment, which could cost $12 billion. Even the biggest utility company can't afford to spend that much money on one project. Still, I have no doubt that we can deal with carbon more effectively with a large national commitment to nuclear.
How has your industry's attitude toward global warming changed?
I think 90 percent of my colleagues believe the climate problem is a real issue; five years ago, it might have been 30 percent. But you have big dichotomies of view as to whether climate is a problem that the world order or disorder will cope with. In America, the utilities that have historically been the cheapest suppliers have been coal burners. And out of both conscience and self-interest, they are the most reluctant to be in favor of a carbon-cost penalty—like a carbon tax—very soon. I don't consider this a war between the enlightened and the unenlightened. I see this as a tension between people who are protecting different but very important values for our society.
So what's the policy prescription needed to control emissions and fight global warming?
We should rely more on competitive market mechanisms than on government fiat. We also should have tighter efficiency standards, and some help for renewables and carbon sequestration. We also need cap-and-trade legislation.
Large companies like yours do lots of scenario planning. In the past decade, did you come across any analysis suggesting that energy prices would be where they are now?
Has anybody had consistent good foresight? Not a bit. When I came into the business in 1984, forecasts for long-run prices of hydrocarbons were very high. I remember forecasts of oil being $200, and it was supposed to happen in 10 years. In fact, the price plummeted. But the upshot wasn't good for either national security or the economy. The things gnawing on us today were baring their teeth 25 years ago.