Power for the People

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.

© 2008