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A Losing Bet: Why Investors Are Turning Away From Coal-Fired Power

Investors large and small are questioning the logic of funding new coal-fired power plants, for good reason. Coal plants are expensive to build and have tremendous environmental consequences. Coal has long been an artificially cheap energy source, thanks in part to taxpayer subsidies and unregulated pollution, but efforts at the state and federal levels to reduce global warming pollution and clean up dirty coal plants are casting doubt on the capacity of new coal plants to deliver returns on investor money.

The Interfaith Center on Corporate Responsibility (ICCR) prepared a report called "Don't Get Burned" that cautions against investing in new coal-fired power plants. Below is a short interview with Leslie H. Lowe, director of ICCR's Energy and Environment Programs, on the perils of investing in coal.

Earthjustice: What is ICCR?

Leslie Lowe: ICCR is a membership organization of more than 275 Protestant, Roman Catholic and Jewish institutional investors, including the pension funds and endowments of major denominations, hospital corporations, foundations and religious communities, whose collective assets exceed $110 billion. It has been a leader of the corporate responsibility movement for 38 years.  ICCR members use their investment assets to engage corporate management and the financial community on social and environmental issues such as global warming, clean energy, food safety, sustainable water use, and environmental justice.

EJ: What is the major focus of the "Don't Get Burned" report?

LL: The report draws an analogy between what happened to investments in nuclear power plants in the 1970s and investments in new coal plants today. (Ed.: Investments in nuclear plants during the late-1970s became very unstable, and now, as the report points out, there are signs that new coal-fired plants are an increasingly risky long-term investment as well.) When the report was issued in 2008, more than 50 new coal-fired plants were slated for construction, despite the fact that more than 20 additional plants had been cancelled, three dozen more had been delayed, and several electric utilities had announced that they would not build any new coal-fired plants. 

EJ: What should investors know?

LL: "Don't Get Burned" educated investors about the multiple risks that new coal plants face:

  • The likelihood of federal greenhouse gas regulations imposing higher costs on coal-burning plants over their useful life (40 to 60 years), making them uneconomic for the long-term;
  • The likelihood of more-stringent regulation of other coal plant pollutants (nitrogen oxides, sulfur dioxide, and mercury) adversely affecting the bottom line of utilities that operate coal plants;
  • The uncertainty about carbon capture and storage (CCS) technology being viable at utility scale and the unknown cost factors for CCS; and
  • The possibility that utility regulators might disallow cost recovery for investors in new coal plants, given the mandate for regulated utilities to provide reliable service to ratepayers at the lowest reasonable cost.

EJ: Based on your findings, how should investors grow and protect their nest eggs in our changing world?

LL: Yesterday's sure thing may be tomorrow's sure loser. Long-term investors must consider the fact that the electric utilities of the 21st Century must be profitable in a carbon constrained world. Energy efficiency is the cheapest way to provide electricity in the U.S. today.