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John W. Rowe

John W. Rowe

Posted: December 3, 2010 11:28 AM

A cleaner energy future for the United States is an imperative for our nation's security, its international competitiveness and its long-term economic well-being. The good news is, we are moving toward becoming a lower carbon, less polluting society. The bad news is, we're doing so in uneconomic fits and starts. We now have a patchwork of clean energy policies at the federal and state levels that largely promote the expensive options and neglect the cheapest ones.

Prominent among these are mandates for utilities to buy renewable power; tax credits for wind and solar power; loan guarantees for new nuclear plants and other clean options; and funding for coal with carbon sequestration. Relying too much on these options could double electricity prices in many parts of the country. Given the sluggish economic recovery and our federal budget outlook, these are costs that America should not pay. There are more affordable ways to ensure a clean energy future.

So the question facing the U.S. is not whether it should reduce air pollution and carbon emissions, but how to do so at the lowest possible cost. While legislation that puts a price on carbon would be the most efficient approach to dealing with that pollutant, it is unlikely in the near future. Meanwhile, fossil fuels still face a variety of challenges. The U.S. Environmental Protection Agency is required by law (and recent court decisions) to tighten regulations for hazardous air pollution including mercury and acid gases. These regulations will make it costlier to operate older, inefficient, higher-polluting coal plants. Therefore, there is great incentive for companies to clean up or retire these plants and replace them with a combination of cost-effective solutions, including reducing consumption through energy efficiency and demand response and adding capacity through the lowest-cost generation options. New natural gas discoveries promise an abundant source of energy, and this lower-carbon, low-cost fuel will be the cheapest way in the near term of meeting any new demand for electricity.

Given the stalemate in Congress the question becomes, how can industry respond? We decided two years ago that we would not wait, and we unveiled Exelon 2020, our company's plan to reduce, offset or displace the equivalent of its 2001 carbon footprint by the year 2020. It serves as a guide to our investment decisions and a framework for our public policy advocacy. The analysis upon which Exelon 2020 is based tells us which actions provide our customers with reliable, clean energy at the lowest cost while also delivering the highest returns for our shareholders. Over the next five years, we will advance Exelon 2020 by investing $5 billion in clean energy projects such as energy efficiency and Smart Grid programs, renewable energy solutions and increasing output at nuclear plants. As a result, we will help reinvigorate the economy and create thousands of jobs both at Exelon and within our more than 5,000 supplier companies.

This year, we expanded our analysis to all of the PJM Interconnection, the 13-state Mid-Atlantic power market in which we operate, to see how the electric utility industry may respond, especially in light of upcoming EPA rules. The findings were striking: under these new regulations, utilities in PJM alone can cut approximately 60 million metric tons of carbon emissions per year. This equates to 75 percent of PJM's fair share of the national 17 percent emission reduction goal that President Obama announced in 2009. And these reductions can be achieved without a carbon price and at wholesale power prices lower than those paid by customers in 2008.

While Exelon, given our expansive nuclear portfolio, is uniquely positioned to be a clean energy company, a similar analysis could be used to design a cleaner energy roadmap specific to any energy company or region. The important thing is that relative economics of our energy alternatives are considered, because in today's challenging economy, and as we position ourselves for the future, we cannot afford unnecessary costs when there are more affordable options.