Dominion Resources – Financial Risks of Continued Reliance on Coal
WHEREAS
For electric power companies, continued reliance on coal is increasingly problematic in the face of declining reserves of high quality central Appalachian coal, unprecedented price increases and coal price volatility, and the high cost of carbon capture and storage for coal plants. By comparison, natural gas prices have reached record lows and supplies are increasingly abundant in the U.S., and costs for wind and solar are declining.
Coal combustion for electricity is a major contributor to air pollution, accounting for one third of the nitrous oxides (NOx), 50% of the mercury, a hazardous air pollutant, and over 36% of the carbon dioxide (CO2) emitted in the U.S. Older coal plants emit substantially more of these pollutants per megawatt hour (MWh) than newer plants.
The U.S. Environmental Protection Agency (EPA) is moving, in some cases pursuant to court order, to tighten regulation of the air, water and waste impacts of coal plants. Industry analysts (Bernstein Research, Jeffries & Company, Standard & Poor’s, Wood Mackenzie) have concluded that the cost of additional environmental control equipment for NOx, particulates and mercury may make it uneconomic to retrofit small, older coal plants. Pending EPA regulations governing storage and disposal of coal combustion wastes will likely increase operating costs for coal plants.
EPA is also developing regulations for CO2 and other greenhouse gas emissions. However, the lack of national climate policy to reduce CO2 emissions further adds to economic uncertainty for coal plants. Commercial deployment of carbon capture and storage technology for coal plants is 10 to 15 years away and “would increase electricity costs by about 30 – 80%,” the U.S. Government Accountability Office reports.
This unprecedented combination of forces has led a number of utility companies to announce coal plant retirements. Dominion has stated that it expects to close two aging coal plants in Massachusetts and Indiana within 5-7 years if environmental regulations occur as expected, as it would become uneconomic to run them. Nevertheless, with 41% of its 2009 electric generation originating from coal-fired units, Dominion will remain heavily reliant on coal. Coal combustion contributes more than 90% to the company’s total NOx, SO2, CO2 and mercury emissions, according to a data extrapolated from the report Benchmarking Air Emissions of the 100 Largest Electric Power Producers in the United States (Natural Resources Defense Council, 2010).
RESOLVED
Shareowners request that Dominion’s Board of Directors, at reasonable cost and omitting proprietary information, issue a report by September 2011 on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy, including assessment of the cumulative costs of environmental compliance for coal plants compared to alternative generating sources.
Dominion Resources – Financial Risks of Continued Reliance on Coal
WHEREAS
For electric power companies, continued reliance on coal is increasingly problematic in the face of declining reserves of high quality central Appalachian coal, unprecedented price increases and coal price volatility, and the high cost of carbon capture and storage for coal plants. By comparison, natural gas prices have reached record lows and supplies are increasingly abundant in the U.S., and costs for wind and solar are declining.
Coal combustion for electricity is a major contributor to air pollution, accounting for one third of the nitrous oxides (NOx), 50% of the mercury, a hazardous air pollutant, and over 36% of the carbon dioxide (CO2) emitted in the U.S. Older coal plants emit substantially more of these pollutants per megawatt hour (MWh) than newer plants.
The U.S. Environmental Protection Agency (EPA) is moving, in some cases pursuant to court order, to tighten regulation of the air, water and waste impacts of coal plants. Industry analysts (Bernstein Research, Jeffries & Company, Standard & Poor’s, Wood Mackenzie) have concluded that the cost of additional environmental control equipment for NOx, particulates and mercury may make it uneconomic to retrofit small, older coal plants. Pending EPA regulations governing storage and disposal of coal combustion wastes will likely increase operating costs for coal plants.
EPA is also developing regulations for CO2 and other greenhouse gas emissions. However, the lack of national climate policy to reduce CO2 emissions further adds to economic uncertainty for coal plants. Commercial deployment of carbon capture and storage technology for coal plants is 10 to 15 years away and “would increase electricity costs by about 30 – 80%,” the U.S. Government Accountability Office reports.
This unprecedented combination of forces has led a number of utility companies to announce coal plant retirements. Dominion has stated that it expects to close two aging coal plants in Massachusetts and Indiana within 5-7 years if environmental regulations occur as expected, as it would become uneconomic to run them. Nevertheless, with 41% of its 2009 electric generation originating from coal-fired units, Dominion will remain heavily reliant on coal. Coal combustion contributes more than 90% to the company’s total NOx, SO2, CO2 and mercury emissions, according to a data extrapolated from the report Benchmarking Air Emissions of the 100 Largest Electric Power Producers in the United States (Natural Resources Defense Council, 2010).
RESOLVED
Shareowners request that Dominion’s Board of Directors, at reasonable cost and omitting proprietary information, issue a report by September 2011 on the financial risks of continued reliance on coal contrasted with increased investments in efficiency and cleaner energy, including assessment of the cumulative costs of environmental compliance for coal plants compared to alternative generating sources.
Dominion Resources – Greenhouse Gas Emissions Reduction
WHEREAS
In 2007, the Intergovernmental Panel on Climate Change found that that “warming of the climate system is unequivocal” and that man-made greenhouse gas emissions are now believed to be the cause with greater than 90 percent certainty.
In October 2007, a group representing the world’s 150 scientific and engineering academies, including the U.S. National Academy of Sciences, issued a report urging governments to lower greenhouse gas emissions by establishing a firm and rising price for such emissions and by doubling energy research budgets to accelerate deployment of cleaner and more efficient technologies.
In October 2006, a report authored by former chief economist of the World Bank, Sir Nicolas Stern, estimated that climate change will cost between 5% and 20% of global domestic product if emissions are not reduced, and that greenhouse gases can be reduced at a cost of approximately 1% of global economic growth. The report also warned that “the investment that takes place in the next 10-20 years will have a profound effect on the climate in the second half of this century and in the next.”
U.S. power plants are responsible for nearly 40 percent of U.S. carbon dioxide emissions, and 10 percent of global carbon dioxide emissions.
According to a 2008 benchmarking study by Ceres, Dominion ranked 13th in absolute greenhouse gases emitted in 2006, responsible for about 55 million tons of carbon dioxide equivalent.
Coal is the most carbon-polluting type of power generation. Coal-fired plants accounted for 46% of Dominion’s generating capacity in 2007, and Dominion has planned an additional 585-megawatt coal power station for Wise County, VA. This project, and Dominion’s Salem Harbor Station in Massachusetts, are facing opposition from local and national groups.
A majority of U.S. states are involved in initiatives to reduce greenhouse gas emissions, and at least 11 states in which Dominion operates or is planning to operate have enacted renewable energy or energy efficiency portfolio standards. Likely new Obama Administration regulations may halt construction on potentially half of the nation’s proposed coal plants.
New York Attorney General Cuomo is investigating whether five energy companies, including Dominion, failed to disclosed climate change related financial risks to investors.
In the Carbon Disclosure Project’s most recent annual survey of the S&P 500 (released 2008), 37% of utility respondents disclosed absolute greenhouse gas emission reduction targets, and 52% disclosed intensity reduction targets. Some of Dominion’s peers who have set absolute reduction targets include American Electric Power, Entergy, Duke Energy, Exelon, National Grid and Consolidated Edison. Those with intensity targets include CMS Energy, PSEG, NiSource and Pinnacle West. Xcel Energy and FPL have both.
RESOLVED
Shareholders request that the Board of Directors adopt quantitative goals, based on current technologies, for reducing total greenhouse gas emissions from the Company’s products and operations; and that the Company report to shareholders by September 30, 2009, on its plans to achieve these goals. Such a report will omit proprietary information and be prepared at reasonable cost.
