Campaign 2012:

Alstom's Cohen discusses missed opportunities on energy heading into elections

What impact is energy policy uncertainty having on technology investments? During today's OnPoint, John Cohen, vice president of government affairs at Alstom, explains why he believes there has been a missed opportunity to discuss energy policy and technology investments during this election cycle. He previews how another divided Congress could affect investments in the power generation sector and weighs in on the new push for a carbon tax.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is John Cohen, vice president of government affairs at ALSTOM. John, thanks for coming on the show.

John Cohen: Thank you, great to be here.

Monica Trauzzi: John, there's a sudden interest among the campaigns and analysts to speak more closely about climate and energy following Hurricane Sandy. From the power generation standpoint, what opportunities do you believe have been missed in the discussion?

John Cohen: Well, first of all, everyone's focused on the right thing, and that is taking care of the people who've been harmed by the storm. But clearly there are policy implications as a result of an event like this. We've heard the public officials talk about a new normal, and that has implications for energy policy, to be sure. The good news is we see both campaigns talking about an "all of the above" energy strategy, and ALSTOM believes that's the right thing. And the question becomes, what exactly does it mean? I take heart in that we have a consensus at least on the broader point, but what ALSTOM looks at is what are the key principles that should be included in an "all of the above" strategy? And we would point to three. The first one would be diversity of supply. So this country is blessed with a tremendous diversity of domestic energy supply. We need to take advantage of that domestic resource base that we have, and historically this has been a key part of economic growth in this country, and I think the foundation of our energy strategy throughout the century. Secondly we need to look at balance. Coal and gas are going to continue to play a key role in our energy mix going forward. We need to have policies in place which keep them in the mix and keep them sustainable as well. And the third point is something which does not get enough attention in our view, and that is efficiency. And we talk a lot about demand side efficiency. ALSTOM looks at the supply side. There's tremendous opportunity to increase the efficiency of the current installed base across the generation mix. So we can increase efficiency, we can increase environment improvement and power output all at the same time. So diversity, balance and efficiency we think are the key principles for an energy strategy.

Monica Trauzzi: I want to focus in on the coal point because Romney and Obama vary greatly on their definition of clean coal. How much uncertainty exists currently within the industry about the future of coal and how serious you're going to have to be about implementing certain technologies in order to meet that standard of clean coal.

John Cohen: Let's take a look at the statistics coming out of the Energy Information Administration Annual Energy Outlook. So the 2012 Annual Energy Outlook estimates that coal and gas will continue to be over half of our generation mix in 2035. And in fact, the base case estimates coal could continue to be about 38 percent of our energy mix in 2035. Which means we have to address coal. We need to keep it in the mix and we need to make it more sustainable. Near term, that means putting in place control technologies for traditional pollutants. It's the sulfur dioxide, the nitrogen oxide, and now mercury, of course. Technology exists today to remove up to 98 percent of those pollutants, and so that technology needs to be implemented. But we also need to look down the road. ALSTOM as a technology company is looking not only at what our customers need today, but what are they going to need tomorrow. And in a world of carbon control, which we think is coming, we don't have the political consensus yet but we believe it's coming, it's critical that that technology be developed so it's in place when our customers need it.

Monica Trauzzi: So you're not resistant to the regulations that we've seen coming out of the Obama EPA?

John Cohen: Well, I think the key point for ALSTOM is, we're a technology company, so we need to provide this technology to our customers. So we do engage to be sure that regulations are achievable, for example, for the mercury regulations on existing plants. Are those regulations achievable? Does the technology exist to achieve the standards? And we have the technology to implement and achieve the standards. But we don't yet have the technology commercially available for carbon control. In our case we're looking at carbon capture and sequestration technology. And if I might point out, that technology works, and we know it works, because we've proven it in demonstration projects on both coal and gas. What we're lacking is the last critical step, which is a commercial scale demonstration project. This will be very expensive, but it needs to be done before we have the confidence to put forward the commercial guarantees that makes it a commercial offering. And so we need a policy framework in place in order to move forward with the commercial scale demonstration.

Monica Trauzzi: How long before we get to that point of commercially viable CCS?

John Cohen: Well, that is dependent upon when we can move forward with the commercial scale demonstration project. It's the key piece of the puzzle. That's where we get the confidence in the engineering and also move on down the cost curve so we can get this into the marketplace. So it depends on when we can get the commercial scale demonstration done.

Monica Trauzzi: ALSTOM has a wide-ranging portfolio of technologies that invests in everything from solar to wind to coal, what do you consider the riskiest investments right now?

John Cohen: Well, I think I come back to the core principle of we need to develop all of our domestic energy resources. So that includes wind. Let's consider how far wind has come. Since 2007, about 35 percent of our new generation brought online to the grid has been wind. That's really quite significant. The Federal Energy Regulatory Commission said in September that 100 percent of new generation was wind and solar. So what we're seeing is the country taking advantage of our full diversity of supply. This needs to continue and a national energy strategy needs to put in place the policy so we can continue to advance all of our diversity of supplies.

Monica Trauzzi: We may very well have another divided Congress after this month's elections. What does that mean for the power generation sector? Does that mean more uncertainty?

John Cohen: I've been in Washington for almost 30 years and I've been involved in the energy debate through those years. And it used to be said that Congress would pass an energy strategy once every ten years whether it needed to or not. Well, we're overdue. And I think the Congress recognizes that, and I think the new administration is going to recognize the need to move forward with policy. So I think that's good news. Again, there's consensus that we need a national energy strategy that is "all of the above," but now we need to figure out the hard part, which is putting together the legislation and moving it through the Congress.

Monica Trauzzi: Talk of a carbon tax seems to have new life and we may see this discussed during a second Obama term. How successful of an approach do you believe a carbon tax is from a business standpoint?

John Cohen: That's a very important question, and what is fascinating right now to watch is the carbon tax debate taking place in the context of comprehensive fiscal policy reform. And it's something this country needs to come to grips with. The Congress knows it needs to do it, I think the new administration is going to try and get it done. And a carbon tax becomes one policy mechanism to address how to offset if you're going to bring down corporate rates, individual rates, you need to find some way to make up the revenue. And so a carbon tax is in the mix of the discussion left, right and center as well.

So here you have a carbon tax in the context of fiscal policy, which also has significant energy policy implications. I don't know what's going to happen, I won't predict, but it clearly is a part of the discussion, and it's an important part of the discussion.

Monica Trauzzi: All right, we'll end it right there. Thank you for coming on the show.

John Cohen: Thank you, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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