Tuesday, March 4, 2008

Rising risks of coal fired power stations

Never fiddle with a winning team. This wisdom however, only holds if the rules have not changed. A new report entitled Don't Get Burned: The Risks of Investing in New Coal Fired Power Stations highlights the risks of continuing to play the old rules. 

In summary the report argues:

New investments in companies that are currently 

building or that are planning to build new coal- 

fired plants carry far more risk, in particular, 

because of the likely regulation of greenhouse gas 

emissions and rising construction costs. As a 

result, investors in both regulated and merchant 

companies cannot be assured that they will recover 

and earn reasonable returns on their investments.

It will be very unrealistic to argue for the substitution of coal fired power station with renewable energies in a short period of time. From a South African perspective, coal is still the best bulk energy feedstock we have, with vast quantities still to be used. Unfortunately, it cannot be denied that the risks of new coal fired power stations, and the associated risks of tying a nations development path to cheap electricity, are rising. Are we rising up to this challenge?

See also discussion on WSJ blog

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