Within the last 24 hours two separate announcements set sharply contrasting courses for Illinois’ energy future. It’s worth a look at how these two proposals measure up, both in terms of economic development and environmental protection.
Mayor Rahm Emanuel launched a new plan to cut the city’s annual energy costs by $5.7 million per year by retrofitting major city-owned buildings to use less energy for heating, cooling, lighting and other equipment. The project will cost an estimated $40 million to be financed by private investors who will be paid back out of the net savings, and will create 375 local jobs in the process. Oh, and, of course, by cutting the amount of power we need to run the city, the investment will reduce the power plant pollution that causes everything from asthma attacks to heart attacks, mercury contamination and global warming.
Almost simultaneously, Governor Quinn signed legislation requiring our state’s gas utilities to enter into 30-year contracts to buy coal-derived synthetic natural gas from a new facility to be built on Chicago’s southeast side, in a neighborhood where breathing the air is already a risky proposition, and the community is already living with a the legacy of industrial pollutants like chromium and cadmium. The plant, proposed by a company called Leucadia National, will cost ratepayers $3 billion, and will produce fuel that is dirtier than the natural gas it offsets, at a time when domestically-produced natural gas supplies are ample.
So let’s assess the costs and benefits of these two investments in spurring job creation, reducing energy costs, and protecting public health and the environment:
- There is no disagreement on the need to spur job creation in Illinois. But let’s look at the cost-effectiveness of how the two proposals seek to accomplish this goal. The Governor’s press release touts the creation of 1500 jobs (165 of them permanent) for the $3 billion investment, working out to a whopping $2 million per job from the Leucadia project. Meanwhile, the Mayor’s plan would create 375 jobs for a $40 million investment, working out to more like $10,000 invested per job created. So, the Leucadia plant will cost 200 times more per job created compared to the City’s energy efficiency investment. Were Governor Quinn to have invested that $3 billion of ratepayer money into a statewide efficiency ramp-up program rather than the Leucadia plant, a heck of a lot more Illinoisans would be donning the hard hats and heading to work.
- The City’s energy efficiency ramp up comes at a net negative cost to the economy. In other words, the cost of purchasing and installing the energy savings measures is lower than the cost of doing nothing and continuing to pay for wasted energy. The upfront investment is to be fully paid for by the savings, with additional savings left over to reduce taxpayer burden.
- The costs to be passed on to Illinoisans to construct and purchase gas from the Leucadia plant are less clear. In response to well-founded concerns from consumer advocates, the legislation included a cap to ensure that rates will not rise more than 2% in any year as a result of the plan, and requires a commitment from the plant owners that they will guarantee an overall 30-year savings to Illinoisans of $100 million. This gamble bets on natural gas prices rising in the later years of the contracts, to make up for the higher costs that Illinoisans will pay in the early years for plant construction and for synthetic natural gas that will likely be more expensive than the natural gas it offsets. By the time we know if this gamble pays off, we will have already sunk the $3 billion investment into the facility.
- Let’s assume the plant does save Illinoisans $100 million per year over 30 years – suspending disbelief. That’s about $3.3 million per year in savings – still less than the $5.7 million per year that will be saved in energy costs through the city’s much smaller initial investment. Again, the City is investing $40 million to save $5.7 million per year, while the Leucadia plant costs $3 billion to save $3.3 million per year.
- The City’s energy efficiency plan will reduce emissions compared to current levels, period. The electricity saved will reduce the amount of power we need to purchase from coal and nuclear facilities, while the reduced heating demand will reduce the amount of natural gas we need to extract, transport and burn as heating fuel.
- The Leucadia plant is a new source of air pollution, toxic heavy metals like mercury, and carbon dioxide. Chicago’s air quality already violates federal public health-based air quality standards, partly as a result of existing coal facilities. Leucadia would add air pollution to areas that are already subjected to elevated levels of pollution from coal-fired power plants and other industrial sources. The pollutants that would be emitted by the plant – sulfur dioxide, nitrogen oxides, carbon monoxide, fine particulate matter and other harmful chemicals – are known to trigger asthma attacks and cause respiratory emergency room visits, heart attacks, and premature deaths. Additionally, despite the much-touted lower levels of CO2 emissions from gasification technology as opposed to traditional pulverized coal burning, the Leucadia plant would nonetheless pump substantial additional CO2 into the atmosphere. Moreover, the purported carbon capture requirement for the plant is illusory because the legislation provides only a small penalty for non-compliance, which may well end up being economically preferable to compliance. The facility would displace an environmentally preferable fossil fuel, natural gas, from Illinois pipelines, and divert resources away from developing truly clean fuel and energy sources. And beyond all this, there are serious land, water and public health consequences of coal extraction, transportation and disposal of byproducts from that process.
It’s disappointing that Governor Quinn supported the Leucadia plant. Three billion dollars over 30 years (or $100 million per year) is a lot of money to pour into such a poor investment, when we have abundant opportunities to put our money to work while putting more Illinoisans to work, reducing harmful emissions and lowering our energy bills.
Unfortunately, we know that similar proposals to build more gasification facilities in Illinois are either waiting for his approval or being debated by the General Assembly. We hope that he will make a better choice for Illinois next time.