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Aggregating Energy Since 2006

Market and Coal

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In a sign that the market is increasingly moving against coal and other technologies responsible for high Greenhouse Gas (GHG) emissions, TXU is being bought out and its plans to build many more coal plants have been scaled back. TXU is an energy company that serves 2.5 million customers in Texas.

If the investors succeeded in taking over TXU, Mr. Reilly said, they would commit themselves to scale back significantly on TXU’s plan to build 11 new coal plants and adhere to a strict set of environmental rules.

I have not been following this story closely, but I take it to be good news that a company looking to build more coal plants was punished by the market.

Within TXU, the controversial plan to build a raft of coal plants had become so damaging to its stock price that its board had been privately weighing a plan to scrap part of the project, said people involved in the talks, bringing the number of new plants to 5 or 6 from 11. Shareholders had sent the stock on a roller coaster ride from more than $67 a share to as low as about $53 over concerns about the risk and vast expenditure; the stock closed at $60.02 on Friday.

The article is not totally clear, but it appears that TXU will still build three coal plants and cancel plans for the other eight. Of the three plants still going forward, at least one is being fought by locals and may not be approved. As of now, this action does not seem to have impacted other utilities who still want to invest in coal facilities.

As for where TXU is going, this seems like a good start.

The group, which included Mr. Reilly, Mr. Bonderman and Frederick Goltz of Kohlberg Kravis, worked out a "10-point plan" that included a commitment by the investors to return the carbon-dioxide emissions by TXU to 1990 levels by 2020 and support a $400 million energy efficiency program.

Though I am thrilled to see the market acting on signals from people and government actions (signals pointing to a rising price to emit GHGs), we still have a lot of work to do to make government policies correctly inform the market and line up the incentives correctly.