Tuesday, December 2, 2008

Evidence for More Investment Spending

Well, predictions are not always right. Just yesterday I wrote questioning the FT article about the drop off in investments by energy companies - particularly generation. When what do my eyes upon opening the Wall Street Journal yesterday but RWE spending $1.25 billion this year (so far) on greenhouse-gas compliance. Up from Euro 175 million.

The article in the WSJ, (subscription only), outlines the need by generators, particularly RWE, E.On and Enel's need to spend money on reducing GHG because they need to buy additional permits above their free quota. After 2012 - these freebies will no longer exist. Thus RWE, which is heavily reliant on brown coal, is screwed if it doesn't invest in clean coal technologies. At around 29 euros per permit with a projected need of 200 million permits by 2012.

Thus, investments are happening. "We have to renew our power plants as fast as possible," RWE states in the article. The choice is modernize or replace power plants to reduce the GHG emissions.

Now the idea becomes one of job creation. No doubt the economic downturn in all countries and regions, including CEE has seen a huge drop in the number of construction jobs. So if we think about the looming deadline of the free Co2 allowances being taken away by 2012, there's a lot of construction that needs to occur. But rather than foster this job creation, we see the CEE countries complaining that they can't meet this target. They're lobbying Brussels to allow free quotas after 2012. As my father would say, 'get to work!'

And getting to work is right, because we just don't need to build new coal power plants that pump Co2 into the ground, but a range of energy sources need to be utilized. One company that keeps adding jobs in Hungary (and now Spain) is Genesis, which makes solar panels. In fact now, as the article states, RWE is giving away 700,000 energy efficient light bulbs in India in a carbon swap.

I believe Obama sees the economic downturn as a time to re-engineer the manufacturing base and construction base of America, I also believe this can be done for the CEE region. Poland, is 96% reliant on coal and the other countries also contain significant coal generation, but get to work - jobs need to be created.