Sunflower Electric Power: Carbon Risks Outweigh Benefits of Holcomb Expansion

I have the complete report available as a PDF file. If you would liek to have a copy, e-mail your requests to renner@ksu.edu. I can't put downloads on this webpage.


Executive Summary Innovest Strategic Value Advisors - March 2008

The following report examines how current and proposed regulatory scenarios, alternatives to coal-fired generation,stakeholder opposition, and rising construction costs continue to shift the competitive balance away from coal-firedgeneration. Furthermore, this analysis includes an in-depth financial assessment of the benefits of constructing gas powerplants over coal power plants in a carbon constrained economy. This report demonstrates the fact that Sunflower has notadequately addressed the financial risks associated with the CO2 output from the proposed Holcomb Station. As a result, Sunflower, a consumer-owned nonprofit corporation, is putting its ratepayers and owners at significant risk.Although the proposed expansion of the Holcomb Station plant would provide Sunflower with additional baseload generatingcapacity, the carbon risks associated with an increased reliance on coal present significant financial risks for the company’sowners and ratepayers. Given that Sunflower is a consumer-owned cooperative, the burden of future carbon costs will beplaced entirely on the company’s ratepayers. Assuming carbon prices between $21 and $48 per tonne, the Holcombexpansion could cost Sunflower ratepayers between $22.4 million and $51.36 million annually. Furthermore, Innovestanalysis demonstrates that under federal legislation that relies on 100% auctioning of emissions allowances, natural gasgeneration becomes more economical at a carbon price of $13.20 per tonne. In conclusion, this analysis indicates thatSunflower has failed to account for likely regulatory scenarios, and will therefore expose its ratepayers to the significantfinancial exposure associated with a strategic focus on developing new coal capacity.