Sean, I finally get what you are asking for. You want a guaranteed payoff for your investors ahead of the normal payback period of your project. The lever that you expect to use to get this payoff is that your project will "reduce emissions." But that's not true is it? Your project will only reduce consumption of coal-fired electricity. That does nothing to prevent the utility from selling that capacity down the road and continuing to burn coal. If that was the case there would be undue regulation that prevents "market forces" from working their magic.

You can't guarantee a greenhouse gas impact because you cannot choke down the input of coal to the power plant by reducing the consumption of a single user. The reduction of emissions is entirely hypothetical and dependent upon an overall reduction in demand for coal-fired power.

Thank you for precisely summarizing the objections to cap-and-trade greenhouse gas legislation.

Large players will lobby to structure laws so that they are "credited" with greenhouse gas reductions that may or may not physically appear at the smokestack. That is precisely the failure of the EU's carbon trading program.

You are asking for your investors to be credited with a reduction in carbon emissions when your company can only deliver a reduction in power usage. This would amount to a short-term return guaranteed by the government on a long term investment in GHG emissions. Since the coal burner is a separate, private, entity from the power user, another private entity I'm not sure why the government should guarantee the behavior of either. The coal plant could stop burning coal, the power user could shut down and your investors get to keep their money because they would get paid up front in the carbon trading scam. Neat trick that.

Hey, nobody's paying me for buying a smaller car. Why should all of us pay you?

The only market I see here is the market in legislators.

Put the Carbon Back

You raise a point that is frequently misunderstood.  Namely, that the demand for energy has a relation to the amount of energy demanded.  This isn't true, but is common.  When you write that:

You can't guarantee a greenhouse gas impact because you cannot choke down the input of coal to the power plant by reducing the consumption of a single user,

You are implicitly implying that the power fleet will continue running at full capacity regardless of what the load does.  This isn't so.  When you shut your lights off, you cause a power plant somewhere to curtail load - voltage sags, and the system responds.  The first generators to cut back are the most expensive ones, and further cutbacks then ripple through the system.  But they curtail.

This is admittedly hard to get one's head around - and it is well-nigh impossible to demonstrate precisely which powerplant curtailed in response to a specific load reduction.  But there are lots of folks (like the World Resources Institute) who have done a pretty good, unbiased job at coming up with metrics for the carbon intensity of a MWh of power supply for any given geography (since a MWh reduced in coal-intensive West Virginia has a much higher implicit carbon reduction than a MWh reduced in hydro-intensive Idaho).  

The key though is that reducing CO2 emissions is not simply a matter of reducing fossil fuel combustion that you personally control.  It is also a matter of reducing the use of upstream fossil fuel uses - whether fertilizer-intensive crops, oil-intensive plastics or electricity "from the wall".  If we are going to meaningfully reduce carbon, we have to put a price on those who increase their use of those fossil-intensive (but one step removed) energy sources.  And that means not only in the form of a penalty, but also, yes, an incentive to those who help us conserve.  Whether that is me with my company or you deciding not to drive your car.  

First, the average coal power plant in the US is about 30 years old. The sunk costs are paid for and other than the operating costs, coal mostly, the plants are the cheapest way to generate power. Any alternative power source has either higher facility cost (wind) or higher fuel costs (natural gas) per megawatt. The coal plant is the last thing that gets powered down.

Spinning reserve is the second problem with the idea that power savings automatically transfer to GHG emissions reductions. You can't just let a massive coal boiler cool down quickly. Neither can you afford to let multi-ton generators fall out of phase with the power grid. Therefore even if the grid goes down they have to feed that coal plant fuel and the generators steam so that they can stay up to operating temperature and speed.

So a utility corporation, constrained by law to maximize shareholder value, is going to run the coal plant in preference to contracting or purchasing clean power. That is unless the law states that it must act against the shareholder interests by, say, buying wind power while they vent steam at the coal plant.

The way to make coal power go away is to make the first and last unit cost of every megawatt of coal power more expensive than the clean alternatives. At that point utilities will transfer grid load to other power sources and customers will conserve to save their pocketbooks.

Beware complicated rules; the projected offset "market" is nothing but complicated rules.

Put the Carbon Back