ICF International Advises Industry That Coming Carbon Regulations Must be Considered to Avoid Risking Billions in Stranded Energy Investments.

TXU Cancellation of Coal Plants is the Tip of the Iceberg 

FAIRFAX, Va. -- ICF International (Nasdaq:ICFI) reiterated today that the U.S. power sector must consider the significant impacts of potential CO2 regulations in investment plans, especially when investing in new generation capacity. With at least six CO2 legislative initiatives announced in the new democratically controlled Congress since the first of the year, and increasing regional plans to control CO2 in both the Eastern and Western U.S., CO2 regulation on a federal level is nearly certain within the next five to six years. Several of the proposed bills include provisions specifically designed to discourage the development of new conventional coal plants. The proposed leveraged buyout of TXU, with the accompanying pledge that eight of its 11 planned coal-fired power plants be cancelled, is just the latest sign from industry that CO2 is becoming the driving factor in power sector decision-making.

Power companies have announced plans to develop more than 140 new coal-fired plants between now and 2025, not including TXU's original 11. As many of the plants employing conventional pulverized coal technology are reconsidered in the face of CO2 regulation, TXU's new owners, utilities, and regional power systems will have to address how best to replace that capacity with other sources. ICF's 2006 Emission and Fuel Markets Outlook projects that a CO2 policy will displace 150 gigawatts (GW) of new coal-fired capacity, worth more than US$300 billion, that made economic sense under current regulations. A diverse portfolio of generation and demand-side management technologies will be required to replace that displaced coal capacity.

"New coal plays an important role in a CO2-constrained market," said Steve Fine, a vice president at ICF. "In the near-term pulverized coal is one of the few reliable baseload technologies available. But over time new coal will need to be capable of capturing its CO2 emissions and will be built along with a mix of new nuclear, renewable, and gas-fired capacity to meet demand growth, which will need to be at least partially offset by greatly expanded energy efficiency efforts. Pursuing plans to build new electric generation capacity without considering the impact of potential CO2 policy on fuel allowance and electric markets could, therefore, be a very costly mistake."

ICF's projections show that CO2 regulations will impact existing coal-fired generators as well. While capacity factors of existing coal units may not be significantly impacted except under the most stringent proposed policies, margins will decline and affect the overall value of those assets. In addition, the changing economics of those plants, which made sense in a three-pollutant world, will make billions of dollars in control investments no longer cost-effective under a CO2 policy.

"By 2020, a CO2 policy could make US$6 billion in scrubber investments resulting from current regulations unnecessary," said Chris MacCracken, a project manager at ICF. "Existing coal plants will continue to generate a substantial portion of the nation's power in the coming years, even under a CO2 policy, but getting the most from them financially and operationally means factoring CO2 into the operational and investment decisions regarding those plants, as well as factoring in the potential value of investments in renewables and end-use efficiency."

ICF provides its clients with a comprehensive, integrated view of U.S. electricity, coal, natural gas, oil, and allowance markets based on more than two decades of forecasting energy market trends as one of the nation's leading energy and environmental analysis firms. For more information, visit http://www.icfi.com/emissions.

ICF International (Nasdaq:ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 2,000 employees serve these clients worldwide. ICF's Web site is http://www.icfi.com.

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