AES Expands Alternative Energy Business

By Steven Mufson
Washington Post Staff Writer
Tuesday, April 18, 2006

AES Corp. yesterday said it would invest approximately $1 billion over the next three years to expand the company's alternative energy business and develop projects to reduce or offset greenhouse gas emissions.

About half that amount would go to enlarging the Arlington-based company's existing wind-power business. AES, a global power company, purchased the wind-generation company called SeaWest last year, and it operates facilities with 600 megawatts of capacity. AES said it expects to add 500 megawatts of capacity over the next two years and plans to triple its investment in wind generation over the next three years.

"Energy consumption is growing and we don't see that changing," said William Luraschi, AES executive vice president of business development. "Traditional ways of meeting that are not going to be sufficient."

Other energy companies also have begun seeking ways to reduce greenhouse gas emissions. Last year, BP PLC announced it was creating an alternative energy business focused on solar, wind and other forms of power generation. Chevron Corp. also invests in low-carbon and carbon-free technologies.

AES's wind farm in Abilene, Tex., began commercial operation this year and AES said it had contracted to sell the entire output for the next 15 years to a major utility. Though most of the company's wind projects are in the United States, AES said it was also considering projects in Europe.

AES said it would also spend about $250 million on its liquefied natural gas business. The company has received permits to construct an LNG terminal on an uninhabited island in the Bahamas from which it will transport natural gas to Florida via a 95-mile pipeline. When complete, it will be able to transport 900 billion cubic feet a day of natural gas.

The company is also pursuing proposals to build LNG import terminals near Baltimore on Sparrows Point and on an island near Boston, but similar proposals have aroused strong opposition from residents elsewhere in the country.

The remaining $250 million would go to projects that would take advantage of new international regulations on the emission of greenhouse gases under the Kyoto protocol and the European Union's emission trading system. In 2008, most countries will be required to keep their greenhouse emissions at or below certain ceilings. Companies unable to meet those standards will have to pay penalties or buy credits from companies that have them to sell.

AES plans to develop projects that will generate credits to sell, either by reducing emissions at existing plants or by nurturing agricultural or forestry projects considered beneficial for the environment. For example, the company has already been working on a reforestation project in Brazil next to one of its hydropower facilities. When completed, it will cover 25,000 acres with 3 million to 4 million trees and produce 100,000 to 150,000 tons of credits a year. The current price of those credits is more than $20 a ton.

"We can reforest a rain forest in Brazil and credits are created that can be sold in Europe, Japan or Canada," Luraschi said. Bill Lyons, AES managing director for climate change and technology development, said the "opportunity created here is that there is a significant disparity between business as usual and the total [emissions] permitted by the regulations."

AES said it had also reached agreements with Los Alamos National Laboratory and XL TechGroup Inc. to evaluate and bring to market new technologies in alternative energy.

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