European utilities leading the way on environment

European utilities, including Scottish & Southern Energy, have come out looking rosier than some of their U.S. counterparts in a new report that rates how electric and gas utilities are responding to social and environmental challenges.

The Electric and Natural Gas Utilities Sector Report from Boston's KLD Research & Analytics looked at 14 of some of the largest U.S. and European utilities, seeing how they've handled climate change, air pollution, nuclear power safety and increased energy demands.

"I think the report shows that European companies in this regard are farther ahead. Your Scottish & Southern Energy, your Ibedrola, even E.ON," Andrew Brengle, senior research analyst at KLD, told the Cleantech Group

"Either through the happenstance of being in European economies, where the Kyoto protocol is in effect, whether that was a driving force or whether they're more enlightened, from our standpoint, probably a little bit of both."

But Brengle pointed out that all of the companies have a soft belly. E.ON, which has plans to invest $4.1 billion in renewable energy by 2010 (see E.ON going big with wind), has significant safety and reputation risks given that its nuclear holdings are among the highest in Europe, according to the report.

KLD's reports are used by investors who are interested in socially responsible investing, integrating social, environmental and governance factors into their investment strategies.

Noel Friedman, managing director of research products at KLD, said the blemishes on some of these companies shouldn't discourage investors.

"You can look at these issues and you can make more informed decisions, and you can take these factors into account. Just because you can't be perfect doesn't mean you can't be good," said Friedman.

Over the last two years of researching the 52 page report, Brengle said there was definitely a "sea change" in attitudes about environmental issues.

Duke Energy's CEO took a big hit two years ago when he called for a cross-sector regulatory framework for carbon emissions in the U.S.

"He was called everything from a turncoat to, Heaven forbid, an environmental extremist," said Brengle.

At the same time, American Electric Power was also working on the policy and management front to realign its future vision.

"Both Duke and American Electric are leading the way on carbon sequestration or the IGCC, the integrated gasification combined cycle, basically the most promising of the clean coal technologies," said Brengle. But he added, "The report makes it clear they certainly have a long way to go."

Of the all the companies rated, the report said Scottish & Southern Energy had the greatest potential opportunity to benefit from tighter greenhouse gas emissions standards, while heavy coal users such as Duke Energy would be the most challenged.

Take a look at a Scottish & Southern hydro station >>

One leader on the left side of the Atlantic is Edison International, which the report noted for its efforts to secure grid reliability.

The other companies examined were Enel, Exelon, FirstEnergy, FPL Group, Sempra Energy, Southern Co., Williams Cos., and Wisconsin Energy. KLD did not disclose the full rankings of winners and losers, but Brengle said there was certainly a theme to the ratings.

"Large fleets of coal plants isn't good. And a large fleet of nuclear plants is also more negative than positive, albeit if the company has a good safety record, that's a good thing as well."

"We also acknowledge that you're not going to right the ship or turn course on a dime, especially with burgeoning energy demand," said Brengle.

He said all the projections going through 2030 and 2050 show a huge rise in the demand for energy, and that it would take all forms of production and solutions to meet that demand.

"I would put efficiency at the top, because that's usually the cheapest and most effective way first, alternative sources would be next, and then ways of reducing risk on nuclear and coal," said Brengle.

This is KLD's first report focusing on the electric and natural gas sector, and future reports would most likely be bigger.

"Probably the biggest thing would be to expand the report to cover a larger number of utilities," said Friedman. "I think the Asian utilities would be next."

While the issues are likely to stay the same for the next few years, what could change most is the configuration of companies. "There's a lot consolidation going on now," said Brengle.

Cleantech developments making news in the past 24 hours

• India aims for $4B in cleantech cash by 2015
• Tata Motors moves Indian Nano plant
• Something's fishy with China algae plant
• Saudi Arabia adds to desal strategy
• Beijing hikes fuel prices to pay for cleaner blend
• Solyndra reveals thin-film solar tubes
• Solar takes stock after tax-credit battle

View the last week of cleantech developments here | Subscribe to full feed