In one of the latest bids to save the Navajo Generating Station, the West’s largest coal-burning power plant, the Department of Interior has stepped in to try and stave off its closure. Last week, Timothy Petty, the Interior Department’s assistant secretary for water and science, sent a letter to the Central Arizona Project, a regional water utility, pressuring it to continue purchasing electricity from the power plant, which is slated to close in 2019.
In the past, the water project, which is operated by the Central Arizona Water Conservation District, has purchased most of its power from the generating station. However, with the impending closure of the plant, the utility began looking to new and cheaper energy sources, including renewables like solar. On Thursday, despite the Interior Department’s recommendation, CAP’s board voted to sign a 20-year power purchase agreement with a solar company.
Those working to save the plant fear that CAP’s decision to move forward with alternative suppliers will prevent any potential investors from coming forward to buy the generating station. However, the utility has said it will still consider purchasing electricity from the power plant if a new owner can “provide competitively priced power,” CAP spokeswoman DeEtte Person said in an email.
The battle to keep the coal-fired power plant running is emblematic of a larger national effort to keep coal in operation, despite market forces that favor natural gas. As part of his “energy dominance” mandate, President Donald Trump’s administration has tried to bolster the country’s coal production, moving to lift regulatory burdens to increase the profitability of the energy source. Time and again those efforts have proven inadequate to save the struggling industry.
Several attempts have already been made in the case of the Navajo Generating Station. In April, Arizona Gov. Doug Ducey signed a bill that would provide a multi-million dollar tax break for coal in Arizona, as a way to attract a potential buyer for the generating station. A few weeks ago, Rep. Paul Gosar, R-Ariz., revealed a draft bill that would require the operator of CAP to purchase as “much of its total power requirements as possible” from the station until the utility has paid off its $1.1 billion debt. In addition to that mandate, the bill would temporarily exempt any potential new owner of the plant from having to conduct a National Environmental Policy Act review, and would waive Clean Air Act requirements, according to AZ Central.
If no buyer comes forward — a Chicago-based company has said it might make an offer — the plant will close in December 2019. The generating station supplies over 700 jobs, 90 percent of which are held by citizens of the Navajo Nation. In a statement, Navajo Nation President Russell Begaye asked for more time to find a buyer before utilities like the CAP pursue alternatives. “We should continue to work to find solutions to keep the plant operating while supporting both the Navajo economy and families,” he said. Both the Hopi Tribe and Navajo Nation also receive royalties from coal production, with 85 percent of the Hopi Tribe’s annual budget coming from the generating station.
In the same week that the Interior Department put pressure on the Arizona utility to buy power from the generating station, a leaked White House draft memo directed the Department of Energy to save struggling coal and nuclear plants across the country. The memo described plans to order grid operators to buy energy from coal and nuclear plants for at least two years, allegedly to boost the resilience of the power grid, according to a statement from the White House.
Despite a coal-friendly administration, Thursday’s vote for solar by the CAP board suggests that coal is no longer considered an economically viable option for future energy generation. Addressing representatives from both the Hopi Tribe and Navajo Nation at Thursday’s board meeting, CAP’s Board President Lisa Atkins stated that the utility was “not at war with coal.” Rather, it was seeking a “long-term, cost-effective, reliable and diverse power portfolio.” Coal, it would appear, no longer has a prime spot in that energy mix.
Jessica Kutz is an editorial intern at High Country News.
This article was first published June 8, 2018 on The High Country News.
In December, the state’s largest utility — Xcel Energy — released a short report summarizing the responses to the solicitation it had issued to power suppliers for bids to bring new sources of electricity to the grid. The utility received 430 bids, and 350 of those were for renewable energy projects.
That was remarkable on its own, but what surprised people even more were the bids for projects that added battery storage to the mix. They were cheaper than anyone expected.
“It’s a testament to how quickly the market is changing,” Pierce says.
For years, renewable energy advocates have pushed utilities and regulators to consider adding battery storage to their electrical generation portfolios for flexibility and to reduce intermittency problems that come with solar and wind. Until recently, it wasn’t considered a realistic option: Batteries were expensive and largely untested by utilities, and risk-averse regulators mostly let grid managers ignore them in their bids, statements and long-term planning documents.
Analysts say that’s starting to change as batteries come down in price, as momentum builds behind renewables and as renewables create a natural market for storage. Utilities are increasingly looking at batteries as a tool for leveling out power available over the course of the day and for replacing bulky and expensive peaking power plants that have high costs but only occasionally run at or near full capacity to meet peak demand (in the Southwest, this might be one hot day in the summer when everyone has their air conditioning turned up).
Some see the Xcel Energy report as the most recent case in a growing trend. Xcel’s preliminary analysis from December (a more thorough report is expected to come out June 6) showed that the median bids for battery storage projects coupled with solar and wind generation came in at about US$36 and US$21 per megawatt-hour, respectively. The prices of projects that combined solar or wind with storage, according to the report, were still more expensive than conventional fuels but only marginally more expensive than bids for standalone solar or wind projects. What it shows, analysts say, is that utilities can use batteries without adding huge costs to renewable projects.
Xcel is not alone. Utilities across the country appear to be more receptive to the idea of adding storage to their portfolios. Tucson Electric Power’s decision to build a solar-plus-storage project for US$45 per megawatt-hour generated dozens of headlines last year — and that price-point is higher than the Xcel median. Earlier this year, NV Energy, an affiliate of Berkshire Hathaway Energy, announced it would include battery storage in its bidding process for the first time. Around the same time, California regulators pushed a utility to procure energy storage as a replacement to natural gas. A few months later, Florida Light & Power announced a project adding storage to an existing solar plant.
Kate McGinnis, the Western U.S. market director for Fluence Energy, a global battery storage provider that Siemens and AES Corporation launched last year, says it’s clear that attitudes toward storage are changing. “We’re seeing utilities talk directly to us to learn more about what storage can do and how it can help them to meet the various grid challenges they are experiencing,” McGinnis says.
But she also offered the following warning: The Xcel numbers, as medians, reveal difficulties in comparing different energy storage projects. Batteries are diverse and complex. Different batteries have different capacities — some might be able to hold enough energy so they could discharge power over five hours. Others might be able to store enough for 10 hours…
Boosting Efficiency, Replacing Gas
A big driver of the shift in energy storage is cost, says Yayoi Sekine, an analyst for Bloomberg New Energy Finance. She notes that the price of lithium-ion batteries has dropped from about $1,000 per kilowatt-hour in 2010 to about $209 per kWh in 2017. The decreases came as more batteries were produced at a more efficient scale to accommodate a growing electric vehicle market.
“That’s a massive decrease in prices over not that long of a period,” she says.
Utilities, Sekine says, see an opportunity to use storage to make the grid more efficient. Adding more solar to the grid has created big issues for how grid operators manage a utility’s generation portfolio, the biggest of which is commonly known as the “duck curve” (the name comes from the a graph of net load on the grid; it forms what looks like the outline of a duck). It occurs when so much solar power is produced during the day that it creates a slew of issues for meeting demand at night. The thinking is that if some of that solar power were stored in a battery, it could be dispatched with more flexibility and deployed more gradually to better balance supply and demand.
Others want to take storage and solar a step further. They believe that, as prices become more competitive, the two together can obviate the need for some natural gas plants. According to a new report from Greentech Media, solar and storage together are expected to compete directly with natural gas peakers — plants built to meet peak electricity demand — by 2022.
“That is an application where we think [battery] storage can be highly competitive,” says Ravi Manghani, an industry analyst who directs Greentech Media’s energy storage research.
The industry still faces some headwinds. Analysts say costs need to decrease even more for batteries plus renewables to compete head-on with most conventional fuels. David Hart, a professor at George Mason University and a co-author on a recent working paper on energy storage, says that more research and development is necessary. He proposes that government mechanisms encourage innovation, especially research in battery types other than lithium-ion.
Another challenge, Hart says, is the fact that electricity prices vary based on time and location.
Here’s the release from the University of Colorado (Andrew Sorensen):
Cheap natural gas prices and the increasing availability of wind energy are pummeling the coal industry more than regulation, according to a new economic analysis from the University of Colorado Boulder and North Carolina State University.
Co-lead author Daniel Kaffine, CU Boulder associate professor in economics, looked at natural gas, wind and coal-fired power generation across 20 U.S. states from 2008 to 2013 in the study, which was published in the American Economic Journal this month.
The study found a “significant” link between plummeting natural gas prices, increased wind generation capability and the drop-off in U.S. coal burning.
“While either factor in isolation would have cut into coal’s share of the market, the combination of the two factors proved to be a potent one-two punch,” Kaffine said.
When the researchers applied 2013 natural gas prices and wind generation levels to the 2008 energy market, they found utilities likely would have cut coal-fired generation overnight. That suggests federal regulations like the 2014 Clean Power Plan have not been main drivers in the decline of coal-generated electricity in the U.S.
“The biggest single factor here is the decline in natural gas prices due to advances in drilling and production technologies used in natural gas extraction,” Kaffine said. “To the extent there is a ‘war on coal’, it’s a war being fought primarily in the marketplace between gas and coal.”
Coal-fired generation, according to the paper, dropped roughly 25 percent from 2007 to 2013, while natural gas prices decreased dramatically, largely due to hydraulic fracturing, or fracking. Wind generation increased over that period thanks to state-level renewable energy portfolio standards and declining costs.
“In the eastern U.S., where wind generation is less prominent and natural gas was particularly cheap, the fall in coal generation is almost completely driven by declining natural gas prices,” Kaffine explained. “However, in the central part of the U.S., wind played a more important role, though was still relatively less important than falling gas prices.”
Along with the blame for killing coal, natural gas and renewables also deserve some credit. According to the study, the decrease in coal burning from 2007 to 2013 curbed carbon dioxide emissions by 500 million tons annually, the equivalent of taking more than 100 million cars off the road each year.
Kaffine and his co-author Harrison Fell plan to follow up their research by diving into the local environmental impacts of wind generation in densely populated areas.
EVs improve our air quality. Vehicles are one of the two largest sources of air pollution, and a majority of Colorado residents live in areas of the Front Range that violate federal air quality standards. Dirty air is unhealthy for all of us, and it has a particularly negative impact on children, the elderly, and people suffering from asthma or lung disease. Electric vehicles have no emissions from the tailpipe and are so much more efficient than gas cars. A 2017 study for the Regional Air Quality Council found that EVs emit 99 percent less volatile organic compounds and 30 percent less nitrogen oxides than a new gas car today.
EVs bring real economic benefits to consumers. Fuel cost savings can approach $1,000 per year for every electric vehicle. If Colorado is able to achieve the goals set out in the state’s recently adopted EV plan, consumers will save over $500 million per year by 2030. Those consumer dollars will be reinvested in our communities, supporting local businesses and creating jobs…
But the economic benefits don’t just help EV drivers; getting more EVs on the road also will lower everyone’s electric bills. EVs help utilities make more efficient use of their existing power plants and grid infrastructure (which all of us have to pay for), thereby spreading out the costs more and reducing the share that each of us pay.
Here’s how that works. Utilities have to build their power plants for peak electrical use, which normally happens during the day – and all of us pay a portion of that infrastructure cost. But most EV drivers charge at night in preparation for the next morning’s drive, and night is when other electrical demands are low and power plants have excess capacity. So by charging their cars at night, EV drivers help utilities pay down their fixed costs. A study by a national consulting firm found that every EV on the road drives down the total electricity costs paid by other customers by $650 — and by 2030, ratepayers could be saving $70 million per year! The same study found that high levels of EV adoption would lead to total net economic benefits across Colorado of $43 billion by 2050.
Despite all of these benefits, the state Senate recently voted in a party line vote to end the state electric vehicle tax credits (the House rejected this bill). Others have called for new fees on EVs, based on the argument that EV drivers don’t pay gas tax. But EV owners already pay an extra vehicle registration fee, that is designed to pay the same amount into the highway fund as a gasoline vehicle that is as efficient as an EV would pay. It doesn’t make sense to add even more fees at a time when EVs still make up a very small part of the market.
If we want to achieve all the benefits that EVs bring, we need to get a lot more on the road. Because Colorado has supported EVs with a tax credit and state investment in charging stations, the EV market here is one of the best in the country, with the sixth-highest market share of any state in 2017. Sales are growing by over 50 percent per year.
A cooperative that serves four Western states could soon be losing customers amid concerns it’s not moving away from coal quickly enough.
Colorado-based Tri-State Generation & Transmission boasts of having the most solar generation of any G&T in the United States.
But whether it’s shifting to renewables quickly enough from its coal-heavy portfolio — and flexible enough to accommodate locally-generated electricity — has become a central issue with several of the 43 member cooperatives.
Directors of one of those member co-ops, La Plata Electric Association, voted in January to study alternatives during the next 10 to 15 years. The decision was made by the Durango, Colorado-based co-op after a petition was signed by 1,000 people and 100 businesses calling for 100 percent renewables with deeper penetration from local sources.
“We are buying our electricity from one of the dirtiest sources in the United States and paying well above market prices,” says Guinn Unger Jr., a La Plata director who favors a study of the co-op’s alternatives. “Why wouldn’t we want to explore our options?”
Colorado’s Delta-Montrose Electric Association began negotiating a buy-out with Tri-State last year with much the same goal: greater development of local renewable resources.
A template for both Colorado co-ops was established in 2016 when a New Mexico co-op, Taos-based Kit Carson, left Tri-State and signed an all-requirements contract with Guzman Renewable Energy Partners, a wholesale broker. Guzman paid the $37.5 million exit fee to Tri-State. It also promised to work with Kit Carson to develop 35 megawatts of solar arrays in Kit Carson’s three-county service area until 2023, when federal investment tax credit is set to expire. Kit Carson and Guzman are also planning to add battery storage.
Luis Reyes Jr., chief executive of Kit Carson, says consultants to his co-op concluded that ratepayers would save $50 million to $70 million over the life of the 10-year contract. The plan includes rapid construction of local solar farms and robust purchases of wind generation likely combined with battery storage.
Bob Bresnahan, a Kit Carson director and retired executive from Nike, says he believes solar will meet a third of residential electrical demand by 2022. He also contends the co-op can make deep inroads in its goal of 100 percent renewable generation by 2030.
La Plata’s contract commits it to getting 95 percent of its wholesale electricity from Tri-State Generation & Transmission through 2050. This commits La Plata to paying Tri-State 7.3 cents a kilowatt-hour even as wind and solar prices continue to tumble. Elsewhere in Colorado, Xcel Energy has received bids from wind developers at less than 2 cents a kWh and solar plus storage far below what Tri-State is charging La Plata.
Member cooperatives of Tri-State can produce more than 5 percent of their total electrical use, the result of a 2015 ruling by the Federal Energy Regulatory Commission. Still in question are the terms. Tri-State, in an appeal to FERC, wants a ruling that says that member co-ops must pay for what Tri-State calls its fixed costs related to power production. FERC has not ruled on that case, which was filed in early 2016.
‘We’re bullish on renewable energy’
Tri-State’s 43 member cooperatives collectively deliver electricity to 200,000 square miles in New Mexico, Colorado, Nebraska and Wyoming. Their 615,000 metered members/customers include Telluride and other ski areas in Colorado and giant circles of corn on the Great Plains, oil-and-gas fields in New Mexico and some of Denver’s fastest-growing suburbs.
Co-ops created Tri-State in 1952 to deliver electricity from new giant dams being built in the Missouri and Colorado River basins. Hydro still provides about half of Tri-State’s 1,115 megawatts of renewable generation. Wind constitutes the largest share of the new renewables, but the 85 megawatts of contracted solar are tops in the nation among G&Ts. Member renewable projects total 98 megawatts.
“We are bullish on renewable energy,” says Tri-State spokesman Lee Boughey.
In 2005, with demand still rising sharply, Tri-State was bullish on coal. Wanting to build a major new coal-fired power plant in Kansas, it asked member co-ops to extend their all-requirements contracts by a decade, to 2050, the presumed lifespan of the plant. Kit Carson and Delta-Montrose refused.
Finally, in March 2017, Tri-State got permits from Kansas to build the plant but has indicated it will not do so. Instead, it is shedding coal-fired generation. In December, the association lost its 40-megawatt stake in a unit at New Mexico’s San Juan Generating Station. It’ll lose another 100 megawatts of part-time generating capacity at Nucla, Colorado, by 2023 and then 102 additional megawatts of generation at Craig, Colorado, before 2026. All are the result of settlements under the Clean Air Act to reduce regional haze.
Unger, the La Plata board member, says 60 percent of Tri-State’s electrical generation still comes from coal. Tri-State will only confirm 49 percent for 2017, but also reports 19 percent of its electricity comes from contract purchases.
In Durango, La Plata’s subcommittee has met several times, but Unger says it’s still not clear to him that La Plata should, like Kit Carson, leave Tri-State. He’s disturbed that nearly half the board members didn’t want to evaluate the co-op’s options.
“We should be asking ourselves, what are the facts?” he says. “People are not willing to look at it.”
Unger is also annoyed by implications that Kit Carson was forced to increase rates after it left Tri-State to pay the exit fee. “News articles indicate that the rate increase was to help the co-op with unprofitable affiliates, but the timing is a concern,” wrote Mike Dreyspring, chief executive of La Plata Electric, in an op-ed published in the Durango Herald.
Kit Carson’s rates, responded CEO Reyes, “have not increased one cent due to the buyout.”
‘Coal is no longer the lowest cost fuel’
Directors of Delta-Montrose were unanimous in January 2017 in approving exit negotiations. Neither DMEA representatives nor Tri-State will comment on the talks, citing a non-disclosure contract.
“What our board members want most is the flexibility to be able to diversify generation resources,” says Jim Heneghan, DMEA’s renewable energy engineer. Directors, he says, see local renewable generation as a vehicle for economic development.
Delta-Montrose began pursuing this vision of local generation about a decade ago. it’s in a region of organic apple farms and other agriculture production along with one remaining coal mine. Scores of high-paying coal mining jobs have been shed and the region still lags the economic vigor found in more urban areas.
A diversion project east of Montrose completed in 1909 contains a major fall before delivering water to farms. In harnessing that falling water to produce electricity, Delta-Montrose hit Tri-State’s 5 percent cap on local generation. When an outside developer proposed a third hydro plant to Delta-Montrose, the co-op took the proposal to FERC. In 2015, FERC agreed that the co-op was required, under the Public Utility Regulatory Act of 1978, to negotiate purchase of power generated by what PURPA calls a qualifying facility.
Tri-State concedes that it cannot interfere with a member’s purchase of energy from a qualifying facility. But it wants to be able to assess the co-ops for the fixed-cost portion of sales it has lost above the 5 percent threshold.
“It’s a question of how members relate to each other within their association,” explains Tri-State spokesman Boughey. “Each association member agreed to equitably share costs, and that if members self-supply in excess of the 5 percent provision they would not be paying their fair share of the association’s fixed costs. These costs would have to be made up by other members.”
In Durango, Mark Pearson sees a different equity issue. The director of the San Juan Citizens Alliance, an advocacy group, he says the tens of millions of dollars exported from the local economy to Craig and other coal-mining towns would be better kept at home. Of La Plata’s revenues, 67 percent goes to Tri-State for electrical production elsewhere.
“This is great for Craig to have this money raining down on their community, but we should have that money circulating in our community. If we can keep the money local, it’s better economically for us,” he says.
Taking the long view, DMEA director John Gavan sees community choice aggregation coming, where consumers will have the choice of many power suppliers.
Unlike electrical generation even today, he foresees changes driven from the grassroots that pose questions about Tri-State’s one-member, one-vote setup. He contends smaller co-ops have been more easily influenced by the expertise of Tri-State’s coal-minded officials. “Tri-State is a Senate without a House of Representatives,” he says.
Both Pearson and Gavan see resistance to change being the fundamental issue. “It’s just hard for the old guard to change as quickly as the world is changing, to realize that coal is no longer the lowest cost fuel,” says Pearson.
ABOUT ALLEN BEST
Allen Best writes about energy, water and other topics from a base in metropolitan Denver. He began writing about energy, the climate, and their relationship in 2005. He can be found at http://mountaintownnews.net
Prices for solar, wind, and battery storage are dropping so rapidly that renewables are increasingly squeezing out all forms of fossil fuel power, including natural gas.
The cost of new solar plants dropped 20 percent over the past 12 months, while onshore wind prices dropped 12 percent, according to the latest Bloomberg New Energy Finance (BNEF) report. Since 2010, the prices for lithium-ion batteries — crucial to energy storage — have plummeted a stunning 79 percent.
“The economic case for building new coal and gas capacity is crumbling,” as BNEF’s chief of energy economics, Elena Giannakopoulou, told Bloomberg.
At the same time, solar and wind plants — which are increasingly being built with battery storage — are eating into the utilization of existing coal and gas plants, making them far less profitable. For instance, the super-efficient combined-cycle gas turbine (CCGT) plants that have been popular in recent decades, were designed to be used at full power between 60 percent and 90 percent of the time.
But their actual utilization rate (also called the “capacity factor”) has been plummeting in recent years, and is now close to a mere 20 percent in countries as diverse as China, Germany, and India.
FromThe Conversation US (Eric Hittinger/Eric Williams):
The market for energy storage on the power grid is growing at a rapid clip, driven by declining prices and supportive government policies.
Based on our research on the operation and costs of electricity grids, especially the benefits of new technologies, we are confident energy storage could transform the way American homeowners, businesses and utilities produce and use power.
Energy storage in this context simply means saving electricity for later use. It’s like having a bunch of rechargeable batteries, but much larger than the ones in your cellphone and probably connected to the grid.
After annual average growth of about 50 percent for five years, the U.S. electricity industry installed a total of 1 gigawatt-hour of new storage capacity between 2013 and 2017, according to the firm GTM Research. That’s enough to power 16 million laptops for several hours. While this amount of storage is less than 0.2 percent of the average amount of electricity the U.S. consumes, analysts predict that installations will double between 2017 and 2018 and then keep expanding rapidly in the U.S. and around the world.
To see why this trend is a big deal, consider how electricity works.
It takes a hidden world of complexity and a series of delicate balancing acts to power homes and workplaces because the grid has historically had little storage capacity. After being generated at power plants, electricity usually travels down power lines at the speed of light and most of it is consumed immediately.
Without the means to store electricity, utilities have to produce just enough to meet demand around the clock, including peak hours.
That makes electricity different from most industries. Just imagine what would happen if automakers had to do this. The moment you bought a car, a worker would have to drive it out the factory gate. Assembly lines would constantly speed up and slow down based on consumer whims.
It sounds maddening and ridiculous, right? But electric grid operators basically pull this off, balancing supply and demand every few seconds by turning power plants on and off.
That’s why a storage boom would make a big difference. Storage creates the equivalent of a warehouse to stow electricity when it is plentiful for other times when it is needed.