Coal’s future as a power source flickering
Xcel Energy Colorado has closed several coal plants over the past decade, usually to address air quality concerns in metro Denver. Those early closures have typically resulted in higher electricity rates for its customers.
But on Tuesday, the state’s largest utility made an economic argument for shuttering two of its coal-burning units in Pueblo a decade ahead of schedule, saying the move would address public demands for cleaner energy, significantly reduce air pollution, and lower electricity costs.
“We are at a unique point in time where we could voluntarily propose to retire these coal generation units early and replace them — and save money,” said David Eves, president of Xcel Energy’s Colorado operations.
On Tuesday, Xcel Energy submitted its Colorado Energy Plan to the Colorado Public Utilities Commission, including a request to shut down two units at the Comanche Generation Station in Pueblo with a capacity of 660 megawatts.
Bids will go out to replace that generation later this year, part of a much larger request for up to 1,000 megawatts of wind, 700 megawatts of solar and 700 megawatts of natural gas generation.
“We expect the Colorado Energy Plan portfolio will come in lower than current costs. It will significantly reduce customer bills,” said Erin Overturf, chief energy counsel at Western Resource Advocates, one of 14 groups involved in working out the agreement with Xcel.
If the argument from the environmental community used to be consumers will pay more, but breathe easier, it has shifted to one of that says breathe better and pay less.
Eves also expressed confidence Xcel can obtain electricity at a lower cost from new sources than it can from the older ones it wants to shutter. If for some reason that doesn’t happen, the company’s 2016 Electric Resource
Plan allows the two Comanche plants to continue operating.
Closing the two units would remove 4 million tons a year of carbon dioxide emissions and eliminate the need to purchase and transport 2.5 million tons a year of coal from Wyoming’s Powder River Basin, according to Xcel.
And Eves argues it is what customers keep telling the company they want, although some critics question the benefits being promised.
“Will this plan be good for the ratepayers? There is no evidence of that,” countered Stan Dempsey Jr., president of the Colorado Mining Association.
Dempsey said he isn’t convinced new providers can underbid coal or prove as reliable over the long haul. Solar and wind aren’t consistent and storage remains expensive. Natural gas has become the fuel of choice to cover the gap, but it too has challenges.
Prior to 2009, natural gas was a volatile commodity and if producers, facing a supply glut, achieve their goal of developing a robust export market, higher prices could return, Dempsey warned.
“If we indeed internationalize natural gas, that will change the dynamics,” he said.
He adds that the political climate for coal is finally improving, following a difficult stretch during the Obama administration. After a steep drop last year, coal production in Colorado is rebounding this year.
Amy Cooke at the Independence Institute in Denver takes an even harder stance in a blog post, arguing the agreement involved political arm twisting from the state and is the latest “backroom deal” in a long series that have disregarded ratepayers.
Between 2001 and 2014, the cost of electricity in Colorado has shot up 67 percent, or double the rate of inflation, despite flat consumption and falling fuel costs. Xcel has continued to profit in that period and environmental groups have gotten what they wanted. Ratepayers have been hit with electricity cost increases far beyond income gains, which suggests a planning and procurement process that isn’t protecting their interests, argues the Independence Institute, a libertarian group.
For example, under a 2004 agreement, Xcel agreed to invest tens of millions of dollars on equipment to scrub the emissions at the two older Comanche plants and address air quality concerns. But that investment will not be fully realized, and ratepayers will have to carry the cost for that.
But supporters of the new plan argue economic fundamentals are shifting so rapidly that Xcel’s 1.4 million Colorado ratepayers will come out ahead even after accounting for the costs associated with an early retirement of the two coal plants. That’s why the Colorado Office of Consumer Counsel, which represents residential ratepayers, and the Climax Molybdenum Co., a major electricity user, signed on.
Inflation numbers show the cost of electricity in the Denver-boulder-greeley area dropped 2.3 percent in 2015 and 0.8 percent in 2016, according to the U.S. Bureau of Labor Statistics. And Colorado, despite its reputation as a green energy leader, remains heavily dependent on coal, which carries additional costs that don’t show up on utility bills.
Brookings, in a study last December, found that 30 U.S. states managed to shrink carbon emissions even as their economies grew between 2000 and 2014. Colorado, because of its dependence on coal, wasn’t in that group.
Comanche Unit 1, launched in 1973, could hit the scrap heap by 2022 if regulators approve the plan and competitors can outbid it on cost, while Comanche Unit 2, launched in 1975, could face closure by 2025. Those timelines could move up if the savings from new providers are greater than expected.
If the two units do close, they would join a long list of coal-fired plants forced into an early retire- ment. Xcel in March took the 184-megawatt Unit 5 at Valmont Generation Station in Boulder offline and shut down the first four units back in 1986.
In late 2013, Xcel Energy decommissioned the last two coal-fired units at its Arapahoe Generating Station, with a combined capacity of 156 megawatts. Prior to that, in 2003, Units 1 and 2, with 45 megawatts each, were shut down at the station on Santa Fe Drive and Evans Avenue.
Xcel Energy, between 2011 and 2015, retired three coal units capable of producing 365 megawatts of electricity at its Cherokee Generation Station in Adams County to comply with the Colorado Clean Airclean Jobs legislation, which seeks to cut nitrogen-oxide emissions in the region by 70 percent. The 352-megawatt Cherokee Unit 4, criticized as a big contributor to air pollution in metro Denver, switched to natural gas this month.
Metro Denver now has no coal-fired plants left, and rural coal plants also are closing. At the end of 2010, Xcel Energy shut down two smaller and older units at its Cameo Station near Palisade and in April 2013 imploded the structures, citing the opening of the more efficient Comanche Unit 3.
Xcel Energy owns a share of the coal-fired units at Craig Station in northwest Colorado. Craig Unit 1, built in 1980 with 427 megawatts of capacity, i slated to close by the end o 2025, around the time o Comanche Unit 2, as part o a deal struck with environ mental groups to reduce haze and improve air quali ty.
Coal’s share of powe generation in Xcel’s Energy mix is declining rapidly Back in 2005, coal-fired sources provided abou two-thirds of the compa ny’s electricity in the state with natural gas at 30 per cent and wind and solar at 2 percent each.
By 2016, coal was down to 46 percent, natural gas had slipped to 25 percent and wind shot up to 23 percent with hydro at 4 percent and solar at 2 percent. By 2026 Xcel estimates that wind will be the largest genera tion source at 40 percent followed by coal at 23 per cent, natural gas at 22 per cent, solar at 14 percent and hydro at 1 percent.
So what will be left o Xcel Energy’s Colorado coal fleet after 2025 There’s the newer and cleaner Comanche Unit 3, a 750-megawatt giant tha came online in 2010. At the Hayden Generating Sta tion, Xcel Energy manage and co-owns a 169-mega watt unit that dates back to 1965 and a 262-megawat unit from 1976. And in northeast Colorado, the Pawnee Generation Sta tion, launched in 1981 in Brush, has a capacity of 50 megawatts.