|
Coal-heavy power supplier won’t let its member cooperatives leave, which one co-op calls a “financial suicide pact”
By Joe Smyth | joe@cleancooperative.com | @joesmyth
The generation and transmission association that provides electricity to large swaths of the rural West and Upper Midwest is facing increasing pressure from its member cooperatives and lenders about its reliance on coal, challenges to its rates in proceedings at the Federal Energy Regulatory Commission, and efforts by some member cooperatives to end their contracts in order to purchase wholesale power from other providers.
Those challenges facing Basin Electric reflect the growing tension between some of the electric cooperatives that provide electricity to much of rural America, and the generation and transmission associations that sell wholesale power to those co-ops largely generated with increasingly uneconomic coal plants. As one co-op director put it, “Across America, the generation and transmission model is being challenged by the distribution cooperatives who own them. We want more flexibility and local control to help us manage and even reduce costs. By Joe Smyth | @joesmyth Tri-State Generation and Transmission Association announced last month that it will close its coal plants in Colorado and New Mexico and build a gigawatt of new wind and solar projects, in a move that its CEO said will “transform Tri-State as a power supplier.” Tri-State CEO Duane Highley explained that replacing coal with renewable energy will reduce costs as well as carbon emissions, as the power supplier submits its plans to Colorado regulators this year. Wind and solar prices “way, way below” two cents help accelerate coal retirements At a press conference in the Denver State Capitol with Colorado Governor Jared Polis, Highley explained how the dramatic declines in renewable energy prices enable Tri-State to reduce costs by replacing coal plants with new wind and solar projects: “This is what's amazing and why this is an exciting time for our business. We've seen the cost of renewables plummet. From the first renewable project we signed 10 years ago, we're seeing like an 85% reduction in the cost of solar energy. And because the wind and solar energy now comes in prices lower than the cost of generating with any fossil fuel, coal or gas, it provides us with an opportunity, if you want to call it a "green energy dividend," that those savings in energy costs can be used to help us accelerate the retirement of coal and pay for that accelerated retirement, without negative rate impacts.” Highley’s comments confirmed what a variety of analysts have found over the last two years. A pair of reports by Moody’s Investors Service in 2018 found that “most municipal and G&T cooperative-owned coal power plants have operating costs greater than the all-in cost of renewables,” including Tri-State’s coal plants, and highlighted how “high quality renewable resources” in Tri-State’s and Basin Electric’s service territories “may enable these utilities to reduce rates for their customers where the price of new renewables undercuts that of existing coal.” A report by the Rocky Mountain Institute later that year found that Tri-State’s member co-ops could save hundreds of millions of dollars by replacing coal with renewable energy. Tri-State did not provide pricing details about its new wind and solar projects, but Highley told Colorado legislators at an energy hearing last July that its previous request for proposals “resulted in costs well below two cents for both wind and solar, I mean well below, I mean way, way, below. Lower costs than what we can get at variable cost from operating any fossil fueled unit. So I'm expecting that to be the case again.” Tri-State will build a gigawatt of new wind and solar, reaching 50% renewable by 2024 Tri-State announced 304 megawatts of new wind projects and 715 megawatts of new solar projects in Colorado and New Mexico. Tri-State said that by replacing coal plants with those new renewable projects, along with existing wind, solar, and hydroelectric projects, “by 2024, 50% of the energy our cooperative consumes will come from renewable resources.” The new wind and solar projects that Tri-State announced will be built in the service territories of seven of Tri-State’s member co-ops, and two of the solar projects will be built at coal facilities that Tri-State will close.  Map of planned new renewable energy projects, from Tri-State Responsible Energy Plan In Eastern Colorado, Tri-State announced the 200 megawatt Niyol Wind project in Highline Electric service territory, along with the previously announced 104 megawatt Crossing Trails Wind project in K.C. Electric service territory. In Southwest Colorado, Tri-State announced the 120 megawatt Coyote Gulch Solar project in La Plata Electric service territory, and the 110 megawatt Dolores Canyon Solar project in Empire Electric service territory. Tri-State also announced it would add another 40 megawatt solar array to the previously announced 100 megawatt Spanish Peaks Solar project in San Isabel Electric service territory in Southern Colorado. Tri-State also announced the 145 megawatt Axial Basin Solar project on its Colowyo coal mine land in Northwest Colorado, as well as the 200 megawatt Escalante Solar project at the site of its Escalante coal plant in Eastern New Mexico. Tri-State will close over half of its coal fleet Tri-State announced that it would close its Escalante coal plant in Eastern New Mexico this year, and the larger Craig coal plant in Northwest Colorado by 2030. Along with the closure of the Nucla coal plant last year, those closures represent 1001 megawatts of coal capacity, or about 53% of the total 1884 megawatts of coal capacity that Tri-State owns. The Colowyo coal mine, which supplies the Craig coal plant, will also close by 2030. Tri-State detailed the costs associated with the closures of its coal plants and mine in a filing with the Securities and Exchange Commission. Tri-State did not announce any plans for its ownership interests in coal plants operated by other utilities, the Springerville coal plant in Arizona and the Laramie River coal plant in Wyoming.  While the full Craig coal plant will close by 2030, Unit 1 will close by 2025 as previously announced. Tri-State also said that it “is working with the other plant owners to determine the specific details for the retirement of Unit 2." Tri-State operates the Craig plant, but is a partial owner of Units 1 and 2 along with four other utilities, including some that have pressed for an earlier closure. The other owners include Xcel Energy, PacifiCorp, Platte River Power Authority, and Salt River Project, each of which has announced emissions reductions plans, accelerated closures of coal plants, or both. Tri-State also said “we’re committing not to add more coal to our system,” and announced that it had formally canceled its efforts to expand the Holcomb coal plant in Kansas. That project had been effectively dead for years, and Tri-State acknowledged in 2017 that it was unlikely to move forward. The Wichita Eagle reported that Sunflower Electric, the utility which operates the existing Holcomb coal plant, said it had “supported Tri-State’s efforts to market the permit to other utilities” - but that no utilities were interested in purchasing the permits to build a new coal plant. At a meeting in 2017, a Tri-State director predicted as much, explaining that “the board has voted to get out of Holcomb. So there’s the possibility that we could sell it, but I don’t know who would want to buy it. I don’t think there’s going to be any coal plants built.” Although no new coal plants were likely to be built, Tri-State’s commitment “not to add more coal to our system” also means that Tri-State won’t increase its ownership stake in existing coal plants, which it did as recently as 2018 when it boosted its share of the Laramie River coal plant in Wyoming. Colorado regulators could seek more aggressive carbon emissions reductions Tri-State said that its plan will achieve a “70% reduction in CO2 emissions associated with Colorado wholesale electric sales” by 2030, from 2005 levels. That approaches, but does not quite meet, the 80% cut in carbon emissions by 2030 that Colorado’s climate legislation urges for electric utilities. Colorado regulators could seek more aggressive emissions reductions from Tri-State. At a January 22 Colorado Public Utilities Commission meeting, commissioners and staff discussed the process for Tri-State’s upcoming electric resource plan (ERP), and commission staff recommended: “We suggest that a single scenario be required in Tri-State's rules for its initial ERP filing and following filings, and that would be to require an assessment of the costs and benefits of early retirements of utility owned resources and the acquisition of new utility resources, required to reduce the carbon dioxide emissions associated with the utility sales by 80% from 2005 levels by 2030.” Commissioners unanimously approved that recommendation. Tri-State did not say how much its system-wide emissions will be reduced under the plan. Colorado accounts for about two-thirds of Tri-State’s electricity sales to member co-ops. Negotiations with La Plata Electric and United Power continue While the clean energy announcement brings Tri-State closer to meeting Colorado and New Mexico’s climate and clean energy policies, it’s not yet clear what it will mean for the power supplier’s negotiations with some of its largest member co-ops. At the press conference, Highley said that “with this announcement, we are meeting the stated sustainability goals for every one of our member systems” and expressed hope that its member co-ops would consider staying with Tri-State. United Power and La Plata Electric have requested that the Colorado Public Utilities Commission determine the price they would need to pay to end their contracts with Tri-State, as Delta Montrose Electric has done. In a press release responding to Tri-State’s announcement, La Plata Electric CEO Jessica Matlock said, “While Tri-State’s future goal will help meet our carbon reduction goal, we do not yet know what the costs of its plan will be to our members and what LPEA’s role will be for producing local, renewable energy into the future.” At the press conference, Highley pointed to an upcoming option that Tri-State hopes will help address some its member co-ops’ concerns about Tri-State’s restrictions on local energy development: “The work of our contract committee will be announced in April. And at that time we'll have a block of energy available for our members to bid to self-supply. To the extent that our members develop local renewable projects, it will take some pressure off the remaining development for Tri-State, but if you look at the total Responsible Energy Plan, by 2030, as we look at a goal of 90% reduction in carbon emissions in Colorado, it's going to involve the construction of thousands of megawatts of new renewables. So more than double what we're announcing today, yet to come.” Crossposted from Energy and Policy Institute Moody’s Investors Service warns that some generation and transmission associations are heavily dependent on coal, and so face higher carbon transition risks. But Tri-State and Basin Electric are better positioned to navigate those risks, according to the investors report, because they benefit from “abundant wind resources” which “may enable these utilities to reduce rates for their customers where the price of new renewables undercuts that of existing coal.” By Joe Smyth | joe@cleancooperative.com | @joesmyth A report published last week by Moody’s Investors Service detailed several factors that generation and transmission associations and municipal utilities must consider as they navigate the transition from coal to clean energy. This latest report, "Public Power and Electric Cooperatives -- US: Prudent self-regulation is key to managing carbon transition risks," follows an earlier Moody’s report in April, which showed that many of the coal plants owned by generation and transmission associations and municipal utilities are more expensive than new renewable energy - including each of the coal plants owned by Tri-State Generation and Transmission Association.
This latest report provides more details about the risks and opportunities that these types of utilities face in the "carbon transition," and how those differ from investor-owned utilities because of differences in business model, governance, and rate-setting. But at a broad level, the Moody’s report notes, municipal utilities and generation and transmission associations “face the same growing imperatives to reduce emissions as their larger investor-owned utility (IOU) peers, driven by a combination of public policy at the state and local level as well as customer demands.” |
Recent ArticlesBasin Electric faces growing pressure on coal from co-ops, insurers, and banks
Tri-State: Moving a cooperative power provider from coal to clean energy Tri-State will replace coal plants with a gigawatt of new wind and solar United Power and La Plata Electric ask Colorado Public Utilities Commission to determine Tri-State exit fee Colorado Rural Electric Association spent electric cooperatives’ money supporting Republican politicians Colorado Public Utilities Commissioner questions "whether or not Tri-State has been candid with us" Rural America could power a renewable economy - but first we need to solve coal debt Tri-State explores FERC rate regulation to limit state oversight Poudre Valley Electric sets "80 by 2030" carbon free goal Guzman Energy proposal would finance retirement of Tri-State coal plants, add 1.2 gigawatts of new wind and solar power Colorado Public Utilities Commission will oversee Tri-State resource planning Colorado communities and state Energy Office urge Public Utilities Commission oversight of Tri-State Reports examine the impacts of Tri-State's high wholesale power costs Tri-State executive involved with anti-Clean Air Act group since 2005 US Congressional Committee requests details of Tri-State funding to anti-Clean Air Act group Renewable energy projects stalled in 2018 among Tri-State member co-ops Second co-op asks Tri-State to pull “Better Together” ads Tri-State won’t allow co-op members to attend annual meeting Tri-State expects member co-ops to support bylaw changes at annual meeting Rocky Mountain Farmers Union calls on Tri-State to adopt flexible contracts and more clean energy Co-ops in Colorado push for change at Tri-State Will Municipal Energy Agency of Nebraska remain reliant on coal? Tri-State ad campaign tells co-ops they’re “better together” La Plata Electric concerned Tri-State debt will lead to higher rates Colorado Public Utilities Commission asserts jurisdiction over Tri-State More Colorado co-ops announce clean energy goals Ski industry climate change efforts shift to electric utilities and their regulators Public Utilities Commission rejects Tri-State motion to exclude Colorado Energy Office from exit charge case Tri-State claims that co-ops "have intervened on Tri-State's behalf at the PUC” don’t add up Colorado state legislators urge Public Utilities Commission to determine Tri-State exit charge United Power says Tri-State policies are turning away large customers Next PUC Commissioner John Gavan "consensus choice" of Governors Hickenlooper and Polis Tri-State policy change discourages battery projects in rural Colorado and New Mexico Colorado Public Utilities Commission orders Tri-State to "satisfy or answer" exit charge complaint from Delta Montrose Electric United Power seeks solutions to "increasingly outmoded G&T business models" Clean Energy Means Business Summit highlights renewable energy opportunities and challenges in rural Colorado Governor-elect Jared Polis says moving Colorado toward more renewable energy will be a top priority Electric cooperative officials discuss cheap renewable energy and an “eroding monopoly” Delta Montrose Electric members vote for new financing options, supporting a potential buyout of Tri-State contract Poudre Valley Electric requests Tri-State policy changes and fuel mix study Holy Cross Energy plans to shift away from coal, aiming for 70% renewable energy What do corporate renewable energy commitments mean for electric utilities? Colorado Energy Plan approval will mean new renewable energy investments in rural Colorado Report: Tri-State could save $600 million by shifting from coal to renewable energy Delta Montrose Electric seeks new financing options to end contract with Tri-State Wind energy jobs in rural Colorado attract bipartisan support Colorado Energy Plan analysis shows switching from coal to renewable energy will boost jobs and local tax revenue Poudre Valley Electric and Xcel Energy Colorado President win national awards from Smart Electric Power Alliance Latest coal plant subsidy proposal could hit electricity bills in the West Moody’s report: “High quality renewable resources” could help Tri-State and Basin Electric navigate rising carbon transition risks Senator Heinrich highlights “frustrations in New Mexico” with Tri-State’s limits on local solar Moody’s report shows Tri-State’s coal plants are more expensive than new renewable energy Tri-State’s limits on local energy development are a growing problem for co-op members Governor Hickenlooper discusses Tri-State at the Climate Leadership Conference Bids for Xcel’s Colorado Energy Plan include a proposal for the world’s largest battery New wind and solar power in Colorado is now cheaper than existing coal plants Companies' 100% renewable energy goals are getting results in Colorado What does cheap solar mean for electric cooperatives? Colorado towns and cities are helping push utilities to embrace renewable energy How are electric cooperatives navigating the transition from coal to cheap clean energy? Blocked from building more solar projects, United Power shifts to community batteries Economic reality sets in for Tri-State efforts to expand the Holcomb coal plant Solar projects in the works in Grand and Jackson counties Mountain Parks Electric grapples with solar Categories
All
Archives
November 2020
|
RSS Feed