Economic reality sets in for Tri-State efforts to expand the Holcomb coal plant

By Joe Smyth | [email protected] | @joesmyth

Coal can't compete with cheap renewable energy

After more than a decade of efforts to dramatically expand the Sunflower Electric Power Corporation’s coal-fired power plant in Holcomb, Kansas, Tri-State Generation and Transmission Association, the principal backer, now considers it unlikely that the project will move forward.
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The Holcomb coal plant expansion project received a key air permit in March, following a Kansas Supreme Court decision. As the economic reality facing the coal industry continues to make it less and less likely that new capacity will be added, Holcomb seemed to be a potential outlier; last month it was called “perhaps the most likely prospect for a major new coal plant in the United States.”

But without the support of Tri-State, a Colorado-based utility, prospects for the 895-megawatt coal unit are increasingly dim. 

In an August 14 filing with the Securities and Exchange Commission, Tri-State reported that it had “assessed the probability of us entering into construction for the Holcomb Expansion as remote.” As a result, the utility reported that it had written off more than $93 million it spent trying to build the coal unit.

Lee Boughey, Tri-State’s senior manager for communications and public affairs, acknowledged in an email that the utility had determined that some of the project’s costs were not recoverable, but said the Tri-State Board of Directors hadn’t made a final decision about the fate of the project.

The discussion that took place at a recent board meeting, however, indicates that at least one member of the board considers plans for the coal plant to be effectively over.

At an August 10 board meeting of Mountain Parks Electric, Carl Trick II, a Mountain Parks board member who also serves on the Tri-State board, gave an update on the Holcomb coal plant expansion project. (The Tri-State Board of Directors is composed of one representative from each of the 43 electric cooperatives in Colorado, Wyoming, Nebraska, and New Mexico that purchase electricity from Tri-State.) 

According to Trick, “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.”

“Holcomb is over,” Trick added. 

Tri-State and Sunflower Electric originally sought to expand the Holcomb coal plant in 2007, but the project had been blocked by legal challenges from the Sierra Club and Earthjustice. Since then, the economic case for building a new coal-fired power plant in the U.S. has essentially evaporated — even without accounting for the costs of carbon pollution and the health impacts that stem from burning coal. 

While the Trump administration has sought to blame the decline of coal on federal clean air and water rules, vowing to revive the industry despite countless expert analyses to the contrary, utilities are increasingly choosing to invest in renewable energy instead of coal simply because it is cheaper. 
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Windy states like Kansas are particularly well situated to benefit from the declining costs of wind energy. A March report from Moody’s Investors Service found that in the 15 states with the best wind resources, new wind generation now costs significantly less than existing coal-fired power plants. Kansas is among those windy states, along with the four states where Tri-State sells electricity: Colorado, New Mexico, Wyoming, and Nebraska.

A recent Moody’s report shows wind energy in Great Plains states is much cheaper than coal

​In addition to dramatic declines in renewable energy costs, energy efficiency improvements mean that electricity demand has not grown as utilities expected, and natural gas prices have remained low — all discouraging new investments in coal.

After the Kansas Supreme Court ruling approved its air permit, Sunflower Electric did not commit to building the Holcomb plant, instead stating that it would “continue to assess the project relative to other resources.” 

In response to Tri-State’s assessment that it is now unlikely to build the plant, a spokesperson for Sunflower Electric maintained that non-committal approach, stating in an email that “Sunflower continues to keep the Holcomb Expansion Project as an option. As with every project, our Board will take into consideration current industry demand and dynamics and will only move forward with the project if it is in the best interest of our Members and those they serve.”

As far as Tri-State is concerned, spokesperson Lee Boughey explained that “much has changed over the past 10 years since the project was originally proposed. Tri-State has been able to meet the current and projected electric needs of its members by adding other generation resources, including renewable and natural gas resources.”

Boughey said that Tri-State has added nearly 470 megawatts of renewable energy resources since 2008, and plans to add another 75 megawatts of wind generation later this year.
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“It appears Tri-State is finally realizing that new coal expenditures are a losing proposition,” said Zach Pierce, senior campaign representative for Sierra Club’s Beyond Coal Campaign. 

“The costs of wind and solar have dropped so sharply that Tri-State customers will benefit from a planned transition away from all coal as the fuel becomes increasingly uncompetitive,” Pierce continued. “This is the right moment for the utility to listen to the growing demands of its member co-ops in Colorado to allow for more localized clean energy solutions that will lower costs and stimulate new job growth.”

Crossposted from ThinkProgress