Climate and energy

State regulators have approved a plan by Xcel Energy Inc. to shut down two coal-fired power plants in Colorado, citing benefits to public health and concerns about carbon-dioxide emissions.

It’s the first time in the nation a utility has volunteered, and regulators have approved, a plan to shut down power plants because of CO2 emissions, which are linked to global warming.

The Colorado Public Utilities Commission spent Monday and Tuesday discussing a plan from Xcel Energy Inc. (NYSE: XEL) to meet its customers’ power demands for the next several years. A written order offering specific details of the decision is expected in a few weeks.

The closures are two to four years away, and Xcel has proposed using natural gas to make up for the lost power supplies.

“In reaching the decision the commission was trying to move Xcel Energy toward carbon reduction goals that Gov. [Bill] Ritter has outlined in his climate action plan,” PUC spokesman Terry Bote said Wednesday.

“Also, they were adding renewable-energy resources in a cost-effective, technically feasible manner, ensuring an adequate supply of electricity in the future and being respectful of the cost that consumers have to bear,” he said.

Xcel, based in Minneapolis, is Colorado’s largest utility, serving about 70 percent of the population with natural gas and electricity.

When Xcel filed its plan in late 2007, the utility proposed shutting down the coal units at the Arapahoe power plant in Denver, near Santa Fe Drive and Evans Avenue, and the Cameo plant in Grand Junction.

“We are pleased that the commission has agreed with our proposal to close two of our power plants, as we continually move toward reducing our carbon dioxide emissions in Colorado,” said Xcel spokesman Mark Stutz.

“Gov. Ritter last year called for a 20 percent reduction in carbon-dioxide emission by 2020. These closures will reduce our emissions by 1.4 million tons a year and put us well on the way toward meeting the governor’s goal,” Stutz said.

The plants together can generate a total of 229 megawatts of electricity. Xcel proposed replacing the coal-fired generators at Denver’s Arapahoe power plant with ones that use natural gas and can generate 480 megawatts of power, but a decision on that plan has been postponed.

With the commissioners’ approval, the Cameo plant near Grand Junction is scheduled to close by December 2010. The Arapahoe station in Denver is slated for closure by December 2012, Stutz said.

“The Colorado Public Utilities Commission has set a clear path for Colorado’s energy future,” said Keith Hay, energy advocate for Environment Colorado, an advocacy group. “Colorado will be a leader in clean, renewable energy, and we’ll close down coal-fired power plants and replace that energy with renewable resources.

“We need to look at renewable resources first, and we need to get off of expensive and environmentally costly fossil-fuel resources. Solar is a better investment today and will be a better investment for tomorrow to supply energy for Colorado,” Hay said.

The commissioners also approved adding at least 200 megawatts of power from renewable-energy sources that have storage capability, Bote said.

That’s likely to mean Colorado will get a concentrated solar power plant that uses materials like molten salt to store the power of the sun’s heat for hours after sunset.

State regulators also approved adding 850 megawatts of power supplies from wind and solar generating plants, Bote said.

The second article - titled “Can Tri-State Emerge from the Dark Ages” - is from the Telluride Watch.

This past legislative session in KS, Tri-State partnered with Sunflower Electric to propose 1,400 of new coal generation for Kansas in Holcomb. This would have produced over 11 million tons of carbon dioxide emissions per year. The plants were vetoed three times.

Tri-State and Sunflower are appealing KDHE’s original permit denial through the courts. In the meantime, Tri-State is now preparing to propose either a coal-fired or nuclear plant in Holly, CO.

(article reprinted in full below)

DENVER – Officially, at least, Xcel Energy was nowhere to be seen last week in the hearing room at the Colorado Public Utilities headquarters in Denver.

But Xcel, the investor-owned utility that serves much of urban Colorado, was like an elephant in what was described as a precedent-setting “conversation” between PUC commissioners and representatives of Tri-State Generation and Transmission, the dominant supplier for rural Colorado.

At every turn, Tri-State representatives emphasized how they differ from Xcel: Their customers have generally lower incomes. Their market share is much smaller. It’s more difficult to integrate renewable energy because of a different daily demand curve, which has fewer midday spikes.

PUC members just as vigorously suggested differences, some none-too-flattering. Particularly prickly were the questions of Matt Baker, a PUC commissioner appointed by Gov. Bill Ritter in January. Does it bother Tri-State, he wanted to know, that Xcel has already developed some of the best wind resources in rural Colorado – on Tri-State turf?

No, responded Ken Reif, a senior vice president and general counsel at Tri-State, because Tri-State has different needs than Xcel. “At the moment we do not view wind as a viable baseload resource,” he said, referring to the constant, or base demand.

Again and again, Tri-State insisted that lowest cost is the driving force for determining how electricity is produced. Coal, at the moment, remains the cheapest.

Even that did not go unchallenged. Baker questioned whether coal prices will remain low, given recent increases.

Until it becomes cheap to ship coal to China, coal will remain relatively cheap, Tri-State representatives said.

And on it went for much of an afternoon.

The bigger picture

The exchange was the first chapter in what could become a loud debate in Colorado as Tri-State seeks to build a major new transmission line and a new power plant, which Tri-State representatives say could be either coal-powered or nuclear.

Tri-State clearly will need a permit from the PUC if it builds a power plant. However, it disputes the PUC’s authority over major transmission lines. For that matter, it disputes whether the PUC has any legal right to demand information about its plans.

Tri-State representatives repeatedly emphasized that the meeting was not a “hearing,” as is mandatory of Xcel, but rather a voluntary report.

By whatever name, the meeting was clearly part of the Ritter administration’s broader effort to reduce the state’s carbon footprint. Ron Binz, the PUC chairman, said as much in an interview later.

“I think all sectors of this industry need to pull their share, and while there are reasons that exact solutions may be different in rural areas and for small utilities, that’s just a matter of degree,” said Binz. He added: “Everybody has a role to play in this, including the co-ops.”

A central issue is to what extent coal can be a bridge into the future. If somewhat begrudgingly, Tri-State is conceding carbon constraints, but is holding out hope for technological innovation. A key question is whether carbon can be filtered from exhausts and sequestered underground, eliminating the emissions of carbon dioxide, a key greenhouse gas.

An experiment recently launched in New Mexico, in the San Juan Basin south of Durango, is part of that effort.

Tri-State is heavily invested in coal. It owns part of a coal mine at Craig, and even has some railroad cars for hauling coal. Altogether, about 75 percent of electricity distributed by Tri-State comes from burning coal. In contrast, Xcel gets 64 percent of its electricity from coal.

Xcel, in contrast, has invested more heavily in natural gas, which is more expensive than coal, but has half the carbon footprint – and can produce electricity more readily in response to peak demands. It can also more readily be integrated with intermittent renewables.

Colorado’s state government wants to see a much more rapid development of renewable energy sources and also a greater emphasis on energy efficiency than exists today. Guiding the effort is the Colorado Climate Action Plan, which ambitiously calls for a 20 percent reduction in greenhouse gases by the year 2020 and an 80 percent reduction by mid-century.

City and country mice

Today’s differences between Tri-State and Xcel can be traced to their roots.

Roots of the Public Service Co., Xcel’s subsidiary in Colorado, can be traced to 1869, when business leaders in Denver formed a company to provide gas lighting. In time, the company expanded to deliver electricity. Cities, with their closely spaced customers, were easily serviced. As such, they provided greater profit to private, monopolistic entrepreneurs.

Extending power lines to farms and ranches was far more expensive. In the 1930s, most of rural America remained without connection to electrical grids. To dismantle this electrical divide, Congress in 1935 set up the Rural Electrification Administration. That agency provided low-cost federal money to the new local electrical co-ops.

Unlike Xcel, which is owned by investors, with shares traded on Wall Street, these electrical co-ops are owned by the customers. Each customer is a shareholder, with a right to select directors.

In turn, several co-ops in 1952 created Tri-State, to absorb the job of getting electricity. Much of that electricity then came from dams, but today’s supply is only 15 percent hydroelectric. The growth in demand has been met primarily by burning coal and, increasingly by burning of natural gas.

Today, Xcel delivers 64 percent of electricity consumed in Colorado, either directly to consumers or to sale of rural co-ops and municipalities. Tri-State delivers 14 percent. Municipal utilities deliver most of the rest.

Co-ops describe themselves as a “family,” and the family tends to move as one. Despite their foundation in representational democracy, the co-ops, when they band together, tend toward secretiveness. Meetings are not open to the public and, according to many who have been involved, dissent within those meetings not pleasantly indulged.

The lines of fracture within Tri-State, as with much of the nation, are about coal, and whether it is a wise investment in the future.

The most openly rebellious of Tri-State members has been Delta-Montrose Electric, which in December 2006 rejected extension of a contract for coal-fired generation from Tri-State to the year 2050. The current contract is to expire in 2040. Kit Carson Electric, a co-op based in Taos, N.M., also rejected the extension.

Dan McClendon, general manager of DMEA, says the basic mentality of Tri-State and its cooperatives has been one of resisting change. Short-term costs dictate everything, he charges. “We don’t change until we have to,” he says.

Xcel has resisted change, too, but less stubbornly. After finally reaching a compromise with environmental groups, it is now building a 600-megawatt power plant near Pueblo, but plans to decommission two smaller coal-fired plants, one in Denver and the other near Grand Junction.

It has also increased efforts in what is called demand-side management, improving energy efficiency such as is achieved by compact-fluorescent lightbulbs and encouraging conservation, such as programs that temporarily cut use of air conditioners on hot summer afternoons.

Tri-State has been less aggressive about developing renewable energy. It is planning to get 10 to 20 megawatts from a concentrated solar project planned in New Mexico. It has also issued an invitation for proposals this year to develop another 50 to 100 megawatts of renewables.

This compares with the 189 megawatts shortage in supply forecast by Tri-State officials for the four-state service area by 2014.

Supply and demand

Tri-State expects 88 percent of its demand growth during the next five years to come from the industrial sector, primarily its booming oil and gas sector.

“We have very little growth at this point associated with the oil shale industry,” said Robert “Mac” McLennan, Tri-State’s senior vice president for external affairs.

Plan A for Tri-State was to partner with a Kansas company to build two new coal-fired power plants at Holcomb, Kan., in the state’s southwest corner. Gov. Kathleen Sebelius last October denied air-quality permits for the plants, citing the emissions of carbon dioxide. The U.S. Supreme Court last year ruled that C02 can be regulated under the Clean Air Act.

Tri-State is appealing the Kansas veto. Just the same, it is readying a plan B: either a coal-fired power plant or a nuclear generator, this time in Colorado, near Holly. The land and water rights have been secured, officials said, and air quality studies are now underway.

At least officially, Tri-State accepts that federal action putting a cost on carbon dioxide emissions will make coal-fired electricity more expensive. A tax of perhaps $50 per ton in emissions is why is why Tri-State is now looking “very hard” at nuclear, said McLennan.

Tri-State is investing research money into the potential for carbon sequestration. Use of renewables might be expedited, he added, if means to store compressed air can be found in Tri-State’s service area. Such storage technology is considered critical for allowing making both solar and wind capable of supplying electricity for baseload demand.

Xcel believes it can meet 30 percent of its demand through renewables.

The efficiency crucible

Demand-side management is also a central point of contention. Critics believe that Tri-State could, instead of building a new plant, meet demand by improving efficiencies.

That point was implicit in several comments from PUC members. Binz, the PUC chairman, suggested that Tri-State could engage a third-party energy efficiency firm, such as is done in Vermont, Wisconsin and several other states, providing expertise and volume unavailable to the local co-operatives.

While improving efficiency costs less than adding new supply, he conceded, it’s a tough sell to consumers.

Tri-State argues that, in the short term, demand can’t be dented sufficiently – that it needs a new power plant. Officials further argue that Tri-State does not have the direct relationship with consumers.

There is no doubt that Tri-State is changing. The executive team has largely been replaced in the last four years. Moreover, there has been dissent from the coal-first approach in even the most conservative rural communities.

The measuring stick, at least in Colorado, is always Xcel.

“We are not as far along as Public Service [i.e., Xcel] in our process, but our pace is far greater than it was even two years ago,” said Reif, Tri-State’s chief lawyer.

The question is whether Tri-State is picking up the pace sufficiently, given the carbon constraints that are generally expected from Congress within the next several years.

— Maril Hazlett, www.climateandenergy.org