THE FUTURE OF POWER

Electricity may soon get cleaner … and a lot more expensive

ENERGY | Patrick Yeagle

Climate change is happening already, and climate scientists say the more the globe heats up, the more humans will suffer.

Summer heat will last longer and bring hotter average temperatures. Wildfire season will start earlier and end later, while prolonged drought in some areas will further raise the risk of fires. Other areas will see an increase in rain, bringing with it the risk of increased flooding. Allergy season will last longer. Melting polar icecaps will raise sea levels, endangering coastal cities. Invasive species will find it easier to spread as winters weaken. Some of those predictions, such as the longer, hotter summer, have already come true, with 2012 being the longest and hottest summer on record for the United States. For Illinois, climate change means more dangerous storms, higher humidity, more heat waves, more flooding and other problems.

Dr. John Holdren, senior science advisor to President Barrack Obama, says there is “very high confidence” among scientists that the already measurable uptick of global average temperature is caused by an increase in atmospheric carbon dioxide and other greenhouse gases released by human activities.

To help turn the tide of global warming, the U.S. Environmental Protection Agency on June 2 proposed the nation’s first-ever set of regulations on greenhouse gas emissions for existing power plants. If implemented, the rule would reduce CO2 emissions from the power sector by 30 percent from 2005 levels. The year 2005 marked one of the highest annual carbon dioxide emissions in the U.S., making it a convenient benchmark against which to measure reductions.

The rules were immediately met with praise from environmental groups who hailed them as the first real step toward preventing catastrophic global warming. But the coal industry vowed to sue the EPA over the proposal, saying it will eliminate coal plants and drastically drive up energy prices. Scientists say the very existence of the human race may be in jeopardy if we don’t enact changes. However, making these changes would require some painful sacrifices in the U. S.

A foundation made of coal

Like it or not, coal is the backbone of America’s energy industry. More than 39 percent of the electricity generated in the U.S. during 2013 came from coal-fired power plants, according to data from the U.S. Department of Energy. The next closest competitors were natural gas with 27 percent and nuclear power with 19 percent.

Coal’s dominance is partly because of its reliability and partly because coal was the first source of energy on the scene when the world’s addiction to electricity was still forming. Coal remains the king despite being filthy at every stage from the mine to the smokestack. Decades of federal environmental regulations have attempted to clean up the pollutants from burning coal. But those regulations haven’t touched carbon dioxide emissions, the greatest contributor to global warming.

Coal is the largest component of what’s known as America’s “base load capacity,” which refers to the minimum amount of power needed to satisfy demand during a given 24-hour period.

Because coal, natural gas and nuclear plants cover that minimum demand, they’re referred to as “base load” plants. Renewable sources like wind and solar are referred to as “peakers” because they typically are only utilized when demand for electricity peaks. Because coal is a base load fuel, any environmental regulations that affect its use will inevitably cause ripples through the power market as a whole.

Phil Gonet, executive director of the Illinois Coal Association, says 60 percent of coal plants in the U.S. are 50 years old or older, and many are already slated for shutdown. He says the EPA’s proposed rules “pretty much preclude any new power plants being permitted that operate under coal.” He believes the new rules would require a coal plant to capture CO2 and store it underground, an unproven technology known as “carbon capture and storage.”

Illinois is home to the FutureGen 2.0 project near Jacksonville, which would be the first commercial-scale demonstration of carbon capture and storage technology in the world. However, the troubled “clean coal” project remains only partially funded, with no private investors on board and $1 billion in public money making up most of the existing funds. The federal government canceled the project once, only to revive it later. Several partners have backed out, leaving only coal mining and coal equipment companies involved in the project. Gonet says without carbon capture and storage, coal plants probably won’t be able to meet the new regulations.

“If this means that it’s going to be harder to use power off of coal and power plants shut down, it’s going to create a shortage of electricity and will raise prices,” he said. “That will be harmful to the economy and for poor people.”

Howard Learner, executive director of the Chicago-based Environmental Law and Policy Center, calls that claim “fuzzy economics and political spin.”

“Many utilities and energy companies are already shutting coal plants because they’re not economically competitive in today’s electricity market,” Learner said. “The utilities and other coal plant owners are deciding to not invest in modern pollution control technology and other needed equipment. They’re being required to take responsibility for the costs of their pollution, rather than externalize those costs on the public. Coal plant owners should take responsibility for reducing their pollution – that’s sound economics and common sense.”

Currently, no coal plants in Illinois are scheduled for closing. A subsidiary of power company Ameren had planned to close five coal plants in Illinois rather than spend money upgrading their pollution control equipment. In December 2013, Houston, Texas-based Dynegy Inc. took the plants off Ameren’s hands in exchange for also taking on the $825 million debt associated with the plants. The Illinois Pollution Control Board granted Dynegy a “variance” which allowed the company not to meet certain state pollution standards at the coal plants until 2019.

Additionally, Ameren previously closed its coal plant in Meredosia, but the plant is being maintained in case the FutureGen 2.0 project ever comes to fruition.

The market rules

The proposed regulations from the EPA are aimed at reducing the nation’s carbon dioxide emissions from power generation by 30 percent below 2005 levels. To accomplish that, EPA has asked the individual states to meet specific goals based on a formula that accounts for each state’s energy mix and other factors. Even though Illinois is already the national leader in producing low-emissions electricity because of the six nuclear power plants located here, the state would have to reduce its carbon dioxide emissions by 33 percent.

The EPA rules don’t contain a formula for states to meet their goals, however. Instead, the EPA offered several options from which each state can choose: energy efficiency programs to reduce consumer demand, efficiency improvements at power plants, switching to natural gas, closing dirty plants, changes to how the nation’s power grids work, trading of carbon credits to help dirty plants meet standards and more.

Illinois already has several such programs in place, including state-level limits on greenhouse gas emissions, renewable energy standards and energy efficiency codes for buildings.

Kim Biggs, spokeswoman for the Illinois Environmental Protection Agency, says IEPA is still analyzing the proposed federal rules to determine what changes Illinois will need to make. The agency will play a central role in developing the state compliance plan under the new rules, but many of the changes will likely have to be approved by the Illinois General Assembly.

Because each state’s approach to meeting the reduction goal will be different, and because states are still analyzing what will be required of them, it’s unclear whether Gonet’s prediction of mass coal plant closings will come true. If it does, there are a handful of options waiting to take coal’s place. Nuclear power, which many environmental groups see as a barrier to the spread of renewable energy sources, seems poised to step in if coal steps out. The U.S. is already heavily invested in nuclear power as one of the three main base load energy sources and the only one of the three with no direct carbon dioxide emissions. If more nuclear power plants are built to replace coal plants, the likelihood of renewable energy sources like wind and solar being fully implemented is low.

Thomas Kauffman, a spokesman for the Nuclear Energy Institute, says it’s much more complex than nuclear simply taking coal’s place.

He points to the difference between how states regulate their energy markets as one major factor preventing a nationwide switch to nuclear power.

Some states, such as Georgia, have what are known as “regulated markets” for energy, which means power generators sell directly to consumers and are closely regulated by the state. In those states, consumers’ utility rates directly pay for new facilities, and the state plays a central role in determining what types of new plants get built. Kauffman says regulated markets allow investment in projects with higher upfront costs, like nuclear energy, because each utility is basically a managed monopoly.

Other states, like Illinois, have deregulated “merchant” markets, in which power generators don’t sell electricity directly to consumers. Instead, the power generators sell to separate companies that transmit the power and sell it to consumers. Merchant markets encourage competition among power generators, which is an incentive to provide the cheapest power possible. While that means lower prices for consumers, it also usually means using coal or other fossil fuels.

While Georgia, a regulated power market state, is currently building the first two nuclear reactors approved in the United States since the late 1970s, Illinois’ six nuclear power plants continue to lose money because consumers opt to purchase cheaper power from coal plants. Illinois only has nuclear power plants because they were built before the state deregulated its power market in the 1990s. Kauffman points out that all of the pending nuclear power projects in the U.S. are in states with regulated markets.

Because of their current unprofitability, Illinois’ nuclear power plants are facing an uncertain future. Krista Lopykinski, director of nuclear communications for power company Exelon, says the company is still determining whether the Clinton Power Plant, a nuclear reactor facility about 40 miles northeast of Springfield, will remain open. Lopykinski called the plant “economically challenged” and said Exelon will probably decide what to do with it in June 2015. The company owns all six of the nuclear power plants in Illinois.

However, the economics of nuclear power plants in Illinois could change if coal plants begin to disappear under the new EPA rules.

During the recently ended spring legislative session, the Illinois House of Representatives passed a resolution declaring nuclear energy an asset to the state and called on federal authorities and grid operators to enact policies that would ensure Illinois’ nuclear power plants don’t close.

David Kraft, director of the Nuclear Energy Information Service, a Chicago-based group devoted to ending nuclear power, says the resolution amounts to bolstering an unprofitable energy source that creates toxic waste. Instead, he says, Illinois should have passed a pair of bills that would have strengthened the state’s Renewable Portfolio Standard, which mandates a certain percentage of renewable energy be used in supplying the state’s electricity demand.

“If nuclear energy is supposed to suddenly be low carbon and low emissions, shouldn’t wind and solar be rewarded for their unique attributes of not creating radioactive waste or nuclear proliferation around the world?” Kraft said. “To single out nuclear as some sort of magic wand or fairy godmother for solving the climate crisis is totally a distortion of what nuclear actually is.”

According to the U.S. Department of Energy, Illinois has the largest electrical generating capacity of any state and the largest amount of power generated from nuclear plants. Illinois produces more energy than it needs and exports about 25 percent of its energy to other states, with its six nuclear plants supplying more than 12 percent of the nation’s electricity.

In 2013, Illinois’ six nuclear power plants produced 48.9 percent of the state’s electricity, while coal plants produced 41.2 percent. Renewable sources accounted for less than 8 percent of Illinois’ electricity, with wind accounting for most of the renewable contribution.

Although natural gas only produced 2 percent of Illinois’ electricity in 2013, natural gas is currently cheap and plentiful because of the horizontal hydraulic fracturing boom taking place in other states. “Fracking,” as it’s commonly known, is a controversial extraction method used to free up trapped pockets of oil and natural gas. If coal plants do shut down as a result of the new EPA rules, the use of cheap natural gas to generate power could increase.

The Dallman decision

Some of Illinois’ existing coal plants may be candidates for full or partial conversion to natural gas, including Springfield City Water, Light and Power’s three older Dallman generation units.

CWLP has four main coal-burning generation units, the newest of which is the Dallman 4 unit, which started operation in 2009. The utility also has three oil and gas peaking turbines to supplement the power from the four Dallman units when electricity demand is high. CWLP commissioned a study in 2013 of the utility’s three older coal-fired Dallman units, exploring options to keep the units in compliance as environmental regulations tighten.

CWLP chief utility engineer Eric Hobbie told Illinois Times in May that the utility has continually upgraded pollution controls on its boilers since they were built in the 1960s and 1970s. However, the study outlined substantial costs and potential pitfalls associated with further upgrading the pollution equipment on the older Dallman units. CWLP could decommission the units, continue upgrading the pollution control equipment, or retrofit the units to burn natural gas.

Hobbie said in May that a decision on the older Dallman units has not been made, but it seems likely CWLP will retrofit them to burn natural gas during certain periods. The units are dirtiest during startup and shutdown, so burning natural gas during those times would significantly decrease emissions, even if coal remains the primary fuel used during normal operation. Hobbie defended the three older boilers, which are in compliance with currently applicable environmental regulations, saying they isolate CWLP customers from rising energy prices during times of high demand. Because CWLP can mostly meet the demand with the four Dallman units and the smaller peaker turbines, the utility doesn’t have to purchase more expensive power from other producers and pass that cost on to customers. It’s unlikely that CWLP would convert the older Dallman units to burn natural gas exclusively, Hobbie pointed out, because natural gas is a common residential heating fuel, which means homes get priority for delivery over power plants during periods of high demand. That also means the price of natural gas can be volatile, which makes running a power plant on natural gas risky.

Hobbie estimated the potential cost to retrofit the three older units to burn natural gas at between $10 million and $15 million total, although he points out that CWLP doesn’t have that much money saved because the utility’s profit has gone toward buoying up the City of Springfield’s budget for several years. About $2 million from CWLP’s electricity sales went into the city budget for the current fiscal year, Hobbie said.

Challenging times

Exelon’s decision to wait until the middle of 2015 to make its decision on the Clinton nuclear power plant may be based on the timeline for approval of the EPA’s proposed emissions rules. The EPA is currently taking public comment on the rules, and they are due to be finalized by the beginning of June 2015. Because the EPA rules don’t prescribe specific limits on carbon dioxide but rely instead on the states to develop their own compliance plans, it’s unclear how any given coal plant would be affected, or whether there will be incentives for power suppliers to switch to renewable energy sources.

Depending on what each state does to meet its respective carbon dioxide reduction goal, the U.S. could see dramatic shifts in the relative importance of coal, nuclear, natural gas and renewables. If states opt to protect coal plants by trading carbon credits or other indirect means of reducing carbon dioxide, coal could remain a central part of the nation’s energy mix. Likewise, technological advances could make carbon capture and storage economically viable, which would provide coal power with a means of compliance. On the other hand, if states prioritize adding more renewable energy capacity to meet the carbon dioxide reduction goals, the use of coal power could fade away. Those effects won’t be known until at least 2015, however, because state compliance plans won’t be finished until the EPA rules are finalized.

In the meantime, it’s almost certain that the coal industry and other groups will challenge the EPA’s rules in court. Legal wrangling over the rules could take years, which could push back the implementation of carbon dioxidereducing changes. EPA has momentum on its side, however. In April, the U.S. Supreme Court ruled that the agency does have the authority to regulate air pollution that crosses state borders. A separate Supreme Court decision in 2009 held that greenhouse gases are pollutants that can be regulated under the federal Clean Air Act, which provided the EPA with solid footing for its newly proposed rules.

Most experts are reluctant to speculate on the effects of the new rules and whether the U.S. will see skyrocketing energy prices and rolling blackouts as a result of losing base load coal plants. Power producers like CWLP and Exelon are waiting to see what happens with the new rules before they commit to spending money on power plants that may have no future.

One thing seems clear, however: renewable energy has a long way to come in the U.S. In total, hydroelectric, biofuel, geothermal, solar and wind energy provided just 12.9 percent of electricity in the U.S. during 2013. Hydroelectric made up more than half of the contribution from renewables at 51 percent, with wind following at 32 percent. Solar power – the supposed holy grail of renewable energy – made up a paltry 1.8 percent of the electricity produced by renewables. To put the renewable energy contribution in perspective, coal-fired power plants produced almost 1.6 million gigawatt hours of electricity in the U.S. during 2013, compared to only a half million gigawatt hours from renewables. To replace coal, the renewable energy sector would have to triple its output and then some.

The old guard in the energy world – coal, natural gas and nuclear plant operators – says renewables all suffer from reliability problems. They point out that the wind doesn’t always blow and the sun doesn’t always shine, meaning the U.S. needs a base load power supply that can be called up on demand. Environmentalists counter that the sun is always shining somewhere and the wind is always blowing somewhere. With enough solar cells and wind farms, renewables could cover the base load demand, they say.

Unfortunately, all of these efforts may end up being too little too late. The Intergovernmental Panel on Climate Change says the globe has already warmed by 0.85 degrees Celsius (1.53 degrees Fahrenheit) since 1880, and the rate of change is projected to increase rapidly during the coming century. The largest increase scientists believe the world can tolerate without major problems is two degrees Celsius (3.6 degrees Fahrenheit). An increase of four degrees Celsius (7.2 degrees Fahrenheit) would be catastrophic, IPCC says, bringing mass extinction of plants and animals, the collapse of ecosystems around the world, drought, famine and global conflict over resources.

Even if the EPA rules are implemented quickly and fully, other heavy polluting nations around the world will have to follow suit in order for the cumulative decrease in new greenhouse gas to be significant.

David Kraft at the anti-nuclear group NEIS holds both an optimistic and pessimistic outlook on the problem. He sees an opening for homeowners to create a decentralized network of renewable power sources like rooftop solar panels and personal windmills.

“When you start getting a distributed system in place, where the system is literally on your roof, you don’t care if the power wires go down,” Kraft said. “The renewable community is ready to do this.”

Still, Kraft says, there is no political will among governments and energy companies to significantly curb carbon dioxide emissions. He says his group gave its first presentation on global warming and climate change in 1988, and little has changed since then.

“Quite frankly, we’ve wasted 26 years,” Kraft said. “In 26 years, we could have built a hell of a lot of windmills and put up a lot of solar panels. We just didn’t do it, and the reason is that the only thing that matters to corporate entities worldwide is whether money can be made on solving the climate crisis. The self-interest just is not there to save the ecosystem unless there’s a price tag on it.”

Contact Patrick Yeagle at pyeagle@illinoistimes.com.