On January 18, Xcel Energy filed a motion with the Colorado Public Utilites Commission to reject a merchant coal power plant bid for 2014. Xcel has been under intense pressure from the Colorado Commission to sign a contract with the project. The Company also filed a motion for extraordinary protection for critical parts of the bid report, which means we can’t see the underlying bid info or economic analysis. While this is unfortunate but expected, the parts of the motion we can see make very interesting reading.
This docket is a continuation of the competitive bidding process from the company’s 2003 resource plan and the settlement agreement.
Xcel’s main ground to reject this bid is because it is “not economic.” Unfortunately, we do not have access to the specific numbers, so we should not use this to say that coal plants are never economic. I simply want to highlight the fact that this coal plant, according to Xcel, is uneconomic. If the true cost of externalities of pollution and CO2 emissions were taken into account, the case for any coal plant’s economics becomes much worse.
Some arguments Xcel uses:
- Electricity demand has not kept up with the demand they assumed in the 2003 LCP. (Most likely due to increasing prices of fossil-fuel generated power, and a heightened awareness of the problems associated with global warming, both of which spur efforts for conservation. It is also worth pointing out that our personal efforts to conserve electricity have contributed to the drop in demand, and that drop in demand makes this coal plant less likely to be built. In this way, everyone can make a difference when it comes to fighting global warming.)
- Xcel has successfully negotiated with bidders to provide natural gas fired power to lower their prices (p.5), while the coal bidders want to modify the terms of the contracts in a way that may shift environmental risks to Xcel (p.6) (which would then try to shift the environmental risks to ratepayers.).
- Coal is very capital intensive, so in order to make coal economically effective, the plant must be running as near constantly as possible. (The inflexibility of coal and the need to keep the plants running all the time make coal as difficult to integrate into a system faced with variable demand. In my mind, there is a certain irony in this, because the main argument against wind power is similar: the power supply is not well matched to demand.)
- (p.27) “Far and away the most influential factor contributing to the reduced value of coal bid is the fact that the bidders increased their bid prices from what they initially offered in May 2005.” (These increased bids are probably due to higher estimated construction costs, which coal plants are particularly vulnerable to due to the large amount of steel and concrete used in construction, as well as much higher prices for coal. One of the best arguments for solar and wind generation is the fact that they are immune to escalating fuel costs.)
- While Coal plants require years to construct, Demand Side Management (DSM aka Energy Efficiency), gas and wind can all be on-line in less than 16 months, making it much easier to match supply with demand.
- (p.27) The PUC told Xcel to use their 2006 gas forecast prices in this analysis, at the same time as they were told to use their 2005 coal price forecasts. Even though this artificial imbalance skews the results in favor of coal, it is not sufficient to make the coal bids seem economic.
- There are substantial costs of added transmission to incorporate these coal bids. (pp.47-50) I point this out because wind naysayers often point to the transmission costs of new wind facilities, without taking into account the transmission costs for coal. I infer from the text that this bid may be a mine mouth coal plant in Wyoming, which would require upgrades along transmission lines from Wyoming to Colorado. Considering the Wyoming/Colorado border is an area with excellent wind resource, many sites for extensive wind generation would require the upgrades to the same or shorter sections of transmission lines.
I have uploaded Xcel’s filing here. It will eventually be avialable on the Colorado PUC’s website, under Docket No. 05A-543E.
I’m happy that environmental advocates have this opportunity to build a more constructive relationship with Xcel by joining them in this.
I also believe that these same arguments that Xcel is using here might be effectively used against some of the 150-odd other coal plants currently being planned in the US by utilites which are less progressive than Xcel (and there are many… TXU in Texas and many Rural Electric Co-ops come to mind.)