Environmental Group Digs in on Cost of Wyoming Coal Power

 

 

By Heather Richards

July 15, 2018 - The coal-critical environmental group, Sierra Club, is pressing Wyoming’s largest power provider to release its math.

The Sierra Club’s Beyond Coal Campaign recently commissioned a study that may show PacifiCorp’s coal fleet is more expensive than alternative sources of power like renewables. The study was released June 27, days before PacifiCorp presented a more comprehensive look at its 22 coal units to the Public Utility Commission of Oregon.

Regulators had instructed the company to do the cost comparison, given the changing economics of power, but the results are not open to the public.

Sierra Club filed a challenge Monday in Oregon seeking a release of the utility’s study, which the group believes will prove its own argument that coal is no longer the go-to source for cheap electric power.

“There is no gain in years of work ending with information provided to only a select few, who after years of involvement already have a pretty good idea of what the results would entail anyway,” the group argued in the filing. “Such secrecy flies in the face of transparency in decision-making and open government and is not in public interest.”

Wyoming is the largest coal producer in the country. Its mines provide about 40 percent of the nation’s coal for electricity. It’s also a significant coal burner of coal, not only through PacifiCorp.

The debate over coal power is significant in Wyoming. As West Coast states like Oregon divest from PacifiCorp’s coal-fired electricity, Wyoming customers may be in a tough position, carrying a greater burden of cost for the company’s coal fleet as other areas defect to cheaper sources of power. But Wyoming is also loyal to its coal industry, one that can ill afford to lose customers, particularly ones that operate so close to home.

 

PacifiCorp has downplayed the Sierra Club study as too narrowly focused, and argued for privacy on the cost of its coal plants.

David Eskelsen, a spokesman for PacifiCorp’s subsidiary Rocky Mountain Power, said the company’s reticence had nothing to do with coal. The firm is protecting sensitive information that can matter a great deal in the competitive wholesale power market, Eskelsen said.

“We would do the same for any power plant regardless of the resource type,” he said. Electricity is a commodity, sold on an open market, he said.

“Information about the price and availability of individual generating units is economically sensitive,” he said. “If … somebody who is trading in energy has inside information on ... unit specific information, they can use that information potentially to the detriment of our customers.”

In a redacted copy of a presentation to Oregon regulators, the company criticized the Sierra Club’s study given its “simplistic nature.” The study could be useful, but doesn’t wade into the complexities of “least costs, least risk” across PacifiCorp’s entire portfolio, the company wrote.

The presentation noted that the closure of any one coal plant likely wouldn’t impact the reliability of their electricity system, but it’s complicated. However, the more units retired, naturally, the more complicated balancing power becomes, according to the company.

At Jim Bridger, for example, the western Wyoming plant feeds electricity into two separate balancing areas – regional authorities that keep the dance between electricity availability and electricity demand in harmony. Bridger is also one of the plants in a transmission-constrained area of Wyoming –- meaning there are simply not enough high-power lines to move about 1,000 megawatts of power available, elevating the importance of the exiting power in those contained areas.

“Certain plants, particularly coal plants because they serve baseload power, are critical to maintaining balance on the transmission system so that customers will be served … and the transmission system will operate safely,” said Eskelsen of Rocky Mountain Power.

The Bridger plant is singled out in the Sierra Club as being one of the least economic compared to alternatives. The cost for burning coal to generate each megawatt of electricity is higher than wind, solar or electricity bought on the open market.

Bill Russell, chairman of the Wyoming Public Service Commission, shrugged off Sierra Club’s finding that coal may not be as competitive as other resources. That’s known and understood by most in the industry.

Russell is focused on what cheap alternatives like wind and solar will do to a key tenet of electricity systems: reliability.

“I’m concerned about the stability of the grid and how well it’s going to stand up when it’s stressed,” he said. “My concern is that the breaking point is getting closer and closer to reality.”

As more renewables come on, fueled by federal subsidies that drive the cost of wind and solar to nearly zero, other plants are forced out. This is particularly true in wholesale markets, which many in Wyoming would like to join. When megawatts are sold hourly, the cheapest sources are bought first.

Coal does not do well in those markets, Russell said.

“That’s why I say that the big spinners are not being properly valued,” he said. “Those markets don’t take the value of being able to run 24-7, and provide the frequency and stability that big spinners (offer).”

The Bridger plant burns coal from the nearby Jim Bridger and Bridger Underground coal mines, which PacifiCorp has partial ownership of, and the Black Butte mine, managed by the Kiewit Mining Group. The utilization of nearby resources is not unusual in Wyoming, where the proximity of cheap coal is considered a selling point in keeping electricity cheap and keeping coal plants online. The plant’s four coal units – which house large fireballs fed by coal to produce steam — are not slated for retirement until the late 2030s.

But the issue isn’t just electricity costs for Wyoming. State lawmakers discussed this new challenge for coal-power in the state when PacifiCorp presented a looming challenge at a May legislative meeting. As customers in Oregon — and potentially Washington and California – buy out of their share of PacifiCorp’s coal power, the cost of keeping those plants may fall on a smaller segment of customers, including Wyomingites, the company told lawmakers.

“What is Wyoming’s view of coal risk, (of) keeping coal plants viable and operational?” asked Jeff Larsen, senior vice president of strategic business planning for Rocky Mountain Power. “I think that’s an issue that many [state] regulators are struggling with because they have an obligation to look at least cost.”

It’s a sensitive issue for the state given its loyalty to coal, which provides more than $200 million in severance taxes alone on a given year and employs nearly 6,000 miners with an average salary of more than $80,000 a year, according to the Wyoming Mining Association.

But the PacifiCorp challenge for coal is also another reminder of the long-term fragility of the coal sector as plants close. Wyoming is the third-largest consumer of Wyoming coal, burning nearly 38 million tons last year.

“That’s significant when you look at our largest user in the country is Texas, with about 56 million,” said Travis Deti, executive director of the Wyoming Mining Association.

PacifiCorp’s Dave Johnston plant outside Glenrock burns coal from the Cordero Rojo mine, which may lose a number of customers in the next few years as some of its coal plant buyers in other states plan to shutter. The mining company Cloud Peak Energy has said it can weather closures by finding other buyers, but the importance of each ton sold is more critical than ever as the customer base shrinks. Cordero Rojo’s production has fallen from nearly 23 million tons in 2015 to a little over 16 million tons last year.

Deti was not familiar with the details of the Sierra Club study, work he was wary of because it was commissioned by the environmental group. The economics of coal aren’t fair anyway, he said. Renewables have surged ahead via help from federal subsidies.

But though the West Coast states’ exit from coal is concerning, there is a larger issue in the electricity system in coal’s favor, he said, echoing the company.

 

“I bring it back to a reliability question,” Deti said. “Coal is reliable and renewables are not. That’s just a fact.” 

 

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