Clean Power Plan puts state’s energy future in flux; Utilities see higher energy bills in the future
If South Dakota can produce enough wind and solar power to sell across its borders, it could become the major clean energy player early backers of wind energy predicted.
But nothing in energy is ever simple or certain.
South Dakota’s Congressional delegation has pledged to dismantle the federal government’s new Clean Power Plan, designed to cut carbon emissions by 32 percent.
Sixteen states have promised to challenge the plan in court, and the next president could knock it out of commission.
Wind and solar power alone can’t sustain a power grid, utilities say, as they can’t provide constant power. Quick-starting natural gas plants and hybrid plants are needed during down times, and there aren’t enough of them in the state.
Utilities in South Dakota and around the country have been adding renewables in recent years, but companies and co-ops say the moving pieces can be difficult to track and plan for, given the industry’s complexity and the expectation of guaranteed reliability from the nation’s consumers.
“Basin’s been asking for a consistent national energy policy for years,” said Curt Pearson, a spokesman for Basin Electric Power Cooperative. “The utility industry has been kind of like a pinball in a pinball machine.”
Regulations, subsidies push industry
The Environmental Protection Agency’s plan to cut emissions is the latest to alter the energy landscape since a 2007 Supreme Court’s ruling that held the agency had an obligation to regulate greenhouse gas emissions.
Regulatory uncertainty and the economic downturn played a role in the decision to shelve plans for the Big Stone II power plant near Milbank, according to Otter Tail Power spokeswoman Cris Oehler. The $1.6 billion proposal would have placed another 600-megawatt coal-fired plant near the existing facility, which remains South Dakota’s only coal plant.
Soon after Otter Tail pulled out in 2009, an expensive set of regulations came. Big Stone’s owners invested $384 million to upgrade the facility and cut down on emissions of mercury, sulfur dioxide, commonly associated with acid raid, and nitrogen oxide, which feeds into smog.
Those changes will come online near the end of the year and have extended the plant’s life expectancy by 25 years.
“We’re doing that work to meet other EPA regulations,” Oehler said.
While the EPA tightened rules for existing power plants, state governments set emissions targets and the federal government offered tax incentives to wind and solar projects.
In Minnesota, for example, the state set a renewable energy standard requiring 25 percent of a utility’s energy production to come from sources like wind, hydropower and solar power.
Hurdles to implementation
The EPA’s energy plan announced last week met stiff and immediate resistance from Republicans, utilities and business groups.
A 32 percent national reduction could close more than 100 coal-fired power plants, opponents said. Coal supplies about a third of the nation’s energy.
The National Rural Electric Cooperative Association released a map last week detailing the plants partially or fully shut down under the Clean Power Plan: 171 would reduce capacity, 111 would close completely. In total, the result would be a loss of 85,928.5 megawatts of electricity.
Senators John Thune and Mike Rounds and Rep. Kristi Noem of South Dakota all have pledged to stop the plan.
Rounds and Thune both issued releases last week saying the plan could shut down Big Stone, a fear based on calculations in the original proposal.
But Oehler said the plant isn’t in immediate danger. The rule offers states two ways to hit emissions targets: Through a reduction in rate-based emissions – carbon per kilowatt hour – or a reduction in total carbon mass. Should the state choose a target based on carbon mass, it would only need to reduce emissions by 11 percent by 2030. Should the state choose a rate-based target, the goals would be considerably more difficult.
South Dakota’s targets were pushed downward based on its abundant hydroelectric power, and because of the reductions achieved through Deer Creek Station natural gas plant near Brookings, which was only operational for about a month in 2012.
The multiple pathways approach was designed to allow flexibility, said Monica Lee, the EPA’s deputy press secretary.
“If mass works for them, that’s the beauty of it. States can figure out the most efficient way to get there,” Lee said.
Even so, there are challenges for utilities, and ratepayers could feel the squeeze. Mixing and matching doesn’t happen without a lot of work, coordination and investment.
Like Otter Tail, Basin relies on a multi-state network of coal, natural gas and wind to generate power for its users, who pay their electric cooperatives. Coal plants can lock in costs for fuel for as long as 50 years. Natural gas prices fluctuate, and wind and solar power are intermittent. If coal is replaced by a combination of those three, the cost of bringing more power sources online and the volatile price of gas will be passed along to users.
“When wholesale power goes up, that’s the biggest cost to the consumer,” Pearson said.
Plants like Basin Electric’s 350-megawatt Deer Creek Station do “play a key role in Basin’s future under the Clean Power Plan,” but it’s not designed to operate as a baseload power generator, Pearson said.
The plant isn’t designed to run full-time, as a baseload plant would, but it can adjust to meet power needs with more efficiency and mobility. Even so, it’s not as fast to power on as a “peaker” station, such as the two 95-megawatt generators near Groton, which can be running within 10 minutes to meet high demand and balance out lulls in wind wattage.
Every kind of power generation suits a different purpose within the power grid, said Greg Opdahl, Basin’s superintendent of South Dakota operations, and the systems must align if carbon targets are to be met.
“You can’t just cycle down the coal plants,” Opdahl said. “They weren’t designed for it. It would be like trying to drag race an 18-wheeler.”
Basin is struggling to find a way to achieve the Clean Power Plan’s goals, Pearson said, and utilities nationwide have similar concerns.
“People are still spinning trying to find out what this means,” Oehler said.
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