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Leaving the Coal Paradigm Behind

September 20, 2012 By Will Nissen, Fellow

One of the country’s largest sellers of wholesale power, Virginia-based Dominion Resources, is selling off two coal-fired power plants representing almost 2,700 MW of electricity generation capacity. That’s significantly more than Minnesota’s largest coal-fired plant, the 2,400 MW Sherburne County station in Becker, MN.

This comes after numerous coal plants have announced or proceeded with retirement plans, including Rochester Public Utilities’ coal-fired unit, and even coal mine closings in the eastern U.S.

These events in the coal industry underscore a paradigm shift in how we generate our electricity. The giant coal plants of yesteryear are obsolete and will be replaced with renewable generation sources complemented by responsive natural gas power plants. This new paradigm is a stark contrast from what has been the conceptual and economic norm in the electricity generation industry.

For decades, coal-fired power plants (as well as nuclear plants) were seen as “baseload” powerhouses; churning out the minimum amount of electricity we needed 24 hours a day, seven days a week. These plants operated continually using huge amounts of coal and rarely shut down. The conception was (correctly) that if these plants shut down the lights would go off, we needed them if we wanted to live in a world powered by electricity.

These power plants weren’t cheap; they cost hundreds of millions of dollars to build and needed a steady influx of fuel to stay on. But in the last half of the 20th century this wasn’t that big of an issue. Energy planners utilized a steadily increasing rate of demand for electricity to finance huge and costly coal plants over 20 or 30 years. If you know roughly how many more ratepayers you’ll have every year over several decades, you can plan out a fairly orderly payback schedule to finance plant construction.

Both of these frameworks are being shaken up. Large, centralized coal plants are no longer the only way to provide our continual and peak electricity needs. Natural gas is increasingly becoming a cheaper electricity generation option throughout much of the country. Just last April the level of natural gas-fired electricity equaled that of coal-fired electricity in the U.S. for the first time ever.

In addition, renewables coming online throughout the country are eating into coal’s share of the electricity generation pie. On the west coast, much of this is through a booming solar industry, and here in the Midwest we see it through the rise of wind energy. The top four states in the U.S. for percentage of electricity generated by wind in 2011 were South Dakota (22.3%), Iowa (18.8%), North Dakota (14.7%) and Minnesota (12.7%), according to the U.S. Energy Information Administration.

One argument against wind and solar energy, however, points to its intermittency: the wind doesn’t always blow and the sun doesn’t always shine. This is true on a small-scale, project-based level. My rooftop solar panels or a farmer’s wind turbines lose generation capabilities if the sun goes behind a cloud or the wind dies down.

But on a regional level, a system of wind farms or solar arrays (or both) can overcome this obstacle. While the wind may not be blowing in southwest Minnesota, it may be blowing elsewhere in central South Dakota or northern Iowa. If a cloud passes over my solar panels the sun may be shining in the next town, county or state. As we transition our electricity grid into a regionally connected entity, and as our wind and solar generation capacities increase, wind and solar can provide more and more continual electricity as a system within our electricity grid.

Furthermore, flexible natural gas plants perfectly complement fluctuations in renewable electricity supply. Whereas coal plants can take hours or days to increase and decrease production, natural gas plants can ramp up and down quickly to compensate for sudden changes in supply or demand. As transmission operators become more adept at predicting those changes (which they are), the combination of renewables and natural gas can effectively supply more and more steady, continual electricity to the grid.

The days of financing expensive coal plants with steadily increasing levels of demand are also over. The recession significantly curbed growth in electricity consumption, conservation efforts may keep consumption growth at bay as the economy rebounds, and energy efficiency efforts have made our appliances, buildings and electronic devices less electricity-dependent. Numerous coal plant plans have been ditched and existing coal plants have been mothballed due to lack of electricity demand.

We no longer need coal-fired power plants to keep the lights on the way we did in the past. Policymakers should facilitate this paradigm shift in our electricity generation infrastructure by extending the wind production tax credit and improving Minnesota’s net metering laws to encourage growth in our state’s solar industry.

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