Analysis: Drake: Will everyone lose?

Global climate change may impact the Martin Drake Power Plant, but changing supply conditions might prolong its life.

Global climate change may impact the Martin Drake Power Plant, but changing supply conditions might prolong its life.

The ongoing debate over the downtown Martin Drake Power Plant has been almost exclusively locally focused. Proponents and opponents alike have examined local costs, local health impacts and Drake’s impact on the local economy.

But Colorado Springs isn’t an island, and it may be that a newly unfolding national energy narrative will make the positions of both sides moot.

The discussion as it now stands:

Downtown advocates would like to see the unsightly plant shuttered and torn down, encouraging downtown development as well as allowing the site and the dismal area surrounding it to be redeveloped.

Environmentalists agree, claiming the social, environmental and health consequences of operating the plant far outweigh the transitory economic benefits. Emissions of sulfur dioxide, nitrogen oxides and mercury have proven effects on public health.

Releasing 1.5 million tons of carbon dioxide annually contributes to global climate change.

Drake proponents argue that such concerns are overblown or irrelevant. They note the facility complies with all existing state and federal emission standards, Drake’s three generators are Colorado Springs Utilities’ base load providers, and the coal-fired plant produces power for less than half the cost of CSU’s gas-fired Front Range plant.

And, they emphasize, the recent fire didn’t occur because of the facility’s age. Massive industrial facilities of any kind can experience such accidents, unrelated to age or function. The economic benefits of tearing the plant down are speculative, while the benefits of continued operation are immediate and quantifiable.

And how, they ask, can the city replace Drake’s 260-megawatt base load capacity? Renewables such as wind and solar are expensive and intermittent, of little use when the wind doesn’t blow and the sun doesn’t shine. Buying power on the grid is expensive and uncertain — power may not be available when you need it most. Commercial and industrial customers are sensitive to both rates and system reliability, and CSU scores high in both categories. Building a new gas-fired plant would cost at least $1 million per megawatt — so who’s going to come up with the $260 million to pay for it? That would be you — the ratepayers.

The decision will ultimately be made by City Council, in its capacity as the Utilities Board. But unless our elected officials look beyond the city, we may be in a world of hurt.

Risky Business

Last week brought the release of “Risky Business: The Economic Risks of Climate Change in the United States,” an exhaustive report on the national economic impacts of global warming. It’s the product of a bipartisan committee headed by former New York Mayor Michael Bloomberg, former George W. Bush cabinet member Henry Paulson, and retired hedge funder Tom Steyer. There’s some nonpartisan cred there, with a Republican billionaire, a Democratic billionaire, and Bush’s treasury secretary.

The report mentioned the economic impact of forest fires and reduced water availability, but the authors concentrated on the most obvious consequence: higher temperatures.

In writing about revolutionary Cuba in the 1960s, French philosopher/activist Jean-Paul Sartre called air conditioning “the cold of the rich,” implying that only fat, soft, reactionary capitalists needed artificial cooling.

Clearly, Sartre never spent a summer in Dallas, Phoenix or Kansas City. Had he done so, he would have realized that air conditioning is not a luxury in much of the Midwest and Southwest, but an absolute necessity.

Using conservative numbers, the report suggests that the region will get hotter in the next two decades by several degrees. In part because of the “heat island” effect, regional cities will see dramatic increases in extremely hot weather.

“By the middle of this century, the average American will likely see 27 to 50 days over 95°F each year,” the report predicts, “two to more than three times the average annual number of 95°F days we’ve seen over the past 30 years…these national averages mask regional extremes, especially in the Southwest, Southeast, and upper Midwest, which will likely see several months of 95°F days each year.”

The report says regional electrical demand will increase proportionately, with interesting consequences.

“Most of this increase will occur during times of the day when electricity consumption is already high,” the report states. “Meeting higher peak demand will likely require the construction of up to 95 GW of additional power generation capacity over the next five to 25 years, the rough equivalent of 200 average-size coal or natural gas power plants. Constructing these new power-generation facilities will, in turn, raise residential and commercial energy prices. Our research concludes that climate-driven changes in heating and cooling will likely increase annual residential and commercial energy costs nationally by $474 million to $12 billion over the next 5-25 years and $8.5 billion to $30 billion by the middle of the century.”

What do these numbers mean for the participants in our local debate? The answer will dismay both sides.

The most prudent course may require keeping Drake in operation indefinitely, while building additional gas-fired capacity in the near future.

Taking off the blinders

“There’s a disconnect [about electric generation],” said Dan Simmons, an energy expert at the Institute for Energy Research in Washington, D.C., a right-leaning think tank. “Everyone has an idealized version of the world. We want energy from the cleanest sources at the lowest prices, but it doesn’t necessarily work that way. The way you have cheap electric power is from those unsightly old coal plants — maybe not the most attractive but certainly the most effective.”

“It will be exceedingly difficult to satisfy that [predicted] demand without coal,” Simmons continued, pointing out that 60 GW of coal capacity has been shuttered in recent years. Moreover, building new coal capacity has become virtually impossible.

For example, Sunflower Electric Power has sought since 2001 to build a $2.8 billion, 895-megawatt, coal-fired plant in southwest Kansas. Electricity from the nonprofit wholesaler that would own the facility would supply electricity to 44 co-operatives in Colorado, Nebraska, New Mexico and Wyoming. A construction permit was issued in 2010, but legal challenges have stalled construction.

Such obstacles mean that utilities providers are essentially forced to choose natural gas for new generators, but gas has problems as well.

Pipelines deliver natural gas to power plants in real time, while coal plants can store fuel on site. In times of extraordinary regional demand, gas delivery capacity can be inadequate.

During the “polar vortex” of 2013-2014, gas demand in the Northeast increased so sharply that some gas-fired power plants shut down because of infrastructure issues. Additional power came from restarting and/or increasing output from coal plants, many of which will soon be permanently closed.

A classic supply/demand gap, one created both by a constrained regulatory environment and unrealistic consumer expectations, may emerge in years to come. Buying power off the grid, as CSU is doing this summer during Drake’s shutdown, may become difficult, even impossible.

Taking off the rose-colored glasses

As far as Colorado Springs Utilities is concerned, everything’s up-to-date in Colorado Springs.

“Current power generation portfolio is 49 percent natural gas, 40 percent coal, 11 percent hydro and other renewables,” said CSU spokesman Dave Grossman. “This diverse portfolio provides flexibility to adjust to fluctuating market prices, regulatory pressures and environmental concerns.”

And climate change?

“It’s too early to determine our credit impact and economic risk around climate change,” Grossman wrote in an email.

But CSU has a vision, if not a coherent position.

“Also part of the Energy Vision,” Grossman continued, “[is the] goal of reducing average customer electric demand by 10 percent by 2020.”

But CSU aims to please.

“What do our customers value most?” Grossman wrote. “Low rates? Reliable service? Cleaner air? Climate change concerns? We will do what the community wants.”

In combination with other measures, CSU hopes to “delay or possibly avoid the need to build a new fossil fuel plant in the future.”

 Brave words, but it’s not too early to plan for the future. If the Risky Business forecasts are accurate, there may well be a rush by providers to build new plants within a few years. In that case, new capacity construction costs might dramatically increase.

There’s more bad news.

The price of natural gas in much of Asia and Europe is substantially higher than in the United States. A bill that would open the door for greatly increased natural gas exports passed the House last week with bipartisan support. If, as seems likely, it becomes law, it will create jobs, improve our trade balance and raise the price of natural gas. That will in turn raise the price of gas-generated electricity.

So it’s up to the City Council/Utilities Board. If the group decides to keep Drake and build new capacity, that might guarantee the city’s future energy security, while infuriating many of its constituents.

But regardless of their action, one result seems certain.

“One of the things that we will see [in any future scenario],” said Dan Simmons, “is higher electricity rates.” nCSBJ

6 Responses to Analysis: Drake: Will everyone lose?

  1. Thank you for the outstanding analysis, John. It’s a reminder of just how complex this issue and why we don’t want to rush into making a decision about the future of Drake.

    Deborah Muehleisen
    July 7, 2014 at 1:10 pm

  2. Some Irrational Perspective:

    1.5 Tons of CO2 per year.

    A cubic foot of CO2 weighs 0.1144 pounds per cubic foot.

    That:

    Is a lot of cubic feet.

    Richard D. Wehner
    July 7, 2014 at 1:41 pm

  3. Correction:

    1.5 Million Tons !

    Richard D. Wehner
    July 7, 2014 at 1:43 pm

  4. A few points to note:
    1. integrating 25% renewals is not a major issue so this could give us about 140 mega watt
    2. Investing into DSM products could help to save about 20% of the power need
    3. you are right about gas that will roughly double with export terminals being put into place in a few years

    so overall in the long run if you want to keep costs low the way to go is energy efficiency and investment into renewable energy where you do not have any fuel costs..

    peter miller
    July 7, 2014 at 4:14 pm

  5. “Renewables such as wind and solar are expensive and intermittent, of little use when the wind doesn’t blow and the sun doesn’t shine.” This line is blatantly false and untrue and readers of this publication do not have to tolerate lies like this just because they are in print. Renewable energy continues to be less expensive in the long term because they are in fact RENEWABLE! If CSU burns 55 gallons of coal or natural gas that fuel is gone never to return. A solar panel continues to produce energy over 20 years. Also, solar does produce power on cloudy days and there is no such thing as a day without sunshine. Wind comes close to your intermittent claim but once again a wind turbine produces energy for over a decade. No fossil fuel can make this claim. The CSBJ would do well to stop printing lies.

    Steven Shepard
    July 7, 2014 at 5:22 pm

  6. “Renewables such as wind and solar are expensive and intermittent”
    What is blatantly untrue about that statement? By your own admission the wind does not blow 24 hours a day. I have also noted that the sun doesn’t shine 24 hours a day here in Colorado Springs, in fact it is above the horizon only about 9 hours in January and about 15 hours a day in July.

    So we come back to the question, what do we do at night when the wind isn’t blowing? Answer – we buy the electricity off of the grid from a coal powered plant somewhere at slightly more than we are now paying, or we buy it off the grid from a natural gas plant at 3x more than we are now paying. You’re awful free with my money.

    Also, I hope you realize that if we were to replace the electricity currently supplied by the Drake plant with a solar field, using the industry standard of 10 watts per Sq Ft of panel, for 260 megawatts it would require a field of 26 million Sq Ft, or about 600 acres. That’s slightly less than the size of Palmer Park.

    And of course it still would not produce a single watt of energy between the hours of approx. 8 pm and 7 am.

    As of today, with today’s technology, solar panels do not have a return on investment ( that’s not to say that in the future, with new /improved technology that won’t change ). Go back and read the article that was published right here in the CSBJ about the solar panels that were installed at the Air Force Academy. The Academy says they are saving them a million dollars a year. They also say the panels are expected to last 20 years. The project cost 20 million dollars. So the day the panels have paid themselves off, they will have to be replaced, in other words, they didn’t save even a dime.

    Chris Lukens
    July 9, 2014 at 12:29 am