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In Push for Coal, Utilities Ignore Gas-Fired Plants

Consumers, Wolverine could substitute cleaner, dormant generators

August 11, 2009 | By Glenn Puit
Great Lakes Bulletin News Service

  The United States has a large fleet of natural gas-fired power plants, and many of them are operating far below their capacity.
As two utilities push for state permission to build two new, coal-fired power plants in Michigan, a nationally known energy expert says that natural gas—and not coal—is the key to helping the country, including Michigan, move to a clean-energy, fossil-fuel-free economy.

Joseph Romm a senior fellow at the Center for American Progress, is one of the nation's most influential policymakers when it comes to energy issues, according to U.S. News & World Report.

In an interview with the Great Lakes Bulletin News Service last week, Mr. Romm said that the nation has a large fleet of natural gas-fired power plants that are running far below their capacity.

Mr. Romm's assertion strongly applies in Michigan, according to a report sent earlier this summer to several Michigan agencies that will decide whether the two proposed coal plants can be built. The report lists eight largely idle natural gas plants in Michigan (Please see chart below) whose combined unused generating capacity far exceeds that of the two proposed new coal plants.

Nameplate 2008 Capacity
State Plant Capacity Factor
MI Ada Cogeneration LP 33 71.20%
MI Covert Generating Project 1,176 7.90%
MI Dearborn Industrial Generation 760 17.20%
MI Kinder Morgan Power Jackson Facility 570 9.20%
MI Michigan Power LP 154 66.20%
MI Midland Cogeneration Venture 1,849 33.80%
MI University of Michigan 45 40.60%
MI Zeeland Plant 591 9.40%

“It makes no sense to be building new coal plants right now,” Mr. Romm told the news service. “We have all of these underutilized natural gas power plants, and we’ve already spent most of the money to build them. For a very small extra cost, perhaps half a cent to a penny per kilowatt-hour, you could dramatically reduce U.S greenhouse gas emissions. That is one key role for natural gas in the next 10 to 15 years in replacing coal.”

Mr. Romm’s conclusion about natural gas—that it is a “very important bridge fuel” that allows electric utilities to diversify their energy production portfolio—arrives during a fierce debate in Lansing over the future direction of Michigan’s energy economy. Theat debate will decide whether Michigan sticks with its 20th-century approach to generating power, or embraces the emerging 21st-century energy systems that other states and nations are rapidly adopting.

Sparking a large part of the debate is the drive by Consumers Energy and Wolverine Power Cooperative to convince the Michigan Department of Environmental Quality that their coal plants—proposed, respectively, for Bay City and Rogers City—are the most “prudent and feasible” way, economically and environmentally, to generate new electricity supplies. The agency is accepting written comments via email on Consumer’s claims, contained in its alternatives analysis, until 5 p.m. Tuesday, Aug. 11, and on Wolverine’s claims in its analysis until 5 p.m. Monday, August 17.

But clean-energy advocates reject the companies' claims that new coal power is the best approach to meeting new electricity demand. They point out that there are economically and environmentally better ways to meet any new demand, and, in any account, the state will not need more electricity for at least another decade. The advocates point to new state laws, recent directives from Governor Jennifer M. Granholm, and proposed state laws just unveiled by the ReEnergize Michigan campaign that, taken together, employ energy efficiency and renewable energy to permanently eliminate the need for new fossil-fueled plants while bringing tens of thousands of new jobs to the state.

They also point out that Mr. Romm’s comments buttress a key argument they use to oppose burning more coal: Burning natural gas is a far better approach, both environmentally and economically.

Environmentally, the advocates argue, natural gas-powered generating plants produce far less pollution and climate-changing CO2 than coal plants. Economically, they say, natural gas’s sharply falling price make it far more attractive than it was just two years ago. They view the change as probably permanent, thanks to new drilling techniques that are unlocking big, new, domestic reserves of the fuel and driving down its price.

Moreover, they assert, the natural gas plants are already built, ratepayers are already paying for them whether they are used or not, and the cost of building new coal plants has risen dramatically in the past three years.

“Natural gas could meet an awful lot of what people claim the demand is right now just by using the existing plants,” said Anne Woiwode, director of the Sierra Club Michigan Chapter. “Michigan saw the overbuilding of these plants as a result of the deregulation in the past of electric utilities, and, as a result, there are some very large facilities that have capacity to fill the need.”

Spikey Prices?
Jeff Holyfield, a spokesman for Consumers Energy, told the news service that Consumers already gets 13.4 percent of its energy from natural gas. That is a significant amount, he said, when compared to roughly 4.4 percent for other energy producers in the state. He also acknowledged that, at the moment, “natural gas looks attractive.”

Mr. Holyfield noted, however, that natural gas is a fuel supply that has a history of dramatic price swings, and hat Consumers believes its proposed Bay City coal plant in Bay City is a necessary part of the utility’s strategy to diversify how it generates electricity.

“It (natural gas) is one of the most volatile commodities on the New York Mercantile Exchange,” Mr. Holyfield said.

He added that, when it comes to coal plant, “essentially you don’t want to put your energy eggs all in one basket. We need a balanced approach going forward through energy efficiency and demand management. We are operating the oldest coal fleet in the U.S., and a new, cleaner coal baseload unit should be part of that mix.”

Meanwhile, Wolverine officials refuse to provide comments to the Great Lakes Bulletin News Service for its news articles.

But energy advocates argue that the states’ sizeable, unused natural gas-fired generating capacity could provide the baseload power that both companies have publicly said they need to help keep the lights on. They point out that coal prices, relatively stable for decades, are now quite volatile. Prices for various grades of coal doubled or tripled over the past two years before collapsing as the current, worldwide economic crisis took hold.

The advocates also point to recent studies, many of which Mr. Romm summarized in an article for Grist.com, indicating that the nation’s coal supply is far less abundant than previously thought. If that is true, experts agree, it would guarantee sharply rising coal prices over the coming years. Meanwhile, the natural gas industry reports that, economic crises aside, its proven reserves are growing steadily, forcing prices down.

What Makes Sense?
The report from earlier this summer that confirms Mr. Romm’s assertion about the ready availability of natural gas power plants was produced by Synapse Energy Economics Inc. Synapse, a national firm with expertise in coal plant financing and energy demand evaluation, was commissioned by a number of citizen groups, including the Michigan Land Use Institute, to comment on Wolverine’s Electric Generation Alternatives Analysis, which the state now requires as part of any utility’s application for permission to build a new coal plant.

The Synapse studyfound that Michigan has eight natural gas power plants that are largely inactive. It also showed that, among them, they are able to supply two-and-a-half times the total electricity that the proposed Consumers and Wolverine plants would generate.

In fact, the unused capacity of one mostly idle natural gas plant, the Midland Cogeneration Venture, which was previously owned by Consumers and which now sells electricity to that firm, amounts to slightly more than 1,200MW, roughly 300 MW more than the output of Consumers’ proposed Bay City plant.

That is why, clean-energy advocates say, both Consumers and Wolverine should avoid spending, respectively by their own estimates, roughly $2 billion and $1.3 billion on their new coal plant. Synapse argues that Consumers, Wolverine, and their customers would be further ahead financially if the utilities simply purchased power from those existing, largely idle natural gas plants.

Peter Sinclair, a Midland resident who publicly opposes coal plants and produces Climate Denial Crock of the Weekonline videos, was one of the first to question why utilities were planning on spending billions of ratepayer dollars on new coal facilities when Michigan’s natural gas plants are so underutilized.

“The question I had is, If the price of building a coal-powered plant is skyrocketing, the price of coal is unknown, the cost of carbon sequestration is unknown, the availability of coal over the long haul is unknown, then wouldn’t it make sense to use a plant already built?” Mr. Sinclair said.

Three Dollar Gas?
The New York Times recently asked the same question in a June 15, 2009 news article, “Is natural gas dethroning King Coal? Even clean coal?”

“The combination of greater-than-ever-expected domestic supplies of gas, and a recession that has hammered demand for the stuff, has sent gas prices tumbling,” the article said. “Crude oil is down 52 per cent from last July’s highs; natural gas is down 69 percent.”

The Wall Street Journal also reported the same thing in June: “Abundant new supplies of natural gas, combined with reduced demand for electricity, have sent prices tumbling to less than $4 per million British thermal units, from more than $13 last July. That drop could prompt power companies to invest billions of dollars in natural gas-fired plants.”

And an executive at the energy firm Nstar, formerly Boston Edison, implied that at least some of his industry colleagues expect the price of natural gas to fall even further.

“Nobody was talking about $3 gas a year ago,” said the executive, James Daly, director of Nstar’s gas and energy supply department.

In June, Mr. Romm wrote a highly regarded column on the potential for natural gas to become a bigger player in the energy field, given the likelihood that market and regulatory forces would continue to force the cost of burning coal upward.

“Natural gas alone could meet a great deal of the Waxman-Markey CO2 target for 2020—without requiring gobs of new power plants to be sited and built or thousands of miles of new transmission lines,” he wrote, referring to the bill passed by the U.S. House of Representatives in June to combat climate change. That bill is currently under consideration in the U.S. Senate.

Mr. Romm also told the news service that while he fully accepts the utility premise that energy sources must be diversified, the increased costs of carbon production contained in the Waxman-Markley bill and the huge environmental and health costs of climate change make sticking with coal a very bad idea.

“I would never put our energy policy in isolation, but most states have not been very aggressive with energy efficiency,” Mr. Romm said. “There’s a new study just out that finds the U.S. could dramatically improve its energy efficiency and meet all of its demand growth for the next decade. In this time when we have a very strong economic slowdown, and when Congress is seriously considering climate legislation—we are pushing more efficiency and more renewables and putting a price on carbon—it makes no sense to build new, dirty coal plants.”

Glenn Puit, a veteran investigative reporter, is a policy specialist for the Michigan Land Use Institute. Reach him at glenn@mlui.org. The Michian Department of Environmental Quality is accepting emailed public comments on Consumer’s Electric Generation Alternatives Analysis until 5 p.m. Tuesday, Aug. 11, and on Wolverine’s Electric Generation Alternatives Analysis until Monday, August 17.

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