Study says shift from coal to renewables could save western co-ops $600 million

Energize Weekly, August 29, 2018

A switch from coal-fired generation to a mix anchored by low-cost wind and solar could save the rural electricity cooperatives served by one western generation and transmission association $600 million by 2030, according to analysis by the Rocky Mountain Institute (RMI).

RMI, a non-profit energy consultant, used the Tri-State Generation and Transmission Association, which serves co-ops in four western states, as a case study on the impact of a shift in the generation portfolio.

Tri-State provides wholesale electricity to 43 co-ops in Colorado, New Mexico, Wyoming and Nebraska. About 49 percent of its electricity comes from coal-fired power stations.

Recently, prices for wind and solar have been dropping. In January, a call for supply bids by Xcel Energy for its Colorado subsidiary brought offers as low as $11.80 a megawatt-hour for wind.

“The emergence of very low-cost renewable energy pricing in the United States has created unprecedented opportunities for utilities currently reliant on high-cost, legacy generating assets, particularly in the Mountain West,” the RMI study said. “The drop in renewables pricing is also casting into doubt the competitiveness and viability of operators that are slow to transition.”

RMI modeled three scenarios: business-as-usual, fuel-save, and coal-fired plant retirement.

The business-as-usual scenario costs are primarily for fuel, operation and maintenance, including upgrade costs for environmental compliance. RMI did not include any sunken costs such as plant depreciation. It came up with an operating cost of $40 a megawatt-hour.

In the fuel-save  scenario, 100 megawatts of wind and 100 megawatts of photovoltaic (PV) solar are added at Xcel’s median bid price, $18.50 a megawatt-hour for wind and $29.50 a megawatt-hour for PV, plus 60 cents a megawatt-hour for integration costs and $3 a megawatt-hour for transmission costs. The coal-fired plants were kept as backup capacity.

“The wind and solar complement the coal plant by producing lower-cost energy, reducing the higher-cost operations of the coal plant, while also providing additional capacity to the system,” the study concluded. The combination dropped the overall portfolio generating price to $35 a megawatt-hour.

The scenario retiring all of Tri-State’s coal generation by 2030 and replacing it with 342 megawatts of renewable energy and wholesale market capacity purchases (assumed to be available at the prices offered to Xcel) drops the operating costs to $32 a megawatt-hour—equal across the 12-year period to $600 million in savings over business-as-usual.

“The estimated $600 million savings for Tri-State members can be realized through avoiding the operating expenses and fixed costs of its fossil-fueled power plants,” RMI said. “Operating legacy assets like these in the West has contributed to rate increases for electricity customers.”

Mark Dyson, a principal in RMI’s electricity practice and a co-author of the study, said the analysis is limited because it depends upon publicly available figures and that the institute did not have access to operating cost data from the actual plants. “We just wanted to see how much savings there were on the table,” he said.

Tri-State criticized the analysis for that lack of detailed inputs and models that could accurately forecast resources and costs.

“The RMI report does not equate to the thorough resource modeling in our integrated resource planning,” Lee Boughey, a Tri-State spokesman, said in a statement. “We encourage RMI to suggest scenarios and engage in our inclusive public process next year.”

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