Colorado Springs Utilities is looking at a sooner-than-planned exit from coal-fired generation by accelerating the shutdown of its historic Martin Drake power plant.
The nearly century-old coal-fired plant is currently scheduled to close by 2035, but Aram Benyamin, the newly named head of the city-owned utility, said the city wants to advance the date by as much as 10 years if the power can be replaced with alternative sources or more affordably on the open market.
“There are a lot of
The CSU Utilities Board voted in 2015 to decommission Drake no later than 2035. The process started by retiring Unit 5, the smallest and oldest unit, at the end of 2016. Moody’s Investors Service called that move “credit neutral.”
In 2017, the board reconsidered the decommissioning date. A study considered closure options and evaluated the need for replacement generation.
At the end of the process, the Utilities Board directed staff to accelerate essential transmission projects that will allow for various closure options as early as 2025, exactly 100 years after Drake began operating. The remaining generating units at the plant, Unit 6 and Unit 7, began operating in 1968 and 1974 respectively.
“The new transmission lines will give us more flexibility on imports,” Benyamin said. “We will be able to take advantage of markets that could be very efficient around us.”
By August 2020 CSU expects to have a 20-year plan in place to replace Drake’s power, drawing on diverse sources, including renewables.
In 2007, Drake, just a mile from the city's downtown, provided 42% of Colorado Springs’ total energy needs. Today, it produces about 23%. Generation fell in 2014 due to a fire at the plant. Another drop came in 2016 because Unit 5 ceased operation. Generation from Drake fell by 28% from 2007 to 2015.
A 2017
“If Martin Drake were inexpensive to run, CSU would run the plant more frequently -- as it did in the past,” the study said. “Martin Drake’s higher costs in comparison to other CSU resources must explain why the plant has become of diminishing importance to CSU’s system.”
The Colorado Springs strategy is another example of how economics runs against the Trump Administration’s efforts to keep coal-fired plants operating under the rubric of national security.
On June 1, Trump Administration spokeswoman Sarah Huckabee Sanders announced that President Trump had ordered Energy Secretary Rick Perry to “prepare immediate steps” to stop the closing of unprofitable coal and nuclear plants around the nation.
Perry’s yet-to-be announced plan is unlikely to take effect before 2020 after a comment period. In 2017, Perry proposed subsidies to any plant that could stockpile fuel for 90 days, a move that would favor coal and nuclear plants. The Federal Energy Regulatory Commission dismissed that proposal as unnecessary to maintain reliable power.
Growing supplies of cheap natural gas continue to stymie Trump’s efforts to revive the ailing coal industry. Since Trump took office, 25 of the nation’s more than 400 coal-fired units have shut down, according to the Sierra Club. In 2016, coal produced about 30% of the nation's electrical power while 1,793 natural gas plants generated 34%, according to the U.S. Energy Information Administration.
U.S. power producers plan to take at least 11.4 gigawatts of coal-fired power plant capacity offline in 2018, according to S&P Global Market Intelligence. That’s more than has been retired in a single year since 2015 when 14.7 GW left the grid. By 2022, another 19.8 GW of coal-fired power plant capacity is earmarked for retirement.
Over the next five years, 35 GW of coal and nuclear generation are scheduled to be shut down nationwide, according to Moody’s Investors Service.
“It is not a matter of if we are going to retire our coal fleet in this nation, it’s just a matter of when,” Xcel Energy chief executive Ben Fowke told the Edison Electric Industry Group’s Annual Convention in San Diego in June.
Later that day, Xcel, a Minneapolis-based merchant-owned power utility operating in Colorado, announced plans to retire two coal-fired units that produce a combined 660 megawatts of energy in the state and add 1,800 MW of capacity from renewable power, 275 MW of battery storage and another 383 MW of existing gas power. One megawatt is enough to power about 315 homes for a year.
Xcel’s retirement of 20 coal units from 2005 to 2026, represents 40% of its coal-powered capacity. The aggressive plan puts Xcel on track to reach or exceed its goal of reducing carbon emissions 60% by 2030 from 2005 levels.
On Sept. 5, Colorado Public Utilities Commission unanimously approved Xcel’s plan to close two of the three coal-fired units at Pueblo's Comanche Generating Station 10 years ahead of schedule. The Pueblo plant is about 60 mile south of Colorado Springs.
Xcel plans to invest $2.5 billion in renewable energy, including wind and solar generation and battery storage, as part of its
For public power, “low-priced renewable energy contracts and low natural gas prices limited the impact of the continued transition to clean energy on the sector's financial metrics,” according to a Sept. 13 Moody’s Investors Service report on sector medians.
As one of the 50 largest public power utilities rated by Moody’s, CSU carries a senior-lien rating of Aa2 with a stable outlook. S&P and Fitch Ratings also have stable outlooks on their AA ratings for the utility's $2.26 billion of outstanding debt.
On June 27, CSU priced $227 million of new money and refunding revenue bonds in a deal that Chief Financial Officer Tamela Monroe said was well-received.
"It was very successful issue," Monroe said. "We were able to de-risk the portfolio by taking out some variable rate debt. It was an opportune time to go ahead and fix out the rates."
Serving a population of nearly 450,000, Colorado Springs Utilities provides electricity, natural gas, water and wastewater service.
The city's economy is robust, stabilized by military bases and the Air Force Academy. Housing prices are appreciating at the fastest pace since the recession and home building is increasing, according to Moody’s.
On Sept. 17, the City Council, doubling as the Utility Board, unanimously voted to offer Benyamin the job as chief executive after considering a field of 130 candidates from across the U.S.
Benyamin, whose written responses to questions from the board and a video interview were posted on CSU’s
Before joining CSU as general manager of the Energy Supply Department, Benyamin built his reputation at the Los Angeles Department of Water and Power, the nation’s largest municipal utility.
As senior assistant general manager, head of LADWP’s power system, Benyamin was responsible for 4,000 employees with an annual budget of $3.9 billion, serving more than 4 million residents of Los Angeles. In Los Angeles, Benyamin played a key role in advancing the utility’s push toward a coal-free future in 2008.
“For us, it meant 50% of the energy supplied to the City of L.A.’s 4 million plus population, from coal sources in Utah and Arizona, would disappear by 2025,” Benyamin wrote in his questionnaire. “The short 15-year horizon in utility planning timeline meant that we would be losing half of our generation in a blink of an eye.”
One of L.A.'s coal power sources, the Navajo Generating Station in Arizona, is
In his new post, Benyamin expects shorter planning cycles amid rapid technological breakthroughs, from artificial intelligence to distributed generation.
“Looking back into history, we see that the changes that we went through and the pace of change was measured in centuries,” Benyamin wrote in his response to the city. “Looking forward into the future of Colorado Springs Utilities’ power system, I can see significant changes ahead of us in relativity short period of time, measured in decades, rather than centuries. In our lifetime, we will be presented with many opportunities that we need to be ready to seize on and successfully lead the transformation of our utilities.”
