Published on September 5th, 2012 | by Tina Casey2
Cost of Coal Power Zooms in Midwest
September 5th, 2012 by Tina Casey
The massive new Prairie State coal-fired power plant is coming on line in Illinois, and dozens of communities in Midwest states that own shares in the facility are in for a bad dose of sticker shock. According to an article in the St. Louis Post-Dispatch, the cost of electricity from the plant will be a great deal more than planners expected. Adding insult to injury, some communities in the Midwest are enjoying rate decreases, including one village that just signed an agreement to get its electricity from 100% renewable sources.
It Takes a Village to Get Renewable Power
As reported by Chi-an Chang of Wilmette Patch, the Illinois villages of Kenilworth and Wilmette joined together last June in a purchasing agreement for renewable power. The agreement is in the form of renewable energy certificates from the energy services company mc2.
Kenilworth voters authorized the entire village to go in for the 100% renewable energy option offered by mc2 . Ratepayers there will fork out 4.11 cents per kilowatt hour, which is about 45 percent less than they previously paid under their former provider’s summer rates.
In Wilmette, ratepayers will pay 4.035 for a mix of sources that includes only seven percent renewable energy, but individuals can opt into the 100 percent plan for a small extra charge.
Coal Power Will Cost More…
Meanwhile, communities that committed to buying power from Prairie State are already seeing their rates go up. For example, Jeffrey Tomich of the St. Louis Post-Dispatch has reported that bills for residents of the Chicago suburb Batavia are going up $8 to $21 per month due to the new plant.
That’s just the tip of the iceberg, according to a new report called The Prairie State Coal Plant: The Reality vs. the Promise, which predicts “higher utility bills for 2.5 million ratepayers in eight states and billions of dollars in fiscal fallout” from the new plant.
The report was produced by a group called the Institute for Energy Economics and Financial Analysis, which makes no bones about its mission:
“The Institute’s mission is to accelerate the United States’ transition to a diverse, sustainable and profitable energy economy and to reduce the nation’s dependence on coal and other non-renewable energy resources.”
Be that as it may, IEEFA’s basic findings are sourced from Prairie State’s own figures (the facility was originally developed by industry giant Peabody Energy, which sold 95 percent of its interest in 2007).
Evidently, one factor unforeseen by planners was competition from a significant drop in natural gas prices. Back in 2007, Prairie State predicted that electricity from the plant would be competitive at a wholesale price of $41 per megawatt hour, but the IEEFA lists current market prices at an already slightly lower mark of $40.
Making the math even worse, by 2010 Prairie State had to revise its own figure up to $57, far above the current market price cited by IEEFA.
…While the Price of Renewable Energy Drops
Could it get any worse? Well, yes. The IEEFA report also notes that the original projection of $41 was based partly on the use of an adjacent coal mine and a nearby ash disposal facility, neither of which will actually be available for as long as originally planned.
Combined with other factors, IEEFA predicts that the wholesale cost of power from Prairie State could go far above even the plant’s revised figure of $57, ending up in the neighborhood of $80.
For what it’s worth, local officials seem to be hoping that the price of natural gas will eventually hit a rising cycle, which will put everyone in the same boat of high energy prices.
On the other hand, evidently Prairie State’s planners also seemed to have overlooked the potential for rapid advances in renewable energy technology to grow the renewable energy market, to the point where competition from natural gas may soon be irrelevant.
Wind power alone accounted for a whopping 32 percent of new energy capacity added to the national grid last year, thanks largely to a federal tax incentive. Non-hydro renewable energy as a whole has almost doubled under the Obama Administration.
Planners also anticipated that Prairie State’s generation of constant baseload power would undercut any serious competition from intermittent sources (namely, wind and solar), but new advances in energy storage, energy efficiency, and smart grid technologies are going to make that issue irrelevant, too.
Look for the price of renewable energy to drop even more as new cutting-edge technologies come into the market with an assist from President Obama’s Sunshot Initiative and a raft of other federally supported programs.
In the context of competition from both natural gas and renewable sources, some energy industry watchers have predicted that Prairie State will be the last gasp for new coal power generation in the U.S. So far it looks like they’re on the mark.
Follow me on Twitter: @TinaMCasey.
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