In an interesting duo of energy stories this week, Arizona is getting two new innovative energy storage systems while Illinois is this close to losing up to 2300 megawatts of coal-fired power plant capacity. The news illustrates how quickly the country is transitioning to a low carbon economy. In the context of last year’s McKinsey report on the state of the US coal industry, that’s already proving to be a harsh and painful process for some communities.
Energy Storage Heats Up In USA
The two Arizona energy storage projects are under the umbrella of Tucson Electric Power (TEP). The utility will be working with two companies, Chicago-based E.ON Climate & Renewables and NextEra Energy Resources, to construct two 10-megawatt facilities.
Ten megawatts doesn’t sound all that impressive, but according to TEP, E.ON and NextEra were eager to get shovels in the ground, so their combined bids came in at less than half the anticipated cost.
As further proof that competition is heating up in the US energy storage market, TEP notes that it received almost two dozen qualified bids for the project.
TEP’s new endeavor will enable other utilities to compare the performance of two different battery technologies and integrated renewable energy.
The NextEra facility will be located at a TEP substation, based on lithium nickel-manganese-cobalt technology. The E.ON facility will be a lithium titanate oxide facility combined at the University of Arizona’s Science and Technology Park, where the school’s sprawling “Solar Zone” already provides a test bed for renewable energy and storage.
Utilities like TEP are experimenting with energy storage as a means of avoiding the high cost and carbon impacts of constructing new “peaker” power plants to smooth out spikes and dips in energy demand.
TEP also anticipates that energy storage solutions will help stabilize grid voltage and avoid outages.
Those bottom line and service improvements are in addition to the environmental goal of integrating more renewable energy into the grid, as TEP notes:
…TEP will continue investing in large solar arrays and other community scale renewable resources that add cost-effective capacity to its renewable energy portfolio. TEP anticipates an additional 800 megawatts (MW) of new renewable capacity by the end of 2030, boosting its total renewable energy portfolio to approximately 1,200 MW.
Big Chill For Coal Power
Coal has been taking a steep dive in the US, a trend that most industry observers attribute to competition from natural gas in the US and falling demand overseas. The blame could shift in the coming years as more energy storage and renewable energy enter the grid, especially as costs continue to plummet for solar and wind. The development of the wind-rich Atlantic coast could also help squeeze both coal and natural gas out of the US market.
In the meantime, other forces are at work.
The news out of Illinois, for example, illustrates how regional grid integration and transmission improvements can drive down local energy prices to the point of no return for coal.
Earlier this week, St. Louis Today reported that the Houston-based energy company Dynergy Inc. is threatening to shut down up to 2300 megawatts of coal-fired capacity in southern Illinois because a recent electricity auction failed to meet its costs for peak power production.
If the shutdown is approved, it would account for about 30 percent of the region’s capacity, but it seems unlikely to affect grid reliability in the area. Wind-friendly MISO, the regional grid operator, changed its rules last year to enable more out-of-state power producers to bid in Illinois.
To be clear, the shutdown of up to 2300 megawatts will consist of retiring several coal-fired units used for meeting peak demand, not shuttering entire power plants. However, that’s still a big blow for coal generation in Illinois.
On top of that, last year Dynergy announced that it will retire an entire coal power plant of 465 megawatts.
As for what to do with all those retired coal plants, Dynergy might take a look over at Duke Energy. The company has joined forces with three other partners to construct a new energy storage facility on the site of a retired coal plant in Ohio.
Storm Clouds Over US Coal Industry
If you thought Presidential candidate Hillary Clinton had some harsh — but fact-based — words to say about the future of the coal industry in Appalachia, go back and take a look at last year’s McKinsey & Co. report provocatively titled, “Downsizing the US coal industry: Can a slow motion train wreck be avoided.”
The short answer is no. The report basically says that cutbacks and downsizing won’t help the US coal industry avoid a financial meltdown. You don’t have to read past the first paragraph to get the idea:
The United States has plenty of coal, but the world does not need it. By 2020, the convergence of low-cost shale-gas supply, environmental regulation, and waning international demand is likely to push demand for US coal to at least 20 percent below what US mines currently produce—which is already almost 20 percent below 2008 levels.
The report continues:
The crisis the coal industry faces comprises a number of interlinked parts: overcapacity and continuing demand shrinkage, chronic indebtedness and environmental liabilities, and insufficient profitability, which together limit its freedom of maneuver. Even if industry capacity is cut enough to balance supply and demand in 2020, coal producers would still be unable to service most of their approximately $70 billion of remaining debt and liabilities…
In human terms that translates into bankruptcy and benefit cuts for thousands of retirees, an impact intensified by the debilitating health effects of coal industry employment.
It would be nice if somebody could come up with a plan for helping retirees in particular, and coal communities in general, transition to a more sustainable local economy.
Image: Solar Zone at University of Arizona Tech Park, via Tuscon Aerial Photography.
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