Feb. 15 2018 11:19 AM

Is BWL’s $500 million gas plant too much, too late?

    The Stanton Memo is out. It sounds like a salvo from the political wars in Washington, but a memo by Lansing utility expert and former state regulatory staffer Tom Stanton is part of a local conflict over Lansing’s energy future that’s about to come to a boil.

    The opposition is ready to push back on the Lansing Board of Water & Light’s plan, unveiled in December, to build a $500 million, natural gas fired plant on the grounds of its Erickson plant. The new plant would replace two aging, coal-fired power plants, the Eckert and Erickson plants, which are set to close in 2020 and 2025, respectively. Last week, Stanton fired off a seven-point memo to the Lansing City Council and Mayor Andy Schor saying that the BWL’s plan to build a new plant is in need of a “comprehensive do-over” and the two-year-old analysis that led up to the decision is already out of date. He’s not the only one who thinks so.

    Opponents use words like “overbuild” and “behemoth” for the plant and say it’s already a relic of outmoded thinking in the most swiftly changing energy landscape since steam power was invented.

    If the BWL doesn’t go back to the drawing board, Stanton wrote, it would amount to “a dereliction of duty” calling for “strong and corrective response from the City.”

    This time, the pushback isn’t coming from the usual suspects alone. Not only environmentalists, but concerned ratepayers, energy professionals and a conservative energy group are joining the fray.

    The Stanton memo is bound to have an impact on the agenda Thursday when the Council and the BWL’s Board of Commissioners hold a joint public meeting.

    The BWL contends that when Erickson closes, leaving the REO Town cogeneration plant as the utility’s sole base load generator, the city has no choice but to fire up one last big power plant before crossing the bridge to 100 percent renewables. The utility is proud of its plans to replace only half of the 500-MW hole left by the closing of Eckert and Erickson with gas. The utility plans to make up the rest with renewable energy, efficiency and other sources it’s already exploring.

    But across the nation, the cost of renewable energy and crucial storage are plunging to the point where some utilities are starting to get bids for renewables that undercut fossil fuels.

    Things are moving so fast that critics say the BWL’s strategic plan, completed in 2016, is already outmoded. They want the utility to go back to the drawing board, or at least build a smaller plant to keep the utility flexible in the face of a coming revolution in energy production and distribution.

    THE LAST WAR

    In a phone interview last week, Stanton compared the BWL’s build-it-big strategy to “fighting the last war.”

    A Lansing resident since 1975, Stanton has researched and written on energy issues for decades. He worked for state energy office and the Michigan Public Service Commission for 30 years and is now a researcher for the National Regulatory Research Institute.

    “There’s so much turmoil going on all over the country, it’s truly remarkable,” he said. Last month, the energy world was buzzing with news from Xcel Energy, Colorado’s biggest power company, with a service area that stretches from Texas to Michigan.

    In a scenario similar to Lansing’s, a plan to shut down two large coal-burning plants in Pueblo, Colorado, will leave a 660-MW hole in the utility’s energy supply. Last month, Xcel announced it has received bids for renewable energy that a Denver Post headline trumpeted as “shockingly low” — the lowest prices ever quoted in U.S., according to a Jan. 16 story in the Post.

    Stanton said to expect more news like this in the coming months. The problem of storing intermittent solar and wind energy for use when it’s needed is often cited as a deal-breaker, but battery technology is advancing almost as fast as solar and wind tech. Even with storage factored in, the Xcel bids for wind came in cheaper than coal generation, according to the Post. Solar plus storage came in cheaper than 75 percent of coal generation in the state.

    And that’s just an early shot in what Stanton called the “wild West” scenario that’s coming to the utility world in the next 10 to 20 years. The era of “distributed energy,” as power generation de-centralizes from big plants into widely scattered residential, community and commercial sources, is about to shake the utility industry to its foundations.

    BWL spokeswoman Amy Adamy said the utility plans to review its strategic plan in 2020, but by then, the proposed plant will be a year into the building phase. Construction is scheduled to begin in 2019 and the first ergs are expected to flow in 2021.

    The BWL burns about 800,000 tons of coal a year, according to Adamy. By 2025, she said, that number will be zero. The expected 80 percent reduction in greenhouse gases is no small thing, but critics of the proposed gas plant say there are other ways to pick up the slack from coal.

    “The right thing to do today is to build as little as possible to meet the needs that we have right away, while we take more time to plan and investigate these different choices that are coming,” Stanton said.

    THEY’RE NOT HIPPIES

    You don’t have to look very far to find a large-scale parallel to Lansing’s energy debate. Larry Ward of Williamston is the director of the Michigan Conservative Energy Forum, a primarily Republican advocacy group that started up in 2013.

    The group is part of a surprisingly broad coalition fighting energy giant DTE’s proposed 1,100- MW, $1 billion natural gas power plant in St. Clair County, intended to replace DTE’s aging, coal-fired Belle River Power Plant in East China Township.

    In a Feb. 1 column in The Detroit News, Ward laid out the case against DTE’s big plant, saying that it would “saddle rate-payers with long-term and unpredictable cost.”

    Ward couldn’t care less about the dangers of fracking, the controversial process by which Mother Earth is given a toxic chemical enema to release trapped natural gas. He opposes big new power plants for economic, not environmental, reasons.

    The Union of Concerned Scientists and other groups in the coalition concluded that DTE was “overly optimistic” about the future price of natural gas, and gave short shrift to energy efficiency and emerging technologies in renewable energy battery storage.

    “A big plant might be right answer in the next two to three years, but eight years from now, it certainly wouldn’t be, and 30 or 40 years from now we’re still stuck with it,” Ward said, and he feels the same way about BWL’s proposed plant. “Don’t saddle us with something that isn’t flexible enough to change,” he said.

    When I asked Ward whether his organization is an undercover nest of hippies, he laughed.

    “I’m a die-hard Republican conservative,” he said. “I don’t know how we got to the point where it got so politicized. We all pay electric bills and gas bills.”

    Ward lives in Williamston, part of the DTE service area, but he also has rental properties in Lansing and has followed BWL’s recent moves closely.

    “Some people don’t like coal plants because of the carbon-emitting pollution,” he said. “I don’t like it because of the cost structure it’s saddled us with over the last 40 or 50 years, and we’re still paying the price. Are we going to go through that again?” But the BWL’s Adamy said the parallel to DTE is not apt. “The BWL’s and DTE’s generating needs are very different,” she said. Even after the Belle River plant is retired, she said, “DTE will have major nuclear, coal and natural gas generating units of supply electricity.”

    Without another gas plant, BWL says it will be unable to meet demand when the sun and the wind are not producing energy.

    Adamy said the utility recently approved a three-year rate strategy “which will adequately fund paying for the new plant over the course of the bond terms.” The plant is expected to come in under $500 million, she said, and any bond proceeds not spent on the plant will be invested in renewables and infrastructure improvements.

    Answering the concern that BWL is yoking itself to unpredictable gas prices, Adamy said the utility modeled many gas price scenarios. Even under a high-price scenario, she said, a natural gas plant was still a “necessary, economic and an important part of a least cost resource plan.”

    'A natural gas plant is still a necessary, economic and an important part of a least cost resource plan.' — BWL spokeswoman Amy Adamy'The right thing to do today is to build as little as possible to meet the needs that we have right away' — Tom Stanton, National Regulatory Research Institute

    Finally, she said that scaling back and building a smaller plant, she said, would come at a “significantly higher cost.”

    The Stanton memo still rejects the BWL’s analysis, saying that “any decisions based on assumptions made two or three years ago are not valid.”

    EFFICIENCY DEFICIENCY

    Ward admitted there are big differences between the BWL, a public utility owned by the ratepayers, and privately owned DTE.

    “BWL does a lot of really good things with their reach to renewable and diversified fuel sources,” Ward said. BWL General Manger Dick Peffley said nearly 85 megawatts of wind will be added to the BWL’s already existing 20 megawatts of wind this year and the utility will generate 120 megawatts of solar power by 2030, “making the BWL Michigan’s leader in solar energy.”

    But Ward sees other areas where BWL could improve.

    The most potentially beneficial program is a strangely tough sell — energy efficiency. It’s not a headline-grabber, but it’s also the top item in Stanton’s memo. Stanton said BWL has underestimated the potential of energy efficiency by a “factor of two or three, if not more.”

    “They can do quite a bit more, even to the point where less of their product is being sold,” Ward said.

    But big utilities, even public owned ones like Lansing’s BWL, have little incentive to reduce demand for their own product.

    Adamy pointed out that the BWL’s strategic plan calls for growing its energy efficiency program beyond the State’s mandated 1 percent annual savings and to continue the program even after the state’s requirement sunsets in 2021.

    “We are not aware of any other Michigan utility to formally adopt and commit to a plan to exceed Michigan’s energy efficiency requirement,” Adamy said.

    Mountains of evidence suggest that energy efficiency programs promise the highest return on investment of any expenditure a utility can make, from building a new plant to installing solar panels to upgrading the grid.

    It might take a 2 or 3 percent hike in rates to fund an energy efficiency program with teeth in it, but the return in savings on the customer’s overall bill would be double that percentage or more, according to Ward.

    Usage could go down 4 or 5 percent in households and businesses and up to 15 percent “behind the meter” — an industry term that refers to inefficiencies in utility infrastructure — leading to lower overall bills for ratepayers.

    Adamy said the BWL has no policy limiting investment on efficiency programs to the growth in overall load, as some critics have charged.

    But ratepayers have a way of hating rate increases more than they love — or even notice — the overall reduction in their bills energy efficiency would bring. That limits the utility’s incentive to invest in efficiency.

    “That’s what the utilities will always tell you, and they use that as their justification for saying, ‘we need more capacity now so we better build another power plant,’” Ward said.

    TAKE IT TO THE BANK

    Big, centralized institutions of all kinds are looking more and more Victorian, if not Roman, with every passing year. When grandpa had to do business at the bank, he put on his hat and went downtown to a tall building with massive Greek columns.

    A generation later, modest bank branches were everywhere. Today, your bank is probably in your pocket.

    “My nephews tell me they’ve never even been in a bank,” Ward said. They scan his gift checks electronically and hand them back to him.

    “The system in the electric world is kind of like that,” Ward said. “It was originally built on the one-way flow of electrons from large centralized plants to your house.”

    Experts say the biggest change coming in the next 10 or 20 years is a two-way flow.

    “To be able to produce my own power is very much in the realm of reality right now,” Ward said.

    You can get a glimpse of this future by looking at institutions such as large hospitals or MSU.

    “MSU has operated like this for 100 years, with its own power plant,” Stanton said. “It’s only recently connected with the outside grid, and still largely serves itself. All hospitals have backup generators.”

    In the coming years, sources of distributed energy will range from vast wind farms to neighborhood or community solar gardens to homeowner solar arrays.

    “Denmark, Germany and Sweden have a lot of neighborhood-scale power plants, many of which burn waste from food or agricultural production,” Stanton said.

    These two opposing models — central power stations versus distributed energy resources — are like two trains headed toward each other on the same track, at full speed, according to widely read Canadian nuclear engineer and energy guru Walter Patterson.

    “This is a huge, huge cultural transformation that has to take place,” Stanton said.

    The questions won’t stop at how to generate and distribute power, but even who owns it.

    “Whether it’s two, four or 10 years out, the storage capability has huge potential,” Stanton said.

    Nevertheless, the culture of building big is deeply ingrained in the industry. Like the Hindenburg or the Titanic, it will take some time and pushing to turn the leviathan around.

    “The BWL knows they can control a power plant that they built themselves, turn it on and off and up and down according to their own schedules,” Ward said. “That’s what they’re used to doing and that’s what they’re planning with.”

    Joint Public Meeting Lansing City Council Board of Water and Light 5-8 p.m. Thursday, Feb. 15 REO Town Depot 1201 S. Washington Ave., Lansing

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