Coal Age

MAY 2019

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12 www.coalage.com May 2019 u.s. news continued d a t e l i n e w a s h i n g t o n Mandating Higher Electricity Prices by conor bernstein It has long been suspect- ed that renewable port- folio standards are an incredibly costly and inef- ficient energy policy. Yet, they have grown in pop- ularity and ambition with 29 states and the District of Columbia employing these mandates and policymakers from time to time flirting with a national standard. Suspicion has now been replaced by data. A new, comprehensive study from the University of Chicago's Energy Policy Institute confirms it: renewable portfo- lio standards are driving up electricity prices. The authors of the study found that these standards, which mandate a growing share of electricity come from renewable sources of power, usually wind and solar, increase power costs through expanded spending on backup generation, transmis- sion infrastructure and through stranded assets. It's an important point. While the direct costs of building new wind and solar generation are high (and let's not forget the subsidies), it's the hidden costs — the need for backup, the need for new transmission, the loss of well-operating, existing plants — that make these policies so costly. Just how costly? "All in all, seven years after passage, consumers in the 29 states had paid $125.2 billion more for electricity than they would have in the absence of the policy," the authors observed. The authors and their research can't, and shouldn't be, easily dismissed. They're top economists and the lead author, Michael Greenstone, is a former senior economic ad- visor to former President Barrack Obama. Greenstone observed, "The headline re- sult here and the most important result in the whole exercise: signing up for these policies increases electricity prices, full stop. Second point: what do you get in exchange for that?" The question he poses is a fundamental and essential one. What exactly are consumers paying so much more for? These mandates have done wonders to fill the coffers of wind and solar developers, and utilities, too, have joined in to capture hefty returns for investors, but is this an effective or replicable emissions reductions strategy? Hardly. While critics of the study pointed out that the costs of wind and solar power have fallen over time and insisted this study doesn't ade- quately account for those trends, there's ample evidence to show that forcing more and more intermittent sources of power onto the grid significantly drives up the cost of electricity. The cost of a wind turbine or solar array may be falling, but the system costs of integrating more and more of these weather-dependent sources of power are going up. The existing grid would have to be scrapped and rebuilt to manage our growing reliance on wind and solar power. It's a breathtakingly expensive un- dertaking and one that seems to be a solution in search of a problem. There is a very good reason why coal remains the world's leading fuel for elec- tricity generation. Hundreds of new coal plants are planned or under construction around the globe, particularly in Asia. Instead of raising electricity costs here through mandates and placing an undue burden on consumers while weakening the global competitiveness of our economy, we should be leaning into innovation and the de- ployment of the technologies that can reduce emissions from the fuels and power sources the world uses and will continue to use. The renewable portfolio standard has become the de-facto U.S. emissions-mitigation strategy. It's one expensive road to nowhere. Conor Bernstein is a spokesperson for the National Mining Association, the industry's trade group based in Washington, D.C. According to the OUCC, the state's consumer watchdog, IP&L's load was 6.4% higher than forecast in Novem- ber and Henry Hub natural gas prices were 36% higher than forecast. Power prices were 26% higher than forecast in November. Coal under the new contract is being delivered to the utility's 1,700- megawatt Petersburg plant near Pe- tersburg in Pike County, Indiana. Pe- tersburg is IP&L's only coal plant. The plant burns about 4 million tons of coal annually. All of the coal comes from In- diana and Petersburg's boilers are de- signed to burn Indiana coal. Despite the new coal contract, the OUCC said IP&L's coal inventory currently is within target levels of 25 to 50 days. The OUCC spoke with the utility about the issue of coal freezing in rail cars on its way to Petersburg or after it gets there. However, it is not really a serious problem for the utility be- cause the coal does not stay in the cars very long after it reaches the plant. In a recent filing, IP&L said it pre- fers to sign coal contracts that give the utility more flexibility to buy more coal when needed and less when it is not needed. "As a public utility, IP&L has an obligation to make every rea- sonable effort to acquire fuel and gen- erate or purchase power, or both, so as to provide electricity to its 450,000 retail customers at the lowest fuel cost reasonably possible," the utility said. Report Recommends Retirement of 3 of 4 CWLP Coal Units An energy consultant is recommend- ing the city of Springfield, Illinois, retire three of the four coal-burning generating units at its 572-megawatt (MW ) Dallman plant over the next few years, although that appears un- likely to happen. The Energy Authority report re- leased in May also said the city's larg- est and newest coal unit, 209-MW Dallman 4, should not be retired as quickly. Dallman 4 was built in 2009,

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