Tony Anderson : My reality is that the biggest bill I pay is to my wholesale power supplier who has to deal with wholesale energy at the generator. So, my reality is: “Where is that coming from in the future and at what cost?”
The coal fleet in Michigan is old. We haven’t built a coal plant in Michigan in fifty some years. So it’s old, aging and getting older all the time and we have to clean it up. No one is arguing the fact that it needs to be cleaned up. It does. But we have to get started on that. For some plants it will be too costly to clean up, they will shut down. For other plants it will cost millions to clean them up and we’ll get that done.
My concern is what are we doing today to get ready for my power bill four, five and ten years from now. If we have to shut down some of these plants because they don’t met the clean air standards, fine. But what is going to replace them? Do we have enough generation in Michigan that we can clean-up and keep on? Or do we go out of state and take the jobs and that money and send it to other states where there is generation that’s been built? Michigan is kind of behind. Indiana and Illinois have built plants while we have done nothing. The concern is what happens when you shut one down? Where do you replace that from? The EPA in December 2011 made it almost impossible to build a new coal plant. We were looking at a plant in Rogers City and the EPA emissions requirements are so restrictive that the technology isn’t available too meet them. The vendors can’t guarantee they can meet the emission requirements under the new EPA regulations. So, that takes us to look at how do we retrofit the old stuff, how do we clean that up? There are different regulations for the old and the new. Existing plants have one set of numbers and new plants have a more restrictive set of numbers. You can argue if that’s good, bad or indifferent but that’s the fact today. Today we feel that new is out and we have to look at what is existing and how do we clean it up. It seems like that is where the vendors and manufacturers are focused as well. They’re not spending time on building new boilers and improved boilers for coal fire plants. They’re spending their time on scrubbing systems and how to clean up the old plants. When all of that works is done then maybe they’ll get around to the new plants and that technology.
energy-101.org : If coal is under challenge, what other options are there?
Tony : The other options beside coal are nuclear and natural gas. If you want 24/7 base-load those are your three options in my book: coal, nuclear and natural gas. If you take coal off the table then you have to do nuclear. There is some work being done on small-scale nuclear, 100 megawatt and 200-megawatt units. That’s ten to twenty years down the road. So, the most viable today would have to be natural gas. Our power supplier owns a good-sized peaking plant down by the Wayne County Airport with four different jet engines that produces over 340megawatts of power on peak at peak times. We could take one of two of those and move them somewhere and have a 24/7 base-load natural gas plant. That could happen in our future. Natural gas is definitely in our future…it’s just at what level and what price? Natural gas is viable below four dollars and I’m told it may viable below five dollars and fifty cents but above that it gets to be a problem.
When you look back at history natural gas doesn’t have a good history to make you want to build a 24/7 base-load natural gas plant. We’ve seen it as low as $2.80 and as high as $14 in the last ten years. That’s tough. There’s just not a steady fuel supply price is what history tells us. Maybe with all the fracking and the development we have going on in the country right now maybe that will be different in the future but I have to look back at the history and I’m pretty nervous about building natural gas base-load.
The renewables are problematic in the fact that you still need to have the big three behind them and the big three being coal, nuclear and natural gas. Certainly the renewables like solar and wind are forms of energy but obviously the sun only shines part of the day so that’s only a part time solution. During the winter months in Michigan the output isn’t great because the sun doesn’t come out that often. So, you always have to have something to back up the solar. When the solar panels are not producing you have to have something behind it that something is coal, nuclear or natural gas. Wind is the same way. The wind can blow 24 hours a day but the wind is not going to blow everyday so you need something to back that up.
energy-101.org : If you had to evaluate which directions do you think this is going to go?
Tony : I think we’re going to clean up our old coal plants. Our emissions are going to vastly improve over the next ten years because some coal plants will shut down. That’s going to lower your emissions, clean up your air and the coal plants that stay on are going to be cleaner. So, I think overall there’s going to be some general improvement. I think there could be more improvement if the EPA would lighten up a little bit and we could build some new plants because I feel like the new plants would be better then anything we’re going to retrofit but we’re just not able to do that right now.
I think we’re going to clean up our old coal plants. Our emissions are going to vastly improve over the next ten years because some coal plants will shut down. That’s going to lower your emissions, clean up your air and the coal plants that stay on are going to be cleaner. So, I think overall there’s going to be some general improvement. I think there could be more improvement if the EPA would lighten up a little bit and we could build some new plants because I feel like the new plants would be better then anything we’re going to retrofit but we’re just not able to do that right now.
energy-101.org : If the fleet of power plants is aging, then what are the barriers to just building new?
Tony : Regulatory barriers. Are the regulators going to restrict the clean up or the retrofit in any fashion? Community barriers. Does this community still want that in their area? Economic barriers. Does the utility want to borrow the money to clean it up? A lot of big utilities have several coal plants in their fleet or maybe even dozens. If they have one that needs to be cleaned up, they may have some others that they have improved before that. They may just say we’ve got enough, we don’t need that one, we’re going to moth ball it. And not clean it up because we don’t want to borrow the two to three hundred million it takes to clean it up. It is always supply and demand business, too. If the demand is not there … like some utilities have seen the demand drop off with the recession. I think it’s coming back now but demand is an issue and the balance sheet is an issue. Everybody wants to look good to their investors and their rate payers. And can you afford to borrow two or three hundred million put that in your rate base and still be competitive?
energy-101.org : Let’s go to the other extreme and say so we go out of the power business, Indiana and other states have got it we can just buy it, is that on the table?
Tony : Sure we can shut down coal plants and we can buy from somewhere else but I always go back to simple economics, supply and demand. The country continues to get bigger. The last seven years, I think our energy sales have gone up 1.7%. In the last fifteen years it’s 2.5%. We’ve seen almost a percent of growth go away in the recession but if you believe that the country is going to come out of the recession, that’s going to come back. So you’re sitting on two or three percent growth in a few years when the recession goes away. Do you want to be dependent on the market? Do you want to go out of state for your power when you could have those jobs and have that generation here and not be as dependent on the market? As you take away the supply while demand is going up, well that’s eighth grade economics. The price is going to go up because you’ll have a greater demand. Then you have supply which drives up the market price and that’s not going to be good for the ratepayer, there’s a fine balance there of keeping the supply up with demand.
energy-101.org : As you make these decisions and as you think about where you are going to source your power, what the influence of ratepayers or what’s their response of the complexity of the issue you are dealing with?
Tony : The average ratepayer, their response is what am I going to pay? They want their lights on 99.9% of the time and they want an affordable price. They have jobs, kids and families and we don’t hear from them. At an electrical cooperative like Cherryland they’re members. They’re member owners. So we take it upon ourselves to try to get them the best power we can and that’s reliable power at an affordable price. You’re going to always have a vocal minority who want everything green. And energy conservation will solve all of our problems. But you can’t let the vocal minority control what’s good for the majority. The majority of our people we don’t hear from until their power goes out or their rate go up. So for us it’s reliability and price. And how do we do that as clean as we can? We’re not fighting the fact that we need to clean stuff up. But we are fighting the fact that it needs to be affordable and reasonable.
energy-101.org : What role does conservation have to play in this discussion?
Tony : Conservation’s always going to be a factor. I like to think of it more as let’s not waste our product. Let’s not use it needlessly. Conservation is a factor … it can help. But can it avoid a power plant? Over millions of people you can probably do the math that says,
“Yes if you save a bunch of energy you can avoid one new coal plant.” But what we are seeing at our electrical cooperative is that growth still continues. We’re 1.7% growth in the last seven years and that’s in a time when we’ve had an energy conservation mandate in the state of Michigan for three years. I think we are in year four now. We still see growth going up. We are handing out CFL bulbs and refrigerator rebates. We’re changing out a lot of equipment with new lights in manufacturing plants and growth is still going up. So, are we reducing growth with conservation? Yes. Do we still need to build new plants or retrofit old plants to prepare for the future? Yes.
Again it goes back to not having all your eggs in one basket. I talked about the big three being coal, nuclear and natural gas. Well, certainly somewhere down the list is energy conservation. We can’t let it go. We have to continue. We might not need a state mandate but it’s a player.
But we still have a future of growth we have to prepare for.