Companies increasingly look more to lower priced wind and natural gas

From The Gazette

CEDAR RAPIDS — South of Alliant Energy’s Prairie Creek Generation Station on the city’s southwest side sits a mound of coal — enough to supply the Cedar Rapids power plant for about three months.

Ultra-low-sulfur coal is shipped regularly from Wyoming to the 3300 C St. SW generation station via railroad and stocked in the yard. From there, coal is carried on conveyor into the plant where it is burned to create the steam that turns the generation station’s turbines and produces power for area businesses and homes.

But all that could change in the near future, as Alliant plans to convert that plant’s largest coal-fueled unit to burn natural gas next year. By 2025, all four of the 245-megawatt station’s coal-powered units will have been converted to burn natural gas, and Alliant’s only remaining coal-fueled units in the state will be in Lansing and Ottumwa.

Terry Kouba, Alliant’s vice president of general operations, said … one of the biggest factors is that natural gas has become the cheaper option.

“What we’ve seen over the last two years, year and a half is, because the price of natural gas has been so low, we’re seeing these efficient combined-cycle natural gas units dispatch (that is, turn on) at a lower price than coal units, which typically didn’t happen in the past,” he said.

“The gas plants are getting dispatched ahead of the coal plants for the first time in a long time, maybe ever.”

Kouba said advances in fracking have made natural gas cheaper and more accessible.

Alliant spokesman Justin Foss said the prices for coal and natural gas change constantly, so it’s possible coal once again could become the cheapest energy source. Prices fluctuate almost daily, he said.

According to the website of the U.S. Energy Information Administration (EIA), the average delivered price of coal to electricity utilities in 2014 was $45.66 per ton.

However, the biggest value in adding natural gas units to Alliant’s collection of wind and coal plants is to create a more diverse mix of energy sources for the state. That means the utility can dispatch the cheapest units for that day, which Foss said translates to lower rates for customers.

Cheapest power sources are the first to be dispatched – fuel cost for wind is zero

Iowa utilities are controlled and monitored by the not-for-profit Midcontinent Independent System Operator. MISO was created by the Federal Energy Regulatory Commission to provide safe, cost-effective power for customers in the more than one dozen states within MISO’s realm.

MISO determines what generation plants will operate on any given day and the cheapest power sources typically are the first to dispatch.

Wind “gets dispatched first because the fuel cost is zero,” Foss said.

Turbines only produce power when the wind is blowing, so there’s a benefit to having a mix of energy sources to make up the difference, Kouba said. If natural gas is the cheapest option that day, it pays to have the units to dispatch, he added.

“That low cost gets passed on to the customer directly, so it is definitely beneficial to the customers when we’re buying really low-cost energy in the MISO energy market,” Kouba said.

Ashton Hockman, spokeswoman with MidAmerican Energy, said the utility also is reducing its stock of coal plants, driven largely by added emission regulations. But she said such energy sources cannot be eliminated entirely.

“Fossil-fueled plants remain a critical part of our energy mix as we rely on them when the wind isn’t blowing and the sun isn’t shining. We strive to balance economic, environmental and regulatory requirements using all of our generating assets, both renewable and (non-renewable), in a manner that provides the most benefit to customers while ensuring safe and reliable electric service,” Hockman said in an email.

At the same time, Alliant and MidAmerican Energy have doubled down on their investment in wind power.

Alliant earlier this year reported plans for a $1 billion investment in wind power, while MidAmerican announced a $3.6 million investment in wind. Both projects have been approved for federal production tax credits by the Iowa Utilities Board.

This past Tuesday, the Iowa Utilities Board gave the nod to Alliant’s New Wind Project in Franklin County, near the utility’s existing Whispering Willow Wind Farm. The company could add up to 500 new turbines.

According to the EIA, 53 percent of Iowa’s net electricity generation last year came from coal, a drop from 59 percent in 2014. But Iowa still ranks in the top one-third of states in coal consumption and is among the top 10 states in the nation for coal use per capita.

On the other hand, about one-fourth of state’s energy consumption last year came from natural gas.

And Iowa ranked second last year among all states in net electricity generation from wind, according to the EIA. In fact, more than 31 percent of Iowa’s total electricity generation came from wind, a larger share than any other state, the EIA said.

“When I started in this business, you had two options — nuclear and coal. It’s amazing how much the field has changed in the last 25 years,” said John Watts, plant manager at Alliant’s Prairie Creek Generation Station.

Retrofitting coal plants

Watts said Prairie Creek’s coal-powered units use a small amount of natural gas to ignite the coal, so an infrastructure already exists to support burning natural gas.

However, current natural gas usage in the plant is minimal, so upgrades to the system are required.

“Most of these units were originally installed so that they can operate on gas, just not on the level we are going to operate them, so we have to upgrade some systems. That means increasing valve size, increasing piping size and venting. There are numerous things we have to do in-house, not hugely complicated, but time consuming,” Watts said.

Upgrades also will take place in the station’s yard, where natural gas is pumped into the plant, he said.

“All of that needs to happen in the next year or so,” he said.

Foss said a cost estimate for the project was not available, but described it as “relatively low-cost.”

For Alliant, shifting a coal plant to burn natural gas usually marks the final stage in that unit’s life.

“We’re at a time in the power business where we built these power plants 50 or 60 years ago and guess what, they’re 50 and 60 years old and they’re done with their useful lives, so you’re going to retire them anyway,” Kouba said.

Alliant already has transitioned generation stations from coal to natural gas in Clinton, Dubuque and Marshalltown. The utility’s Burlington Generation Station is expected to stop burning coal by the end of 2021 and could be switched to natural gas at that point.

Last year, MidAmerican retired two coal-fueled units in Council Bluffs and stopped using coal in the utility’s Bettendorf facility, which now burns natural gas only.

MidAmerican still operates four coal-fueled units.

“These efforts have allowed us to reduce the amount of carbon emission we produce each year,” MidAmerican’s Hockman said. “We began engaging in emissions reduction projects and shifting toward renewable energy to balance environmental concerns while producing low-cost, reliable energy.”


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