Fewer Midnight (Coal) Trains to Georgia

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Fewer Midnight (Coal) Trains to Georgia

Fewer Midnight (Coal) Trains to Georgia

April 18, 2013

By Devi Glick

We all know how the story goes: if you misbehave you will get a lump of coal in your stocking on Christmas, courtesy of Santa Claus. Jolly Old Saint Nick was way ahead of his time in recognizing what is becoming clear in the U.S.—no one wants coal.

In the first half of 2012, the U.S. Energy Information Administration (EIA) received no new reports of planned coal-fired power plants in the U.S., and only one coal-fired generator was brought online. A combination of 1) pressure from “cheap” natural gas, as well as renewables and efficiency, and 2) the new EPA mercury and air toxin standards, are currently making it uneconomical to construct new coal plants in the U.S.

Meanwhile, the majority of existing coal-fired power plants are old, dirty, and utilized less and less (compared to newer, cheaper, cleaner, and/or more efficient forms of generation). Increasingly, this aging coal-fired generation presents a tremendous opportunity for our electricity system to transition away from fossil fuels and toward efficiency and renewables. One unexpected place that we are seeing this begin to happen is in Georgia.

Ripe for retirement

Georgia ranks middle-of-the-road 24th in per capita energy use. But it also claims 1st in the operation of uneconomical coal-fired power plants according to a November 2012 Union of Concerned Scientists (UCS) report. UCS classified more than 7,400 MW of Georgia’s coal-fired generation as “ripe for retirement,” tallying coal plants that would be more expensive to operate (taking into account the cost of installing any needed pollution controls to keep a coal plant operational) than a typical cleaner-burning and more efficient natural gas combined-cycle plant.

Yet potentially retiring such aging coal-fired generation presents challenges for a state like Georgia, which relies heavily on coal and other fossil fuels. Further, the Southeast as a whole is the only region in the country where current excess capacity (beyond required reserve margins) is insufficient to replace all the ripe-for-retirement capacity. Thus, replacing Georgia’s increasingly uneconomical coal-fired capacity will require new generation capacity, decreased demand through efficiency, or both.

Georgia’s coal plant retirements begin

A nascent shift away from coal may already be underway in the Peach State. Georgia Power (the largest subsidiary of Southern Company), which serves more than 2.3 million customers, cited the EPA’s new regulations to control mercury and other air toxins as a driving factor when they announced earlier this year that they plan to retire fifteen of their coal- and oil-fired electricity generating units, are looking to switch to cleaner fuel sources, and will install environmental controls at many others.

These units slated for retirement represent 2,061 MW of generation capacity, 18% of the utility’s 11,000+ MW of coal-fired generation. Their 9,000 MW of coal-fired units not slated for retirement are being outfitted with a combined $5 billion in air pollution controls and other facilities upgrades over the next few years.

Taking steps in the right direction

As part of their Integrated Resource Plan (IRP) to replace the to-be-retired capacity, Georgia Power formed the Advanced Solar Initiative. The Georgia Public Service Commission approved the plan in November, and Georgia Power put out a request for proposals (RFP) for 210 MW of solar PV capacity by 2017.

To be sure, this is nameplate capacity, offsetting about 10% of planned retirement generation in name only. Capacity factors for solar are certainly lower than for a central thermal plant, so this new solar—once built—will provide less actual energy than its capacity potential. Regardless, this is a positive sign for PV development in the U.S., and especially the South. Georgia represents two overlapping groups that currently have very little installed utility-level PV—the Deep South and states without renewable portfolio standards (RPSs).

Georgia Power’s 210 MW solar PV RFP is the first utility-scale solar project in the state and the largest “voluntary” solicitation for renewable energy generation in the U.S. by an investor-owned utility. This is a notable bright spot considering Georgia’s historically poor track record when it comes to efficiency and renewables.

For example, Georgia’s spending on efficiency programs is very low, ranking in the bottom third of the country for dollars spent ($21 million in 2011), and in the bottom quarter as a percent of statewide utility revenues. Further, Georgia remains one of only 15 states—9 of them in the South—that lack an RPS. States without an RPS get only about 3.5% of their commercial electricity generation from renewables (excluding hydro); states with an RPS average more than twice that.

As for that renewable generation, only 3.2% of the state’s net electricity generation comes from renewable resources, half the national average of 6.3%, excluding hydro. (The numbers for the Deep South (minus Texas) as a whole aren’t much better.) The state ranked 22nd nationally for 2012 installed PV capacity, and remains in the bottom half for total installed PV, according to the Solar Energy Industries Association.

Georgia has enormous solar potential, however, and this month moved one step closer to unlocking some of that potential with the bipartisan “Rural Georgia Economic Recovery and Solar Resource Act of 2012.” This bill, which would authorize the creation of a unique rural community solar initiative, would allow for the expansion of solar energy in the state through mechanisms such as lower electric bills for consumers, a competitive solar market, private-sector investment, and a voluntary opt-in program.

Clear skies ahead

We might thus see Georgia’s energy landscape as one of tremendous opportunity. Georgia Power’s decision to close certain uneconomical and polluting coal plants and invest in solar PV is a win for the solar industry and a positive sign for efficiency and renewables, both in Georgia and across the country. Georgia Power is a credible, credit-worthy off-taker, and the twenty-year power purchase agreement that they have entered into presents a very low risk to the solar industry in Georgia.

While PV is still more expensive on a levelized cost basis than grid power in many parts of the country, it’s important to note that Georgia Power and the state Public Service Commission expect that this PV resource can be acquired with no upward pressure on retail rates. The basis for this claim isn’t exactly clear, though values besides direct energy generation likely factored in. For example, solar can be used to alleviate peak loads when generation costs are highest (e.g. summer air conditioning needs during the heat of the day). Solar can provide a hedge value and customer protection since it is driven by capital cost rather than operating or fuel costs, compared to natural gas or other fossil fuels. Solar can also bolster a company’s image in the public’s eye, and Georgia Power probably counts some value here as well, especially in light of heavy public and media pressure.

Equally notable is that Georgia Power’s Solar RFP was voluntary in the absence of an RPS. While mounting political and customer pressure to embrace renewables and a cleaner generation fleet, and heavy support from four out of the five PCS commissioners, were likely significant driving factors, the utility had no direct legislative mandate or regulatory obligation to invest in solar. This is part of a larger trend, indicating that in the long run, RPSs and renewable tax credits will become less important as renewables become increasingly cost competitive.

Implications for the Transformation of the Electricity Sector

More than three quarters of U.S. coal-fired power plants have surpassed their thirty-year life span, and a shocking seventeen percent are older than fifty years, according to the UCS. Many of these coal plants are becoming increasingly uneconomical, and Georgia provides a potentially exciting example of how alternatives can be integrated. From states to utilities, as coal-fired generation retires, the question becomes how to replace that capacity—with natural gas, efficiency, solar, wind.

As one of the seats of coal-fired generation, and as one of the few remaining states without an RPS, Georgia Power’s new IRP suggests that clean renewables can gain a foothold as a preferable alternative, even without the benefit of legislative or regulatory mandate, thanks to their increasingly favorable economics and strong public support. Santa’s lump of coal may have been reserved for the naughty, but Georgia’s energy future is looking a little bit nicer.