Renewables Overtaking Coal and Nuclear in Midwest
May 29, 2016
For a snapshot of the woes of the U.S coal and nuclear industries, take a look at Illinois.
Following a four-year drop in electricity demand, power companies there announced the closing of coal and nuclear plants that account for more than 10 percent of generating capacity. The shutdowns come amid a fourfold increase in cheap wind from neighboring states and growing competition from generators burning low-cost natural gas.
Exelon Corp., the operator of 11 nuclear reactors in Illinois, and Dynegy Inc., which has 10 coal-fired plants in the state, are asking lawmakers to bail out their money-losing assets to prevent further job-cutting, closures and, in Exelon’s case, preserve carbon-free electricity production.
“You’ve got free wind power coming from the west and cheap gas coming from the east and that’s not a good place to be for coal and nuclear power plants,” said Travis Miller, a utility analyst for Morningstar Inc., an investment research firm.
But over the past couple of years, researchers have come across another potential solution, one that seems almost too simple. The wind is usually blowing somewhere, and the sun is usually shining somewhere. If we could just connect the whole country to a special grid that would let utilities tap into those resources anytime, wouldn’t that get rid of—or at least lessen—the reliability problem?
The most recent high-profile paper making this argument was published in January by researchers at the National Oceanic and Atmospheric Administration and the University of Colorado at Boulder. Christopher Clack and colleagues built a model to predict the long-term costs of putting all kinds of energy into the electrical system. When they imposed a constraint on their model—it couldn’t use coal—they found that the cheapest option involved a grid of transmission lines that could carry solar and wind energy from almost any part of the country to anywhere else. Other technologies—perhaps Gates’s imagined miracle—would still be required to get rid of carbon-emitting fuels altogether, but the new grid would get us quite far, reducing emissions from power plants by up to 80 percent within 15 years.
This conclusion, Clack said, appeared to surprise some energy researchers. Sending wind or solar energy long distances inevitably involves the loss of some power during transmission, and the alternating-current, or AC, lines that connect most of the U.S. are less efficient for long-distance transmission than direct-current, or DC, lines. The paper’s hypothetical grid would use DC instead of AC. Until recently, big investments in high-voltage DC lines have been rare, in part due to the cost of the technology required at substations to make the power usable. But the model found that if you built a nationwide grid, economies of scale would emerge. In short, the benefits of having long, efficient lines outweigh the cost of power conversion. “People assumed that storage was the key or that nuclear was the key—and now I think there’s more of a recognition that you can actually get quite a long way today,” Clack said, just by changing how renewable energy moves around.
Not just wind. Solar energy – coming online in greater and greater quantities, is moving around on the grid and supplying power to areas not normally associated with utility solar.
As solar expert Jigar Shah has said, in the near future, there will be two kinds of states, those that produce renewable energy, and those that buy it.
“We’re now seeing large amounts of solar in markets where we weren’t seeing it before, such as Indiana, Arkansas, Idaho, Oregon and Mississippi,” said Smith. “That was a tremendous surprise.”
In 2016, 11 percent of new solar capacity in the pipeline will come from retail procurement. Favorable economics — not necessarily sustainability efforts — are the driving force behind the sharp growth in long-term retail contracts.
“Sustainability initiatives do help, but usually these deals are primarily being driven by sourcing needs, price stability and better returns,” said Smith.
Government mandates on the local level are also still driving growth, Sands noted. “Some cities and municipalities have their own goals and targets for renewables,” she said. “So some utilities are adding solar to meet an RPS goal, just not one set at the state level.”
Also, some states offer their own tax breaks and other incentives that are driving solar outside of an RPS. For example, Smith pointed to North Carolina, which has become the largest PURPA market, now accounting for 60 percent of PURPA projects nationwide. “Leveraging the generous 35 percent state tax credit made these projects easily financeable,” said Smith.
Late last year, North Carolina lawmakers extended the state’s solar tax credit for one final year, through the end of 2016. Several developers are now quickly building very large projects within the state. After the credit expires, it’s expected that many solar developers will expand to other adjacent markets.
Below, Mark Jacobson of Stanford, who sees the big picture on this better than most, interviewed in December 2015.