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Rebecca Stanfield’s Blog

Tenaska: Gold Plated Answer to Nonexistent Problem

Rebecca Stanfield

Posted November 7, 2011

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In its desperate bid to secure massive subsidies from ratepayers for its proposed coal power plant, Tenaska, the company proposing the Taylorville Energy Center, is flinging around all kinds of dubious and discredited “facts” about its costs, emissions, and most recently, about the need for “base load” generating capacity in Illinois. 

The company’s leading tactic is to scare legislators into believing that Illinois is facing a shortfall in base load generating capacity – in other words, they want us to believe that we’re going to run out of power plants, and they point to upcoming federal air pollution regulations as the reason.  Specifically, their latest paid ad says:  “Industry analysts expect Illinois to lose up to HALF of its coal plants, which currently provide 45% of Illinois electricity.”

To be clear, this is flatly untrue.  We have ample generating capacity and that is not expected to change as a result of proposed environmental regulations. 

Illinois is in no way is in danger of having too few baseload power plants.   In 2009, Illinois power plants generated 30% more electricity than its citizens used to power their homes and businesses.  Put another way, Illinois plants generated 50 million megawatt hours over and above what we need here in the state.  And, that's with much of the capacity we have standing idle.

In addition, state law requires that our utilities make investments in energy efficiency sufficient to lower sales by about 1% annually.  The upshot of this is that most if not all of the growth in demand you would otherwise expect will be address through efficiency, and sales of power will remain relatively constant or may even decline. 

Even more to the point, Illinois is part of two regional power markets, both of which have ample generation capacity and neither of which are in danger of resource inadequacy due to plant retirements.  Study after study has found that we are not facing a shortfall in resource availability.  For example:

Why does Tenaska say that half of the plants in Illinois are going to close?  It’s not clear what “industry analysts” they’re relying upon, but it may well be a discredited January, 2011 study by the Edison Electric Institute.  The Congressional Research Service says of these reports, “The studies sponsored by industry groups (EEI and NERC) were written before EPA proposed most of the rules whose impacts they analysis, and they assumed that the rules would impose more stringent requirements than EPA proposed in many cases.”  The CRS further states,  “There is a substantial amount of excess generation capacity at present, due in part to the recession and also due to the large number of natural gas combined cycle plants constructed in the last decade, muting reliability concerns.”  

The purported reasons to vote for the Tenaska bill have, one-by-one, been thoroughly rebutted.  Billed as clean, its permit shows that it will be among the biggest polluters in the state.  Billed as economic, the Illinois Commerce Commission estimates that it will cost us twice as much as the same amount of power from wind energy.  And finally, billed as needed to replace older power plants, the overwhelming consensus is that we are not facing a shortage of electric generating capacity.  We urge legislators to vote against this plant once again.

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Tom WolfNov 7 2011 02:07 PM

A concise and informational post from Rebecca. The Illinois Chamber of Commerce believes that new generation will eventually be needed in Illinois -- but it won't be nearly as quick as the Tenaska supporters state.

Plus, when that time comes, the generation has to work economically and the Tenaska plant does NOT meet that threshold at this time.

It's time to put a fork in Tenaska. It's done!

Dave LundyNov 8 2011 02:58 PM

Respectfully folks, you're flat out wrong. In fact, I'm sitting in an ICC hearing on the epa rules and the ceo of MISO just said prices are going up, reliability may be threatened and that 61 gw are likely to come offline.

"Environmental regulations pose a serious threat to the deliverability of reliable low-cost energy." John Bear, CEO MISO

You're entitled to your opinions but you're not entitled to your own facts. Coal plants are closing (good). Costs will rise (bad). The May PJM capacity auction saw 7GW of low-cost power fail to clear. The result was a 354% rise in capacity costs. That will translate into between 107-179 dollars in additional costs for residential ratepayers beginning on June 1, 2014. That's not an opinion. That's a fact.

And Becky, the analyst to which we're referring is WoodMackenzie, which projects a loss of 53.7%. 239 coal units have already announced they will be closing nationwide. That's another fact.

So while you may not like the Tenaska project, please stop ignoring the facts.

Rebecca StanfieldNov 8 2011 05:03 PM

Mr. Lundy - Thanks for taking the time to read my blog! As chief spokesperson for Tenaska, you must be very busy this week. What it seems like you're not able to acknowledge is that, notwithstanding the projected retirement of (mostly very old and very small) some coal capacity, we will still have ample capacity to meet the reserve margin requirements. That was the finding of the PJM study I cited in my blog, and they had of course taken into account the 2011 auction you mentioned. Moreover, no one is projecting a shortfall of capacity in Illinois specifically, where we have tons of capacity sitting idle each year. Finally, to the extent that some of the retiring coal capacity could be replaced, the capacity market should make that possible without massive ratepayer subsidies, and the last thing we need is to replace it with a plant that costs 21 cents for every kwh of electricity produced and still emits millions of tons of pollution, as will be the case with Tenaska. That's a sure way to drive up costs and environmental consequences at the same time.

Dave LundyNov 8 2011 05:31 PM

Thanks for your response. But in your response you've captured the essence of the problem. We have never said that capacity does not exist to meet the demand. What we've said, and what industry analysts, the IPA, CUB, the Attorney General and numerous others have said is that the closure of baseload plants will drive up prices.

As you know, baseload plants are those that have a low VARIABLE cost and operate at a very high capacity factor. As those plants shut down, natural gas peakers will increasingly have to operate to meet demand. As that happens, the peakers will set the wholesale market price That wholesale market price is what all generators are paid in that hour. So even though it may cost Exelon $.02/kwh to produce power, they would get paid $.50-$2.00 and even higher. In fact, this is what Exelon CEO John Rowe is counting on to boost revenue and what he has cited many times to shareholders in explaining how they stand to make billions more as these plants close.

While you and our other opponents repeatedly cite the 21 cent figure (which is a gross distortion because it is a nominal figure which includes 30 years of inflation), you ignore the fact that Taylorville will actually have a relatively low variable cost and therefore help to bring down the overall market cost.

I know this is counter-intuitive, but please allow me to explain by illustrating the point from the last capacity auction. Had power from Taylorville been available during the May PJM capacity auction, the auction price for capacity would have been 24% lower, saving everyone in the PJM territory far more than our plant would have cost. This analysis has been verified by independent analysts.

In short, while you, Exelon, STOP and my good friend Tom attack our project as uneconomic, folks from CUB, AG Madigan, the IPA and others support it BECAUSE it is needed to offset coal plant retirements.

I should also note that in the ICC hearing on this supposedly "Nonexistent problem" that I just came from moments ago, the CEO of MISO and the Chief Economist of PJM both cited much higher numbers for coal plant retirements than those we've used from Wood Mackenzie, the IPA and others. MISO expects 61GW of retirements. PJM expects 25-30 GW. In short, the "nonexistent" problem you describe is apparently going to be much larger than anyone thought.


P.S. While I proudly am the chief spokesman for Tenaska and so will vigorously disagree with you on this issue, I also represent numerous clean energy and environmental for-profits and not-for profits. You will find no stronger advocate for clean energy businesses and I look forward to working with you on those.

Rebecca StanfieldNov 8 2011 06:31 PM

Dave - You might have misunderstood the MISO presentation. The 61GW included retrofits and retirements, not just retirements, so, again, no capacity crisis there.

Also, the capacity cost is a pretty small proportion of the overall cost of power (less than one-fifth even when capacity costs were at an all-time high in 2010).

Finally, the PJM auction demonstrated ver clearly that there are new, clean resources ready to take the place of old coal. Demand response, and efficiency, for example. More than 5 GW of new resources clear the auction. So, bottom line, we can make a transition to a clean energy future without saddling Illinoisans with 30 years of carrying around the baggage associated with Tenaska.

Greg BrothertonNov 9 2011 11:59 AM

Rebecca - I hope that you are one of those rare people who can admit that they are wrong. No one can effectively argue that the existing plants are old, inefficient, polluters. In a perfect world they would be shut down immediately or fined heavily until they take the necessary action to correct the harmful emissions. These fines should be large enough to help fund new technology. In Illinois that has not happened. If the project’s opponents can construct a plant similar to the one proposed by Tenaska without rate guarantees or any other subsidy, then I say "Get started!”

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