King Coal, politics and the new energy economy
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In a hurry to get approvals for Comanche 3, Xcel in 2004 convened discussions with several environmental and Pueblo community groups. A settlement emerged six months later. It allowed Xcel to order concrete, steel and other materials before worldwide prices spurted in 2005-2007. It also gained primary ownership of an expensive power plant, crucial in maximizing profits for shareholders.
Xcel’s makeover
But environmentalists and Pueblo groups also won concessions they believed fundamentally altered Xcel.
“I believe they’re telling the truth when they say it changed the company,” says Ross Vincent, a retired chemical engineer, who represented Better Pueblo in the negotiations. “It hasn’t made them an auxiliary of the Sierra Club, but it has made them much more environmentally conscious. And they have done some pretty impressive things since then. It’s not perfect, but it’s better.”
Of most immediate and local benefit, Xcel agreed to install modern pollution control equipment on the two older plants at Comanche. Computer models predict reduced haze at the Great Sand Dunes. Scrubbers and other improved controls probably would have been installed anyway, owing to stricter federal regulations, but possibly not until about 2017. With the super-critical boiler technology, they also got greater efficiency – meaning more electricity per ton of coal burned, and hence less pollution.
Xcel also agreed to expand efforts to develop renewable energy. “Our view was that you could integrate larger amounts and at lower cost,” says Nielsen of Western Resource Advocates. He believes that view has been vindicated. From 2 percent renewables in 1999, Xcel’s portfolio will have grown to 30 percent by 2020.
Another provision required Xcel to spend $196 million over the next eight years to ramp up its demand-side management programs, or DSM. Before, the company had set weak goals to reduce peak demand, the church-for-Easter-Sunday syndrome, but had done almost nothing to encourage deeper and broader efficiencies.
Most daring, the settlement agreement called for Xcel to begin assuming future imposition of federal carbon taxes. Aside from PacificCorp, later purchased by Warren Buffett, very few utilities were then doing so. It tilts the playing field, making natural gas – with 58 percent fewer carbon dioxide emissions than coal, and solar and wind, with none – more competitive with coal in planning for future needs.
Xcel delivered the settlement to the PUC, allowing no room for cherry picking of parts. Two consented with reservations, but the third, then-PUC Chairman Gregory E. Sopkin, objected vehemently. He was particularly incensed by the assumption of a future carbon tax.
“The totality of evidence suggesting the inevitability of such a tax amounts to grim-faced witnesses declaring, to paraphrase, ‘It’s going to happen – you’ll see,’” Sopkin said. The only competent evidence, he added, was that Congress had not yet adopted such a tax.
Six years later, Congress still hasn’t levied a tax on carbon, either directly or through a cap-and-trade edict. However, classification of carbon dioxide as a pollutant to be regulated under the Clean Air Act may achieve the same effect. The Aspen Skiing Co. filed a brief in that court case.
Comanche 3 gave Xcel Energy the platform for pivoting more securely in its energy resources, shutting down coal plants while ramping up wind, now 1,200 megawatts of Xcel’s portfolio in Colorado.
Xcel has also exceeded the settlement’s requirements for demand-side management, spending $60 million this year alone. In effect, Xcel’s business model has been changing. It’s no longer purely selling widgets, i.e. electrons. It’s selling electrical services.
Looking at the future
Both utility executives and environmental leaders say Comanche 3 will likely be Colorado’s last coal plant – unless cost-effective carbon capture and sequestration technology with acceptable environmental risks gets developed. There are few signs of hope, although a task force this summer has been creating possible legislation to govern geological sequestration. Tri-State Generation and Transmission, the second largest power supplier in Colorado, hasn’t ruled out the possibility of a new coal plant in the Arkansas River Valley, where it has acquired both water and land.
The better question may be whether Comanche 3 will get retired early, well in advance of the normal 50 to 60 years. Vacliv Smil, a professor at the University of Manitoba and prominent energy analyst, scoffs at suggestions of a rapid transition from coal. But environmental leaders think it’s possible.
“I would bet any amount of money that this is Colorado’s last coal plant,” says Geller, of the Southwestern Energy Efficiency Project. “Whether it operates 10 years or 20 years or 50 years remains to be seen. There’s a good chance that it won’t operate 50 years.” He adds: “Sooner or later we will adopt laws that require deep reductions in greenhouse gas emissions by mid-century.”
Leslie Glustrom, a biochemist from Boulder with a growing number of followers, calls Comanche 3 a “billion-dollar mistake.” She argues for abandonment of the plant even now, because of the rising cost of coal. On the face of it, that argument seems absurd. But a paper issued earlier this year by two engineering professors, Tadeusz W. Patzek and Gregory D. Croft, supports her contention, at least globally. They predict a 50 percent decline in global coal consumption in the next 40 years.
Glustrom and others also argue a more fundamental business case. They contend that existing state regulations give Xcel every financial reason to retain control of production, effectively discouraging innovation.
Sharing this view is Susan L. Perkins, a former oil and gas attorney in Greenwood Village who now specializes in renewable energy. “Is Xcel doing a good job within its paradigm? Well, it may be. But it’s within its paradigm.” That paradigm is of monopolistic control. Xcel controls both energy production and sales. That, she says, slows technological innovation.
The parallel to Xcel’s energy production, she says, were the Bell monopolies. Until the federal government broke up the telephone monopolies, consumers had few choices, technological innovation occurred at a snail’s pace, and the Bells exerted great control – even owning the old-fashioned rotary telephones found in houses. After the breakup came incentives to innovate. We now have improved services and at lower costs.
That’s the argument of future years, first being tested in Boulder, where the City Council has been talking about breaking free from Xcel in order to accelerate the pace of change.
Lingering lessons
For Vickie Patton, general counsel for the Environmental Defense Fund, the key lesson drawn from the six years since Comanche 3 was authorized is that leaders matter, in both business and in government.
“The choices that the public makes in our political leadership and the leaders of our private businesses – they matter immensely,” she says. “And leaders like Gov. Bill Ritter and (Xcel chief executive) Dick Kelly, who inherited a decision that they did not make (Comanche 3) and pivoted that decision in a very strategic way to a clean energy economy and a future for Colorado, means that Comanche 3 will in fact be Colorado’s last coal plant.”
Geller, from the Southwestern Energy Efficiency Project, similarly contends that politics matter – because they yield laws and regulations that frame energy choices. “The political dynamic in 2004 was 180 degrees different than it is today. Elections do matter,” he says. “Moralistic concerns and arguments, while certainly well-founded, don’t really matter in the real world. What matters are the laws and regulations in place.”
He does see real progress. “The enemy is not an individual coal plant,” he says. “It’s greenhouse gas emissions. That is what is warming the planet. And, in fact, we have made good strides to where Xcel is cutting in absolute terms its greenhouse gas emissions.
“How many utilities can you name that have said, ‘Yes, we can cut greenhouse gas emissions’?” Geller says. “Let’s keep our eyes on the prize, the total greenhouse gas emissions.”
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