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“Cheap” Idaho Power from Nevada Coal Plant? Not so Much

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I can understand Idaho Power’s dilemma regarding its old coal plants. Not long after the newly acquired and slightly used Nissan Leaf found its place in our driveway, up came the question of what to do with the trusty old reliable and modestly sized Ford Ranger pick-up.

The truck is in great shape for its age. It’s indispensible for Lowes lumber runs, Zamzows landscaping runs, the odd landfill run, and certainly for fishing trips. As far as trucks go, its thirst for fuel is manageable. There are times when it really comes in handy, but is it really worth holding on to given cleaner alternatives and the larger environmental imperative pulling us to cleaner transportation?Such is the dilemma faced by Idaho’s largest electric utility (and by extension its bill- paying customers) when it comes to the North Valmy Generating Station, a two-unit medium-sized power plant co-owned by Idaho Power and NV Energy. It produces about 520 megawatts of electricity for its partner-owners and their customers. But it is no longer nearly as important as it was when built near Winnemucca, NV, in the early 1980s.

Far from being indispensible, Valmy is taking on the look of that old truck. It’s not the “workhorse” it was three decades or so ago. And that’s one reason Idaho Power today is doing what was unthinkable just a few years ago. Another is that Valmy, like scores of other coal plants around the country, is smack dab in the crosshairs of multiple existing and proposed health and environmental regulations targeting coal as a source of electricity.

Idaho Power’s current long-term resource plan envisions shuttering Valmy ahead of schedule – in 2025 rather than 2030 or beyond. That’s an important start, but it’s not enough. We believe that for the sake of our climate, one or both of Valmy’s two units must be retired by 2021. Utility customers will benefit for each year of early retirement.

The Future is Nearer than We Think

Idaho Power is preparing for the coming demise of coal-fired power plants and creating what it calls a “glide path” away from dirty coal generation. These plants, combined with hydropower, once delivered almost all of the electricity consumed by more than a half-million southern Idaho electricity customers.

The end is finally in sight. And we’re thrilled that Idaho Power and partner NV Energy are now discussing how and when to pull the plug on Valmy.

The Snake River Alliance is committed to ending greenhouse gas emissions from the distant coal plants serving our power demands. Even if those plants are not yet fully paid for, they must be decommissioned sooner than our utilities acknowledge is possible. Power customers must help pay for writing them off since we cannot expect our utilities to eat the unpaid portion of closed but still-operable power plants.

The Alliance has worked for years to shut down out-of-state coal plants like Valmy. We’ve made the case multiple times here and here and in other reports, testimony, and white papers. And, importantly, we have made the case about how they can be replaced with carbon-free energy efficiency and renewable energy.

Here are some of the reasons why closing Valmy early makes sense – and why the cost of running the Valmy plant is higher than the power is actually worth.

  • Cheap natural gas prices for plants like Langley Gulch, That prompts changes in which kinds of generation (coal, gas, or other) are sent to customers or “dispatched” first. Increasingly, rising coal plant costs and falling gas plant costs make natural gas the first generation choice, ahead of coal plants.
  • Valmy is a small part of Idaho Power’s generation. In an average water year Idaho Power gets most of its electricity generation from its massive hydropower system. Under average water conditions, Idaho Power meets its average annual sales of just under 15 billion kilowatt-hours (kWh) of power with:
    • Hydropower – 8.6 billion kWh
    • Jim Bridger coal units – 3.1 billion kWh
    • Langley Gulch gas plant – 2.6 billion kWh
    • Valmy coal units –250 million kWh
  • Valmy is actually skewing the average cost of our electricity upward. A big reason we enjoy such comparatively low electric rates is because Idaho Power can generate hydropower, which accounts for more than half our electricity, at a cost of about a penny per kilowatt-hour, which is the unit of electricity you see on your monthly power bill. Idaho Power charges residential energy users about 8.5 cents per kilowatt-hour (which increases the more you use).       Langley Gulch and the Jim Bridger coal plants cost about 4 cents per kilowatt-hour (when we consider total costs of units including operating expenses, depreciation expenses, a return on shareholders’ investment and interest expenses).       By comparison Valmy power costs nearly 12 cents per kilowatt-hour.
  • Inefficiency of line losses. If these cost comparisons weren’t bad news enough for Valmy, bear in mind that the farther away a generator is from where its power is used translates into higher transmission costs but also power losses from transmission lines over long distances. And Valmy is about 300 miles from Boise, compared to most other generation except the Wyoming Bridger plants, some 500 miles from Boise. According to Idaho Power, about 70 percent of your electric bill isn’t the cost of producing the power, but rather building, operating, and maintaining the electric grid used to get the power to you from wherever it’s produced.

That underscores the wisdom of planning for an earlier Valmy shutdown, because the sooner at least one of the Valmy units is retired the greater the overall savings for customers. Bear in mind the Alliance and other advocates are not seeking immediate coal plant closures, which would be impossible without crashing the power grid, but rather urging utilities to begin planning today for retirements and replacing that lost generation.

There are two big takeaways here.

The first is that the costs of running Valmy are greater than the costs of closing Valmy. Even though utility customers would need to pay more in the near term (to write off the unused life of the plant) its other costs are so much higher than those of other power sources that it still makes economic sense to do so — because those costs would be avoided if Valmy closes early. Also, an early closure spares customers the huge interest payments that would be made over the life of the plant.

This isn’t the first coal plant used by Idaho Power to be retired ahead of its time: The Oregon Boardman plant, of which Idaho Power is a 10 percent owner, will shut down early in four years and Idaho Power has already received Idaho utility regulators’ approval to recover costs from the early retirement.

The second takeaway is that clean energy advocates should acknowledge Idaho Power’s willingness to work toward an early coal plant closure – and press to close these coal units even sooner than Idaho Power is considering. We know it’s not easy to retire something as huge as a coal-fired power plant, but it’s possible to do it sooner. Coal plants around the world are baking our planet. A more aggressive schedule for closing Valmy will show that Idahoans take climate change seriously. We can’t afford to wait before acting.

In the long run, coal will become an even worse deal given what we now know about the government clamping down on greenhouse gas emissions, toxic emissions, and other environmental damages caused by coal plants. The costs to deal with all these new regulations will be another huge negative. Failure to begin shutting down Valmy in 2020 or 2021 – not 2025 – is the worst deal in the long run for all Idahoans.

 

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