Oregon Coal Ban

OREGON PASSES LAW, BANS COAL: A BROADER PERSPECTIVE

Scattered between our current energy economy and a future lower emission energy economy are numerous and varied obstacles that present society with formidable challenges. Some are technical; some are social, economic and political. Yet others are a wicked complex of all the above with serious implications for overly simplified solutions that fail to account for these complexities. As such, if society is to transition from where it is today to a much different day in the future, the space in between now and then must be strategically navigated and the challenges must be met and resolved. We can’t just be there…we have to get there. And getting there will require nuclear, natural gas, renewables, and advanced coal technologies ( e.g., CCS, IGCC).
Moreover, not every state and country should be required by law to get there the exact same way. To do so would reflect an egregious misunderstanding of economic development, power generation and the ongoing challenges facing the industry.


OREGON TO ELIMINATE COAL BY 2030—BY LAW

On Wednesday, March 2, Oregon’s state legislature passed a bill, Senate Bill 1547, entitled, “Elimination of Coal from Electricity Supply”, that eliminates coal from the state’s power generation portfolio by 2030. On Friday, March 11, Oregon Governor Kate Brown signed it into law. Falling under Oregon’s Clean Electricity and Coal Transition plan, the bill includes the elimination of all coal-fired electricity imported from other states and further requires utilities to provide 50% of power generation from renewables by 2040—double the current 25% renewables requirement. This is the first such legislation in the U.S. that, by law, bans coal as an energy resource for power generation, although it should be noted that both Vermont and Rhode Island haven’t used coal for power generation in decades. The legislation is being hailed as a precedent for transitioning away from coal and reducing carbon from the power generation sector. However, some level of evaluation would be helpful in order to gain some perspective on Oregon’s particular circumstances as well as the plan’s impacts, both actual and potential. This bill has an involved background; so, for a more thorough recounting of its history, you can read Herman Trabish’s account in UtilityDive.

It’s worth noting up front that Senate Bill 1547 represents a compromise reached pursuant to an initial bill filed in February of 2015 and the October 5, 2015 filing of two ballot measures by the environmental group Renew Oregon. The first of those two measures pertained to the coal ban and the 50% renewables mandate. The second measure included controls on executive pay and wage garnishments for those who didn’t meet the coal ban or renewable targets. The compromise bill did not include executive pay controls.

BACKGROUND ON OREGON’S POWER GENERATION & CONSUMPTION

Oregon’s power generation has been predominantly hydroelectric for quite some time with wind being integrated at significant levels over the past few years (Figure 1). Data from the U.S. EIA (Energy Information Administration) indicate that 6.3% of Oregon’s power generation is from coal (Figure 1; Table 1). However, Oregon’s DOE (Department of Energy) reports that coal constitutes about 33% of Oregon’s electric power mix, which is much greater than the 6.3% reported by EIA. It’s important to understand this discrepancy because eliminating 33% of a state’s power generation resource is quite a different matter than eliminating only 6.3%.

Oregon Power GenerationFigure 1. Oregon’s Power Generation Profile (1990-2013)

Oregon Generation Capacity Table 1Table 1. Oregon’s Resource Mix for Power Generation (2013)

The apparent inconsistency in data highlights the difference between in-state generation, out-of-state generation and in-state consumption. By way of example, in 2013 Oregon generated 59,895,515 MWhrs but retail sales within the state (i.e., consumption) were only 47,640,978 MWhrs (Table 1). Therefore, Oregon had 12,254,537 MWhrs of excess generation. This has been the trend in Oregon for the past ten years. So, what is done with the surplus? The short answer is some of the renewable generation is sold to neighboring California.

Oregon’s in-state electricity consumption is supported by power generated from within the state as well as from outside the state (Montana and Wyoming) where electricity imported from power generation facilities in Montana and Wyoming is predominantly coal-fired (Figure 2). The specific MWhrs of hydro and wind sold to California and the specific MWhrs of coal transmitted from Montana and Wyoming can’t be determined from EIA data and would need to be evaluated using data from Oregon DOE and the power providers themselves. According to Ken Dragoon, senior resource analyst with the Northwest Power and Conservation Council, about 30%-40% of Oregon’s wind energy is sold to California.

Oregon Power Generation Consumption OverviewFigure 2. Oregon Power Generation & Consumption Overview

This raises a general question: If Oregon has a power supply surplus, why does it import from Montana and Wyoming? The logic is based on reliability and economics. That being, it is economically advantageous for Oregon to sell in-state renewable power to California and, in turn, supplement the deficit by purchasing cheaper coal-fired power from out of state. California’s state-level mandates and renewable energy requirements have made California an eager, ready-made market for purchasing hydro and wind power generated in Oregon. Moreover, in purchasing less expensive coal-fired power from out of state facilities to offset the sales of hydro and wind to California, Oregon is purchasing not only cheaper power, it’s also purchasing reliability. Coal, which is dispatchable, is more reliable than wind, which has daily and seasonal fluctuations, and hydro, which has seasonal fluctuations.

In summary, Oregon doesn’t generate power from a 33% coal mix, but it consumes power from a 33% coal mix because it exports hydro and wind power to California and makes up for the deficit with less expensive coal-fired power from Montana and Wyoming. In fact, Oregon has only one coal-fired power plant currently operating (640-MW Plant Boardman) and it generated the full 3,758,996 MWhrs of coal power reported in 2013 (Table 1). It’s noted here that Plant Boardman is scheduled to be retired in 2021.


FILLING OREGON’S COAL VOID

Under the new “Elimination of Coal from Electricity Supply” legislation the economics and reliability issues will become an internalized state issue as in-state and out-of-state coal are eliminated and more renewables are integrated to meet the 50% requirement. This represents a fundamental change to the Oregon power system that will require increased consumption of current in-state hydro and wind along with increased capacity in low- or zero-carbon power generation. It remains to be seen how Oregon will actually meet these constraints, but according to EIA planned generation additions for Oregon include 2,065 MW of natural gas, 666.3 MW of wind and 19.7 MW of solar PV (Table 2). The additional natural gas capacity may need to be re-evaluated given the law’s 50% renewable generation mandate. As for hydroelectricity, while increased consumption can be expected, this will likely be limited to current in-state capacity as new hydroelectric capacity is all but precluded as a qualifying electricity resource for renewable power generation under the new law.

Oregon Planned Generation AdditionsTable 2. Oregon Planned Generation Additions

A longshot option for integrating renewable energy into the void created from the ban on coal is to import wind from Montana and North Dakota. Oregon happens to be in a geographic location, the Pacific Northwest, where wind not only is abundant it also peaks at different times and seasons across nearby states. One such state is Montana where wind frequently peaks at times opposite to peaking times in Oregon. Figure 3 illustrates how the wind resource in Oregon and Montana, using wind speed as a proxy, differs in the months of January and October. Figure 4 illustrates daily differences from June 9 to June 22. This represents a possible strategy that has been proposed by Dragoon and former Montana Governor Brian Schweitzer. However, this would require significant investment in infrastructure to address the constraints with transmission across such long distances. As such, this remains a longshot particularly with respect to financing.

Oregon Montana Wind Comparison SeasonalFigure 3. Comparison of seasonal wind resource availability in Oregon and Montana

Oregon Montana Wind Comparison DailyFigure 4. Oregon & Montana wind resource comparison from June 9-22

SOME PERSPECTIVE

As would be expected, the Oregon coal ban legislation was met with praise from environmental activists, but with incredulity from energy professionals.

According to Sierra Club’s executive director Michael Brune, “This historic step forward is the most significant legislative action the US has taken since the Paris climate agreement. Oregon’s climate leadership is an example for states across the country.”

Rachel Shimshak, executive director of the advocacy group Renewable Northwest, referred to it as a “no-regrets policy“, and added, “We think it will be cheaper for customers to transition away from dirty resources now and invest in a cleaner mix. You might as well make the right decision in the first place.”

On the other side of the energy aisle, Oregon PUC (Public Utilities Commission) Chair Susan Ackerman said the bill will force an increase in utility bills with little environmental impact.

Former Oregon PUC Chair Roy Hemingway expressed deep concerns that no technical analysis accompanied the bill: “I have not seen any technical analysis of this bill’s proposals, which represent the most significant changes in the state’s power system in 35 years. We have assertions from utilities and others but nothing to verify them.”

More pointed remarks came from PGE (Portland General Electric) spokesman Steve Corson in reference to the bill and new federal mandates governing greenhouse gas emissions at power plants: “All these issues are going to have to be addressed in those analytical processes, and from our perspective that’s where they belong, not in some arbitrary stop-the-electrons-here bill. We’re very concerned about something that makes such sweeping changes in our resource planning process in such a short time frame.”

As a follow-on to Corson’s “stop-the-electrons-here” remark, in wholesale power markets such as those in the Pacific Northwest, it may be a challenge to install something analogous to Maxwell’s demon at a state border where only non-coal-fired electricity is allowed to enter the grid and all other generation is prohibited.

On the surface, Oregon’s ban on coal appears idyllic. However, as easy as it may be to laud this bill as a monumental step taken by the United States to address climate change, there are reasons to be cautious.

First, this bill represents only Oregon’s political will to transition away from coal. It remains to be seen how, or whether, the technical and economic constraints will, or can, be met. In particular, can the void created by the elimination of coal be filled in with renewables without compromising service or increasing electricity prices to the point that some Oregonians are negatively impacted? If it can be met, can it sustain long-term economic growth? Ted Sickinger reported that the bill went to lawmakers with short notice, with little to no input from the PUC and with no independent analysis. The lack of independent analysis is particularly troubling, although Pacific Power conducted its own evaluation and predicted that the plan would be affordable and workable.

Second, the impact of Oregon’s coal ban on carbon emissions is not as quantitatively monumental as is a promotional tagline such as, “Oregon Makes U.S. History: Bans Coal from Power Generation Sector”. Based on Oregon’s current ~33% coal consumption and retail sales of 47,640,978 MWhrs in 2013, this will result in a reduction of 15,721,522 MWhrs of coal-fired electricity. This is certainly admirable progress and considered alone it appears impressive. However, the state of Georgia reduced its coal-fired power generation from 60,159,340 MWhrs in 2011 to 40,232,866 in 2013—a reduction of 19,926,474 MWhrs. Oregon has passed legislation that will attempt to do in the next 14 years what the state of Georgia did in 2 years. The difference, though, is in the optics. Oregon will attempt to achieve its reduction through a much-lauded ban on coal, which projects a green, environmentally-friendly image, while Georgia achieved its reduction through the natural order of economics, technological breakthroughs and planning. Moreover, additional reductions in Georgia are anticipated when the under-construction 2,200 MW of nuclear power at Vogtle Units 3 & 4 come on line. As for making strides in climate change, the climate system senses physical carbon reductions regardless of the energy resources, technologies or environmental slogans and laws employed while achieving them.

Third, to suggest that Oregon’s leadership should serve as an example for other states across the country should be tempered by reality. The technical aspects of Oregon’s energy resources, particularly its renewable resource base, don’t compare with a state such as Georgia, which lacks not only the natural hydro and wind resources of Oregon, but also isn’t in near proximity to states with complementary-peaking renewable resources as Oregon has with Montana and North Dakota. Based on current technologies and their associated costs and Georgia’s own natural geography, the best option for renewable energy in Georgia is solar, which is expanding throughout the state. As for wind, while advances in taller turbine towers may create better options for Georgia, that potential remains experimental at this point. The capacity for individual states to incorporate significant levels of renewable energy into their respective power generation portfolios will always be constrained to some extent by natural geographies. To propose that Oregon’s total ban on coal altogether could be a model for other states is, at best, unrealistic and, at worst, misleading.

Finally, carbon emissions from coal consumption in the U.S. represent about 5% of total global carbon emissions. Therefore, as pointed out in previous posts, reducing carbon emissions from coal consumption in the U.S. will have limited global climate impacts given that developing countries such as India are committing to increased coal consumption to support their economic development objectives. As such, it is environmentally imperative that the U.S. continue development of advanced coal technologies such as carbon capture and storage (CCS) integrated gasification and combined cycle (IGCC) and ultra-supercritical steam generation.  Transitioning away from coal in the highly developed U.S. is one thing. However, the U.S. must perform due diligence and ensure that its own efforts to reduce coal-based carbon emissions don’t result in an abandonment of critically-needed coal technologies for the rest of the world, which could in turn result in abandoning the rest of the world to not only the climate impacts of increased carbon emissions, but also human health hazards associated with unmitigated coal combustion in developing countries. To this point, the U.S. has a moral and environmental responsibility to engage in the development of these advanced technologies as it continues to reduce its own emissions.

ENVIRONMENTAL POPULISM

Sierra Club makes no bones about its intent to bring an end to coal as an energy resource. And, if Michael Brune had his way he would end natural gas and nuclear as well. In this particular campaign in Oregon, Sierra Club cited a poll suggesting that 71% of Oregonians support the ban on coal and that more than half of the respondents said they would support it even if the price of electricity increased. This raises a relevant, yet worrisome aspect of some approaches taken by environmentalists in their efforts to end not only all fossil fuel consumption, but also nuclear.

Electricity consumers are customers, and it’s imperative for power providers to listen to customers and respond to their demands and needs. However, even customer demands must be tempered by realistic constraints of technology, economics and time itself, and these constraints must be conveyed to customers so that there is transparency and a clear understanding that customers are being served with the safest, cleanest, most reliable and most affordable electricity that current technology can provide. If a poll were taken and 71% of the respondents declared their support, regardless of cost, for 100% zero-emission nuclear or 100% natural gas, which emits 50% less CO2 than coal, Sierra Club would not be publishing those poll results and demanding that power providers respond to customer demands. Neither would power providers, for that matter.

Oregon’s ban on coal is indeed a bold and laudable expression of its political will, and it will be important to follow how the plan is implemented, evaluate the impacts, both positive and negative, and learn from it. However, what works in Oregon doesn’t necessarily work in other geographies. Michael Brune’s declaration that other states should follow Oregon’s coal ban example carries significant weight within the environmental community. Outside of that community, the general public may actually believe that all states can follow suit and simply transition away from coal with a 19-page legislative bill as did Oregon. This is not the transparency that’s needed nor is it a full disclosure of the complex, if not insurmountable technological and economic challenges that some states would face under such a ban. Instead, overly simplistic declarations only serve to create an unrealistic environmental populism that demands an outcome that industry, current technology and economics can neither deliver nor sustain.

CONCLUSION

Scattered between our current energy economy and a future lower emission energy economy are numerous and varied obstacles that present society with formidable challenges. Some are technical; some are social, economic and political. Yet others are a wicked complex of all the above with serious implications for overly simplified solutions that fail to account for these complexities. As such, if society is to transition from where it is today to a much different day in the future, the space in between now and then must be strategically navigated and the challenges must be met and resolved. We can’t just be there…we have to get there. And getting there will require nuclear, natural gas, renewables, and advanced coal technologies ( e.g., CCS, IGCC). Moreover, not every state and country should be required by law to get there the exact same way. To do so would reflect an egregious misunderstanding of power generation and the ongoing challenges facing the industry.

~ david gattie

…ilyh…

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