Published in Energy

Report: Uneconomic coal plant management costs ratepayers millions

BY Sunday, June 07, 2020 05:55pm

Michigan’s two largest utilities have operated coal plants uneconomically in recent years, costing customers tens of millions of dollars when cheaper and cleaner resources are available, according to a recent study by the Union of Concerned Scientists.

The report released late last month analyzed 2018 utility data across 15 Midwestern states. In total, the report found $350 million in excess costs related to a process known as self-scheduling, when utilities run coal plants regardless of the price grid operators are willing to pay for the electricity.

In Michigan, the report found Detroit-based DTE Energy could have saved customers $94.7 million across five coal plants in 2018, ranking it second behind Louisiana utility Cleco. Jackson-based Consumers Energy could have saved customers $25 million, including $24.7 million by changing operations at the J.H. Campbell plant in West Olive.

Coal is increasingly uneconomic as cheap natural gas and increasingly cheaper renewable energy come online.

UCS Senior Energy Analyst Joseph Daniel, who co-authored the report, said modeling the 2018 data was finished at the end of last year and analysts “poured over” the findings for the following six months. He said the 2018 data is still relevant today.

“If people want to take away from this report that utilities don’t necessarily respond to the wholesale market price, that is clearly still visible today,” he said. 

A recent report from the regional grid operator — Midcontinent Independent System Operator (MISO) — confirms that 15 percent of coal plants in its region are still operating uneconomically.

“So it’s still a problem,” Daniel said. 

And while several of these plants are scheduled to come offline in the coming years: “There’s still tens of millions of dollars in potential savings in operating those coal plants less between now and their closures,” Daniel said. “Secondly, this problem is illustrative of a larger problem: Utilities aren’t running their resources efficiently.”

Utilities dispute claims

In response to questions from MiBiz, DTE and Consumers both issued statements that disputed the UCS report’s findings.

“Consumers Energy runs its power plants based on market decisions made by MISO, the region’s grid operator, ensuring that residents of Michigan and other states have reliable, affordable energy,” said spokesperson Katelyn Carey. “As a regulated energy provider, the costs to operate our plants and provide energy to our customers face regular review by the Michigan Public Service Commission. Consumers Energy is committed to providing energy at the lowest cost possible to the 1.8 million homes and businesses we serve, and will continue to do so as our coal-fired plants are replaced by renewable energy sources through our Clean Energy Plan.”

Consumers’ Karn plant in Bay City is scheduled to close in 2023, while its Campbell plant may continue to run at least one coal-fired unit beyond the next decade.

DTE spokesperson Renee McClelland said the utility follows a “robust process” that includes considering MISO rules for dispatching coal plants and performing a two-week look-ahead based on changing market conditions.

“DTE disagrees with UCS’s claims related to self-scheduling of DTE coal plants,” McClelland said. “UCS has made incorrect assumptions related to coal plant operations, using data not specific to DTE plants, and ignored many factors that affect the economic operation of coal plants, resulting in incorrect conclusions. UCS’s May 2020 report also lacks accurate input to support their claims regarding DTE generating units.”

She added that DTE has proven the economics of its coal plant scheduling “against similarly flawed claims made in the past,” citing a recent MISO report saying the “vast majority” of self-scheduled coal is dispatched economically.

“DTE is wrong,” Daniel responded, saying the UCS analysis assumptions and inputs were vetted to the “highest degree” and that the group relied on DTE’s own information about its coal plants.

Additionally, the MISO report DTE cites says over the past three years, 12 percent of the coal dispatched in its territory was uneconomic.

“The fact that other utilities are operating economically doesn’t absolve DTE from operating coal plants uneconomically,” Daniel said.

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