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TC Light & Power will be meeting with the city commission Mon night, then holding public forums this coming Thurs night and Sat to discuss how we can meet the energy needs of the future. www.tclp.org. 99% of our energy now comes from fossil fuels, and a big question is whether and to what extent our public utility should invest in biomass as part of its energy portfolio for the future. Time is tight because half of all the electricity TCLP uses now comes from a long-term coal contract that expires at the end of this year and cannot be renewed for very long. This is a huge issue, involving hundreds of millions of dollars over the next four decades. Please join this discussion.
where I’m coming from. I don’t claim to be an authority on biomass. Nor have I done a comprehensive study. But because most of my legal practice is now energy-related, I do have access to information and experts. As a lay person with access to good information, I have spent about 20 hours looking at this issue. This is just my two cents.
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my sources. Here are the sources I’m relying on.
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The Michigan 21st Century Energy Plan. This is a report compiled by the MI Public Service Commission for the Governor in 2007. There is a link to it on this site, scroll down and look on the left under the blogroll.
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Green Energy Future for MI. This is a report commissioned by the Natural Resources Defense Council www.nrdc.org, the premier environmental advocacy organization in the U.S., and prepared by Synapse, a firm of energy economists from Harvard and MIT www.synapse-energy.com/expertise/staff.shtml. There is a link to it on this site, scroll down and look on the left under the blogroll.
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George “Skip” Sansoucy. Skip is one of the country’s foremost experts on utility valuation. The city of San Francisco hired Skip’s firm to evaluate the city’s renewable energy potential. http://www.sfbos.org/Modules/ShowDocument.aspx?documentid=18808. I have known Skip since we worked together to represent the Little River Band of Ottawa Indians and the Citizens for Responsible Development in a case involving a large coal plant in Manistee. http://archives.record-eagle.com/2005/nov/03tondu.htm
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The Michigan Electric Utility Dockets. Every plan, project, rate, and budget for Michigan’s two largest utilities gets filed and adjudicated here: http://efile.mpsc.state.mi.us/efile/cases2.php?type=elec
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my two cents. I support TCLP’s plan to add biomass to its energy portfolio. How much biomass needs to be a subject of more discussion. That discussion should focus on the plan for sustainable fuel sources, and on the possible alternatives for minimizing air emissions.
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the situation today. Right now, we (through our utility) get 95% of our energy from coal, 4% from natural gas, and 1% from wind. When you turn on a light, the energy flowing into the bulb comes from coal. That coal was stripped off a mountain in Appalachia, or dug out of the Powder River basin in Wyoming, hauled to one of three coal plants downstate, and burned.
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TCLP has a contract to purchase coal-fired power from the Lansing Board of Water & Light through the Michigan Public Power Agency. TCLP also owns long-term interests in two coal plants: JH Campbell in Ottawa County (run by Consumers), and Belle River in St. Clair County (run by Detroit Edison). In fiscal year 2009-10, TCLP budgeted $6.9 million for its share of the generating expenses at the Campbell and Belle River coal plants, and another $7.5 million for power from Lansing. http://www.ci.traverse-city.mi.us/budget/ComponentunitFund.pdf. That’s a total of $14.4 million that TC residents and businesses spend on coal-fired electricity from far away. The Lansing contract represents 50% of TCLP’s total energy portfolio, and it expires on December 31.
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integrated resource planning. So what are our options? And what is the process for picking the best option? Most energy experts today advocate for integrated resource planning. Where traditional utility planning attempted to meet demand by determining how to supply reliable power at the lowest cost, an IRP process evaluates all available options – including those that increase supply and those that decrease demand. The utility selects the option that meets future demand with the least cost and risk to its customers (including environmental risks). The answer is usually the same: meet demand with a diverse portfolio of sources, and with a strong energy conservation program.
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I think of putting together a diverse portfolio as a little like ordering off a menu at a “small plates” restaurant. Here are the choices:
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Coal. Pros: It is cheap (relatively speaking) right now, and it is base load. Base load means it can be delivered all the time at a steady rate. Energy demand varies from hour to hour and season to season, but there is a minimum “base load” that must always be met. Cons: We send $14.4 million of our money down state, out east, and out west each year. About 10% of that money (and 10% of the fossil fuel burned) goes to energy that is lost in transmission on the way here. Coal pollutes the air. It is not renewable.
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And it is going to get more expensive. The MI Public Service Commission, together with Detroit Edison and Consumers, predict the cost of electricity from new coal plants is going to be $133 per megawatt. (More than double what it is now.) Detroit Edison, one of the shrewdest coal purchasers anywhere, projects in its latest power supply plan that the cost of coal to fuel current plants is going to increase 51% over the next 5 years.
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Nuclear. Pros: It is cheap (relatively speaking) right now, and it is base load. Cons: It is all downstate, which again means mailing millions of dollars out of our region. And the nuclear waste situation is dysfunctional. In short, the U.S. government passed a law in 1983 that said it would dispose of nuclear waste, and charge the cost to utilities. The utilities would pay a fixed fee for waste they had accumulated by 1983, and then they would pay for future waste as it was disposed of. The U.S. government never found a way to dispose of nuclear waste, so the utilities have been storing it – temporarily – for 27 years. The utilities are suing the government, but utility customers are paying for the costs of storing nuclear waste temporarily. And some of the utilities never paid the initial fee, so their customers are paying for that debt as well. For example, if you’re a Consumers customer, you’ve paid a share of the $44 million initial fee that was never paid in 1983. Plus you continue to pay interest on that initial fee, which has been compounding for 27 years and is up to $119 million. Simply from a business perspective, we should stay away from nuclear power right now.
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Wind. Pros: Wind is a good new energy source and there is a ton of wind development now occurring in Michigan, in part to meet new legal requirements for renewable energy. http://www.michbar.org/journal/pdf/pdf4article1576.pdf. It is cost competitive with new coal, and TCLP has signed a contract to purchase 10 megawatts of wind energy from Heritage Sustainable Energy in McBain. It is renewable. Cons: Wind is not base load energy, unless you can store it. Wind energy in Michigan has a capacity factor of between 25% and 35%, depending on who you talk to. (A capacity factor is the amount of energy an asset generates divided by what it could generate running at its max. So a generator with a maximum capacity of 10 megawatts that produces 2.5 megawatts on average over the year would have a capacity factor of 25%.) The only way to provide base load energy from an asset with a capacity factor in that range is if you can store up energy during times the asset is running at its max and then release the energy at a steady rate when the asset is not running. The only utility-scale way to store electric energy right now is pump storage, like the Ludington plant owned jointly by Consumers and Detroit Edison.
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Solar. Pros: Solar can be distributed generation, which is small-scale generation done locally by lots of people. It is renewable. Solar can be fostered by a feed-in tariff. A feed-in tariff is a premium, fixed price that an electric utility pays for energy from solar panels on the roof of a home or business. The solar panels provide the utility with renewable energy during peak demand, which occurs during daytime hours in the summer months. TCLP’s plan says it will begin a feed-in tariff this summer. Cons: Solar is expensive, and has a low capacity factor in Michigan. It is a good way to supplement peak energy (in the summer with all the air conditioners running), but it is not base load power. It should be a piece of the portfolio, but can only provide so much.
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Hydro. Pros: Hydro is base load and it is renewable. Cons: The Boardman River Dams cannot be put back on-line to produce hydro in a cost effective way. TCLP and the engineering firm that did the dams study both investigated this, and both came to that conclusion. A machine salvage business suggested it was feasible and offered to take the project on, but their numbers were not based on any recognized accounting practices, and they had no experience operating a dam. Even if hydro could be brought back on-line on the Boardman River, it would provide only a small percentage of TCLP’s electric needs. And a good part of the community puts value on the fishery and recreational benefits of a free-flowing river.
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Landfill gas. Pros: Base load and cost-competitive with new coal. Renewable. TCLP has a contract for some landfill gas power. Cons: There is not that much of it around.
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Natural gas. Pros: It is cheap right now. It can be base load. It has less toxic emissions than coal. Much of it can be produced locally, instead of mailing our money away. Cons: It is not renewable. It will not stay cheap. According to Skip Sansoucy:
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“Don’t think for a minute that natural gas is going to stay cheap. You can get a 30-month natural gas [power purchase agreement] now – but four, five, six, seven years out you’re going to pay and pay.”
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Energy Efficiency. Pros: It is cost effective. Recent studies by Michigan’s two largest utilities concluded that energy efficiency investments pay for themselves at a rate of $3.50 in savings for every $1.00 invested. It is base load. Cons: There are really no cons to energy efficiency, but there are limits. According to the Michigan PSC, the current gold standard for energy efficiency is Wisconsin, which has had progressive programs in place a long time. The benchmark number for energy efficiency based on Wisconsin’s experience is 1.3 to 1.9% per year. A good summary of this data is at http://efile.mpsc.state.mi.us/efile/docs/15996/0190.pdf, on pages 26 to 29 of the pdf. TCLP’s current target is the new Michigan legal requirement of 1% per year. After getting approval to decouple its rates (separate revenue from units of energy sold), Consumers is now shooting for 1.15% per year.
To really take EE beyond providing customers with financial incentives for efficient light bulbs and appliances, we need to make investments in the grid and meter systems. These investments will allow such things as variable pricing (where your electricity is more expensive during peak times and less expensive other times, incentivizing you to run the dryer at night instead of in the afternoon) and direct load management (where you agree to let the utility cap your air conditioner use on the hottest days in return for a lower rate all year). These investments are cost effective, and should be pursued, but they will require more staffing at TCLP, and will take time. By way of example, Consumers proposes to spend over $118 million in the next year-and-a-half just on the advanced metering infrastructure and operations to set the stage for smart grid. TCLP is starting along this path as well.
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that brings us to biomass. Biomass should be viewed just like all the other energy sources on the menu. Not as the end-all be-all, but as a potential component of the energy portfolio, an option with pros and cons. Does it have a role in TCLP’s portfolio?
I think it does, for a bunch of reasons.
It’s local. A biomass plant or plants would be built here. The people running the plant would live here. The fuel sources would come from Northern Michigan (more on that below). The money would circulate here. We talk a lot in this community about getting more of our food locally, which we should. But we should also be talking about generating our energy locally – and for the same reasons.
It’s renewable. Some fuel sources regenerate quicker than others, but all of them within a human lifetime. (That’s the definition of a renewable energy source – one that replenishes within a human time frame, rather than a geological one.)
It may or may not be carbon neutral. Carbon neutrality refers to whether burning biomass adds carbon to the atmosphere above and beyond what the biomass took out of the atmosphere during its life cycle. I believe the debate will be resolved to say that biomass is not carbon neutral, but that it is lower-carbon than coal. And it is certainly lower in toxics than coal.
It’s cost competitive with energy from new coal plants.
It has the potential for combined heat and power, which saves other fossil heating fuels and helps pay for the operation.
It’s base load. The capacity factor for biomass is 70 to 80%, depending on who you talk to.
fuel for biomass. A big question is what kind of fuel will be available, and how much. TCLP is talking about developing up to 20 megawatts of power from biomass - starting with one 5 to 10 megawatt plant.
The Michigan 21st Century Energy Plan estimates 465 megawatts of new biomass generation from forest sources are possible by 2025, not including ethanol from corn or biodiesel from soy. The plan says that if forest products workers were put back to work and the mills put back in operation, another 16.8 million dry tons of trees could be sustainably harvested for forest products each year. Not harvesting trees for biomass, harvesting them for forest products and using the residues (sawdust, branches) for biomass. The plan estimates that just the residues from these products could double the biomass plants in Michigan. (As of the date of the report there there were five in Michigan, totaling 159 megawatts, but there are more now.) Or the plan says that more agressive sustainable forestry practices could provide the same additional energy.
The plan also estimates that 1.9 million acres of crop land are presently standing idle in Michigan. The plan says this acreage
could be used to grow energy crops such as willow, poplar, or switchgrass. Willow and poplar have a three year harvest cycle. Switchgrass requires three years to mature to the first harvest, and then it can be harvested annually. Based on those assumptions, presently abandoned cropland could potentially contribute an estimated 5.7 million dry tons to the annual energy needs of the state.
These are conservative assumptions, to say the least. They assume that of the total amount of forest residue and crop potential that is available, only 14% percent would be used. According to the plan:
In practice, each MW of wood-fired electric power uses approximately 10,000 tons of wood residues per year. This assumes the power plant operates at approximately 80 percent capacity, generating about 7,000 MWh per year, per MW of capacity. As evident from the above, Michigan is estimated to have an additional 27.5 million dry tons of biomass available that could, in theory, fuel 2,750 MW of generation each year. For modeling purposes, however, only14 percent of this cellulosic biomass potential (about 3.85 million dry tons per year) was assumed to be available for electricity generation by 2016, and a capacity factor of 80 percent was used for analyzing cellulosic biomass energy potential. The large exclusion percentage is a conservative assumption intended to reflect competing land uses, high transportation costs for agricultural and forestry residues (which effectively limit the distance from resource lands to biomass generating facilities), and stiff global competition in the paper and forest products industries.
The Synapse report for the Natural Resources Defense Council estimates that half of the total mass of a harvested tree cannot be used for other purposes and instead could be used for energy. Synapse cites a report by the Antares Group for the National Renewable Energy Laboratory that estimated there to be 248 megawatts of biomass power potential from forest and mill residues in Michigan, and another 666 megawatts of potential from agricultural wastes. Synapse concludes:
Michigan has significant biomass potential from its forest-products industry. Developing this resource could have multiple benefits, including less material placed in landfills or incinerated. Smaller-scale biomass plants would also synchronize supply better with periods of demand. The biomass used should be sustainably harvested or else be diverted material that otherwise would have been incinerated without energy recovery or being placed in a landfill. Biomass supply should be close to the generating plant to minimize transportation costs, and to keep the scale of the plant balanced with the amount of annual supply (or less). This will also ensure stability for fuel prices.
Skip Sansoucy told me that building a biomass plant is a “no-brainer” for meeting our energy needs in a sustainable and cost-effective way. Skip pointed to the experience of Burlington, Vermont, which built a 50 megawatt biomass plant 30 years ago. Skip says it was the best thing they ever did. http://www.cctv.org/watch-tv/programs/burlington-electric-department-building-local-and-sustainable-energy-future (The Burlington plant is much larger than what TCLP is talking about).
focusing on the right questions. Biomass has a lot to recommend it as a component of our energy portfolio of the future: renewable energy, stable fuel pricing, local farm and forest products jobs, more control over our own destiny. It should be part of the mix. How much of the mix depends on careful study of the level of fuel that is sustainable for the region. It sure looks sustainable if we are talking about 10 to 20 megawatts, and the Michigan 21st Century Energy Plan estimates 465 megawatts of new biomass generation is possible from just 14% of the available forest sources, without counting agricultural sources. But we need to study it, we need to discuss it, we need to make sure.
And moving forward with biomass depends on guaranteeing that certain things are off the table, which I believe are already off the table: tires, urban wood waste, and co-generation with coal. Like the sustainable fuels discussion, the environmental controls discussion also needs to be driven by the question of what is the best we can do, instead of what is the minimum we have to do.
And it needs to be driven by a discussion of integrated resource planning: being sure we are doing everything we can with wind, distributed solar generation, and energy efficiency. TCLP’s current 10-year plan is to get to 30% biomass, 1% solar, 4% landfill gas, 6% wind, 4% natural gas, 38% from the Detroit Edison and Consumers coal plants, and 17% energy purchased on the open market.
The discussion we should be having is, should we ramp up the energy efficiency goal from 1% to the gold standard of near 2%? Can we increase our wind from 6% to 10%, and what would that cost? Can we take solar from 1% to 2%? Is there enough fuel for 30% biomass, given other facilities that are or may be coming on-line? Or should we be looking at 10 or 20% biomass, and buying more energy from coal?
The point is, a good IRP process – which is essentially what TCLP is doing right now – will answer these questions. It also demonstrates what is and is not possible by referencing other benchmarks. The benchmark for wind in Michigan is 10% right now, so let’s not hinge our plans on getting to 40% wind. The gold standard for EE is 1.9% per year, so let’s not count on being able to reduce consumption by half in the near future. Solar has a key role, but what is possible with solar in a sun belt state is not possible here.
Let’s use the accomplishments of those engaged in best practices in the industry to put a realistic and achievable plan together. Not bare minimum, but achievable and grounded in what is actually being done in the region. We need to be a leader, but a pragmatic leader engaged in sound business practices and responsible environmental stewardship.
The beauty of public power is that this kind of discussion is possible. We have a utility that belongs to us, is run by a volunteer board, and is willing to go the extra mile to meet our expectations about sustainability and customer rate protection.
What are your expectations? Please let us know.
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