Consumers Energy's Aggressive Push Towards Renewable Energy, with VP Timothy Sparks- [an Energy Central Power Perspectives™ Interview]
- Aug 24, 2021 8:43 pm GMT
Consumers Energy is in a hurry to go renewable.
The Michigan utility released an Integrated Resource Plan in June this year that advances its plans to close coal plants by fifteen years. The plan also outlines an ambitious goal to generate 63% of the company's overall generation mix from solar energy. As recognition for its efforts, the company recently won the Utility of the Year (Investor-owned) award from the Smart Electric Power Alliance (SEPA), a DC-based non-profit for a carbon-free grid.
The push to become a renewable energy-intensive company is a complex one for Consumers. In his conversation with me, Timothy Sparks, vice president of energy supply operations at the company, outlined details of company's move to renewable energy. In the short-term, it means a boost in natural gas generation to 40% of the overall generation mix by 2025. The company is also counting on developments in carbon sequestration technology to bring down the share of natural gas generation.
There's also the question of money to bankroll the transition. When I asked him about rate payer increases, Sparks told me that retiring coal plants and moving to natural gas generation will save approximately $650 million in supply costs, primarily from the reduced expenses on operations and maintenance. But critics caution against such assertions, pointing to the company's recent slate of rate increases. According to them, Consumers Feb 2021 request for a rate hike "openly admits" that the funds will be used by the utility to experiment with solar generation.
Here is an edited transcript of Energy Central's conversation with Sparks.
Your earlier goal was to exit coal by 2040. The June Integrated Resource Plan accelerates the transition by 15 years to 2025? Can you talk about the impetus behind the timeline change? How did you go about analyzing and implementing that change?
Our management wanted to get cleaner faster and we looked at ways in which we could do that. In order to get cleaner faster, we realized that we had to accelerate our coal plant closures. We said that, well, what could that mean?
We started doing several analyses, really on the reliability of our supply. We recognized that we just couldn’t do it all with just more solar or coal initially. We would have to supplement our system with more controllable generation.
That’s the reason, as part of our new IRP, not only are we shutting down the coal earlier but we are replacing most of those megawatts with existing natural gas facilities in Michigan. Coal plants are comple, not to say that natural gas plants are not. But it takes a lot less people to run gas plants as compared to coal units. We sent out Request for Proposals (RFPs) to all the power plants in our state. At the end of the day, we had four different power plants owned by two different entities that responded to our RFPs. One thing led to another and, as part of our plan, we plan to purchase those plants: the culver plant in 2023 and the CMS natural gas assets in 2025.
What is the lifetime of the new assets that you plan to purchase?
All of these assets were built in the year 2000. We expect they’ll have a useful life of, at least, 35 to 40 years. When we get out to that time period, probably around 2030s, we’ll probably have to make decisions related to other technologies. We’ll also have to think about overhauling these plants because they’ll have reached their end of life at that point of time.
It is interesting that you talked about natural gas. According to statistics available on your website, coal accounts for 22% of your overall generation mix while natural gas is responsible for 36% of the total. The share of natural gas increases to 40% in 2025.Subsequently, by 2040, it declines to 10%. Can you talk about the role that natural gas will play in your future generation mix?
We are really looking at these new natural gas plants that we would purchase as a bridge technology for the next 10 to 15 years that will help us maintain a reliable supply system and, ultimately, translating to a reliable electric grid while we ramp up our renewable portfolio – more solar, more wind, and we do believe that batteries will become more important in our supply mix in the future. You have to have controllable generation (as part of the energy mix) because people want to use their electricity when they want to, and not when the sun is shining or when the wind is blowing. Further out into the 2030s, utilization of natural gas plants depends on whether we can sequester carbon from the exhaust and that'll determine how much we run them later into the 2030s.
Based on your existing research, do you think carbon sequestration will turn out to be a viable technology to enable you to prolong the life of these natural gas plants?
Time will tell if carbon sequestration becomes a viable, economic technology. The geology of Michigan lends itself well to carbon sequestration. But it is not yet a mature technology and the price point needs to come down.
Based on our current research, we are hoping to prolong the life of, at least, one of the natural gas plants we have invested in. Maybe we'll keep some of those (new) gas plants running beyond 2040, if we can ultimately make them carbon-free. In the alternate scenario, we will retire the plants. But that's twenty years into the future. Lots of things can happen in 20 years.
What role do you foresee for battery storage in the future? Its role remains relatively constant – from 10% in 2025 to 12% by 2040. Is that a function of the current price point for battery storage?
Batteries will also become an important part of our mix but that will be years off into the future. We believe their share of our energy mix will be higher in the future. It really is a function of the price point. We are just waiting for evidence of it (storage) becoming more economic (for use in the grid). When we prepared our Integrated Resource Plan (IRP), we had to go with available information in the industry right now. You can always speculate a little bit but it may or may not happen. Based on current pricing trends, we see battery storage coming into play in a big way after 2030.
The share of solar in your energy mix is expected to go up from 11% to 63% in less than 20 years. Can you talk about the system-wide changes that are required to make this dramatic transition?
I like to break down that transition into two categories. There’s those solar arrays that will be connected to the distribution level and those that will be connected at the transmission level. Upgrades to T&D lines will evolve over time and our current plan is to install over 500 MW to 600 MW of solar each year. I anticipate more localized issues in our requiring upgrades. A 200 MW solar installation, for instance, will certainly require a connection, or collector substation. But, its location on the transmission grid may or may not require system upgrades beyond the collector substation.
Traditionally, distribution systems are not smart systems. They don’t have a lot of smart devices on them. Our current task is to implement two-way power flows in these systems. We plan to deploy devices that connect back to the control center and with each other so that we have the telemetry to know what the power flows are doing, what the voltages are doing. As far as transmission levels are concerned, we anticipate more, larger solar arrays will be connected to them due to economies of scale. Location and transmission upgrades needed to accommodate the 100 MW and 200 MW solar arrays are the most important tasks we have on hand for upgrading transmission lines.
Consumers Energy retired seven coal plants in 2016. Can you talk about your experience working with communities after retirement of coal plants?
It is better to announce the plans as early as possible to have the time to work with the communities. From a community perspective, it was critical that we announced publicly as soon as we could. Then, we started working purposefully with the communities. These plants were a major part of their tax base and our employees provided revenue to businesses. I think we were right. When you have the time to work through whatever issue it is, you can usually come up with a good solution that everyone in the end is satisfied with.
With regards to the anticipated future coal plant requirements, we are jumping right in and we are doing the very same thing. For example, for our Campbell facility in Western Michigan, announcing that we are going to retire those units in 2025 gives us time with the community and work out a transition plan for them to understand what tax base they will lose over time and how we can repurpose the site for the community.
How do you anticipate electric load trends to play out in the future?
If electric vehicles catch on, that’s certainly going to be additional load on our system. If the talk that’s currently going on about converting gas stovetops and ranges to induction comes to fruition, that’ll increase our electric load as well. It could accelerate some things, such as inclusion of batteries or other electric distribution system enhancements, depending on the extent of the increase and where it shows up.
Can you talk about the role that the CE way will help you in making the energy transition?
The CE way will help us out tremendously during our energy transition. As we look at what we are trying to achieve, it will help us take a methodical approach to problems and how to solve them. The structured way of solving issues will help us plan for resources in areas we haven’t traditionally worked in, like inverter based technologies. At the same time, it will help us focus on our traditional work so we don't lose track of the standard blocking and tackling.
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