June 24, 2005
KCP&L likes to boil water and play wind games
Kansas City Power and Light Co. spent the past year putting on workshops for big power customers and community players in hopes of gaining a consensus for their latest long-range energy plan. Local environmental and citizens groups didn't buy in, so KCP&L is going ahead anyway
They are taking their “plan” to electric rate regulators on both sides of the state line. Company officials are (gulp) projecting a rate increase of 15 to 20% by 2010. KCP&L serves a large portion of the KC metro area.
The centerpiece of their proposal is the $1.2 billion 850 MegaWatt Iatan 2 coal-fired power plant to be operating by 2010 next to the 670 MW Iatan 1 unit. Iatan 1, just north of Weston, MO and on the Missouri River, has been on-line since 1980.
The Iatan 2 design is identical to the now-abandoned proposal for the Weston Bend “merchant” power plant KCP&L wanted to build nearby. That is, just far enough away from Iatan 1 that the power would qualify for sale on the open market. Just a few years ago merchant power plants were all the rage in the utility industry until the collapse of Enron soured investors.
The proposed Iatan 2 is about as big as they come, and will emit some 6 million tons of carbon dioxide per year. KCP&L will own 500 MW and sell the rest to other, as yet unnamed utilities. It will not have dedicated mercury controls though its scrubber will capture maybe 30% of the mercury. KCP&L is also offering to retrofit scrubbers onto Iatan 1 and its older boilers at LaCygne, something the company would have to do anyway.
The question, of course, is why any company would want the public to commit to what is essentially a 19th century technology for boiling water when alarm over climate change is escalating?
To throw the inquiring public and environmentalists off their trail, KCP&L has committed to install 100 MW of wind power in Kansas. The greens aren't taking the bait since they know that western Kansas has world-class wind resources waiting to be utilized in a big way. In May, Gov. Kathleen Sebelius of Kansas signed into law the creation of a Public Transmission Authority, which has the power to build major new transmission facilities in western Kansas if the utilities fail to step up to the plate. Unfortunately, the authority is dithering in the dugout. Westar has announced their own big coal-fired power plant for 2013.
Just how Kansas can use its wind power to displace some $2 billion/year in energy imports is a major question if Kansas utilities aren't buying in.
Finally, KCP&L is proposing to spend some $50 million on a five-year pilot project for demand reduction and energy efficiency. This represents a major new effort for the company. Experts in this field believe 40 to 50% of normal load growth can be displaced with such energy savings programs at a cost lower than adding new capacity.
That's the lay-of-the-land up to now but let's take a closer look at the facts. My sources are testimony from the electric rate proceedings at the Kansas Corporation Commission, FERC (Federal Energy Regulatory Commission) and EIA (Energy Information Agency) databases and the KCP (Great Plains Energy) website. In fact, if you want to know where KCP&L is really heading with all this, take a look at their presentations to industry colleagues and investors on the Web site.
First question: Is there an urgent need?
At the recent KCC hearing KCP&L staff acknowledged that, under their expected demand growth scenario, there would be little or no impact on ratepayers if the coal plant was completed in 2012 instead of 2010. Under the low-load growth scenario, it could be delayed to 2013. Since it takes four years to build a coal plant, using their own numbers, we can conclude that the "drop dead" decision point for Iatan 2 would be 2008 or 2009, not 2005.
KCP&L hangs their hat on a projection that peak demand in 2010 will be 3959 MW, and they will be 431 MW short of in-house capacity, considering a 12% margin of safety. A presentation on their Web site in October 2004 said they owned 4043 MW. But cross-examination revealed they had not subtracted from this estimate some 170 MW in savings from their proposed demand reduction and energy efficiency pilot program. Further, they admit that any shortfall can be made up with purchased power agreements, and that they have been allowing their existing PPAs to expire.
Interestingly, during their all-time peak in 2003, KCP&L still had enough juice to sell 520 MW to other utilities. Also, the company claims that natural gas and oil peaking units are too expensive to rely on for this purpose anymore. Yet in 2003, only 1% of KCP&L's electricity was generated from oil and gas even though those facilities comprise 31% of their capacity.
Anyone who has lived in Kansas City for very long knows we could have a heat wave any time. But the question is, what is the most economical and environmentally sound way to address big power peaks that occur once every few years? Using a new 850 MW coal plant for this purpose is like shooting a fly with a cannon.
If KCP&L succeeds in building Iatan 2, it will be needed only a week or so every year for many years. Meanwhile, its power will be sold on the wholesale market, which, voila!, is what KCP&L wanted to do with their proposed Weston Bend plant. Our analysis indicates that peak demand growth could be handled in the foreseeable future by enhanced demand reduction programs and purchased power agreements while base load is built up with 50 or 100 MW increments of wind power.
Is wind power a good option?
KCP&L accurately points out that wind turbines are a base-load option like coal and not suitable for meeting peak demand. To guard against a shortfall in output, where the wind is blowing weakly during peaks, it is necessary to provide backup power from fossil fuel peaking units or from buying off the grid.
On the other hand this problem is greatly reduced at the best wind sites like in western Kansas and by spacing apart one's wind capacity so that when the wind is not blowing at one location it's still blowing at the other. Also modern weather forecasting allows very accurate forecasting of wind speeds, so back-up systems can be ramped up in plenty of time. A recent government study estimated that wind power can be incorporated into the regional grid with little concern as long as it remains less than 20% of total capacity.
Last year Westar received 17 bids from 13 wind power developers. The company determined that the cost of wind power ranged from $25 to $30 per MWh after deducting the $18 per MWh federal production tax credit (PTC.). This compared to $46.50 per MWh for a new 600 MW coal plant. So even without the PTC, wind and coal are neck and neck. But the cost of wind power has been falling and the cost of burning coal is rising. Further KCP&L is seeking the right to pass on to ratepayers any increase in its fuel costs. There are no fuel costs associated with wind power.
During cross examination KCP&L staff admitted their model shows that, if the PTC is extended by Congress as expected, ratepayers would be better off with more wind power. But KCP&L cites their lack of experience with wind and concerns about how it will fit into their system. We simply note that wind farms are springing up well enough in neighboring states so somebody is in the know.
Also during cross examination KCP&L admitted that Sprint got a discount to sign on to their plan, and that Sprint wanted some of the 100 MW of wind assigned to them — apparently so they could brag about it. Can't blame Sprint for driving a hard bargain, and we applaud their advocacy of renewable energy. But isn't KCP&L, in effect, granting a discount for renewable energy? What about the rest of us?
While KCP&L and other area utilities have never done much about reducing demand, it has been proven to work well in other parts of the country and was cheaper than adding new capacity.
What's most troubling about KCP&L's analysis of this option is they started with the assumption that Iatan 2 will be built. When this huge new plant comes on-line what incentive will KCP&L have to reduce demand? Kinda reminds me of the story about the fox Tyson, Inc. hired to run a weight loss program for their chickens.
KCP&L staff suggested that it would be difficult to obtain the needed power from other utilities because of transmission problems. But they offered no specific evidence to support this claim. Indeed, in 1999 their 500 MW Hawthorn No. 5 boiler blew up and was out until 2001 and they apparently managed quite well to make up the loss in capacity.
KCP&L has not made the case for their new coal plant. There are viable alternatives, at least for the foreseeable future. And talking about the future, don't you think we owe it to our grandchildren to go the extra mile, to do things differently...before it's too late?
Craig Volland is president of Spectrum Technologists, an environmental research firm. He is certified as a Qualified Environmental Professional and formerly was a member of Mid America Regional Councils Air Quality Forum. He is active in the Kansas Chapter of the Sierra Club.
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