(Photo by pirate johnny via Creative Commons)

When it comes to energy efficiency, a kilowatt-hour saved is more than a penny earned.

Spending money on energy conservation has been a better investment for most utility ratepayers than building new power plants and transmission lines.

In Minnesota, utility conservation programs have returned an average of 8 cents per kWh for every 1.5 cents spent, according to the Center for Energy and Environment (CEE), a nonprofit that promotes efficiency.

Yet the two are rarely compared head-to-head in planning discussions. Savings are generally seen as an accounting adjustment to be made before decisions about how much and what kind of new generation to add to the system.

A subtle change to a state statute this spring seeks to change that by making Minnesota’s “energy efficiency power plant” a part of future energy planning debates.

Mike Bull, policy and communications director for the CEE, said the changes will likely be incremental at first, but the aim is to change the way utilities and regulators think about efficiency.

“We’re trying to pull it out, make it visible, and make it a clearer choice between supply- and demand-side resources,” Bull said.

The CEE is a member of RE-AMP, which also publishes Midwest Energy News.

‘You didn’t see it’

Every few years, regulated utilities in Minnesota need to get approval for a long-term resource plan, a forecast of future electricity demand and how the utility intends to supply enough power to meet that load.

Utilities also file regular energy conservation plans that outline how they expect to satisfy the state’s energy efficiency target, which asks utilities to achieve annual energy savings equal to 1.5 percent of sales.

The projected impact of those conservation plans gets subtracted from utilities’ long-term electricity demand forecasts early on in the resource planning process, said Bull, who previously worked as a resource planner for Xcel Energy.

“You didn’t see it. It was just a mathematical change in the load forecast. It wasn’t a visible option for comparing against supply-side resources,” he said.

As a result, there’s been little consideration given to whether it might be a better deal for customers if the utility spent money on lowering electricity use instead of building new power plants.

As part of a broader jobs and energy bill this spring, the Minnesota Legislature said that conservation should be considered an “energy resource,” and a preferred one at that:

“The legislature finds that energy savings are an energy resource, and that cost-effective energy savings are preferred over all other energy resources. The legislature further finds that cost-effective energy savings should be procured systematically and aggressively in order to reduce utility costs for businesses and residents, improve the competitiveness and profitability of businesses, create more energy-related jobs, reduce the economic burden of fuel imports, and reduce pollution and emissions that cause climate change.”

Bull said it clarifies that conservation isn’t only about meeting the state’s efficiency target. Efficiency, he says, should also be pursued above and beyond 1.5 percent whenever it’s more cost-effective than building new power plants and transmission lines.

“It’s to solidify its place in the resource hierarchy,” Bull said. “[What] we were looking to do with that language was to make it more clear that energy efficiency should be the first resource that’s turned to as we collectively do resource planning for our utilities.”

What happens next

One challenge early on will be figuring out how to compare efficiency projects side-by-side with generation projects. The state’s energy office is already discussing how it will measure cost and reliability on the same scale, Bull said.

The changes also clarify that the 1.5 percent annual efficiency target isn’t the sole responsibility of utilities; that the state can and should pursue savings “without direct utility involvement,” such as through codes and appliance standards, Bull said.

The Legislature also instructed the state’s Division of Energy Resources to conduct a series of meetings and produce a report on some of the questions and challenges that lie ahead for the state’s energy efficiency goals.

Among the questions to be addressed is how efficiency should be incorporated into resource planning and certificate-of-need proceedings in the state. The report is due to legislators on January 15.

While it’s still unclear how conservation will factor into those discussions, Bull said it makes sense for the Public Utilities Commission to consider efficiency in them:

“If it can be shown that energy efficiency resources are available to a utility at a lesser cost than, say, a supply side resource, than I think everybody’s better off if the commission encourages the energy efficiency resource.”

FRAC SAND: Railroads are key to the growth of frac sand mining in Minnesota and Wisconsin, as the sand can’t be shipped long-distance by truck economically; and a Wisconsin county will vote tomorrow on a proposed sand mining ban along a scenic stretch of Mississippi River bluffs. (EnergyWire, Rochester Post-Bulletin)

***SPONSORED LINK: Connect with Renewable Energy business leaders, investors, technology innovators, government officials and university educators September 9-11 at RETECH 2013! Midwest Energy News readers receive 10% off with VIP code: MEN10 – register today! ***

COAL: Developers of a failed Minnesota clean-coal project won’t have to make payments on $9.5 million in state loans. (Minneapolis Star Tribune)

POLITICS: A review of disclosure forms finds one-third of U.S. senators have direct investments in energy firms, and a House bill would cut federal renewable energy spending in half. (E&E Daily, The Hill)

SOLAR: Energy Secretary Ernest Moniz pledges to keep moving forward on solar, saying: “the scale and time frame of impact of solar technology, I believe, is underestimated.” (The Hill)

OIL: In an unprecedented move, a North Dakota county zoning board declines to make a recommendation on a proposed oil waste landfill; and the U.S. becomes a net gasoline exporter for the first time in 50 years. (Bismarck Tribune, Kansas City Star)

NUCLEAR: Michigan’s Palisades nuclear plant is up and running again after a repairs are made following a leak of radioactive water into Lake Michigan, and the Perry nuclear plant in Ohio is shut down to repair a coolant leak. (MLive.com, Cleveland Plain Dealer)

BIOFUELS: The leader of an Iowa ethanol industry group says he’s “optimistic” that more gas stations will begin carrying E15. (Des Moines Register)

TECHNOLOGY: A wind-to-hydrogen plant, similar to a project proposed in Minnesota, is up and running in Germany; and a group of Minnesota inventors, led by actor/writer Rich Kronfeld, develops a prototype for a hybrid bicycle/electric commuter car. (Houston Chronicle, Minneapolis Star Tribune)

ICYMI: Still unclear on how capacity markets work? Here’s an explainer. (Midwest Energy News)

COMMENTARY: The weaknesses of nuclear power are economic, not environmental. (Quartz)

A train hauls frac sand outside Serena, Illinois in March 2013. (Photo © Matt Lastovich, used with permission)

©2013 E&E Publishing, LLC
Republished with permission

By Blake Sobczak

Mountains of smooth, yellowish sand have built up around rail terminals in the Midwest, en route to U.S. shale oil and gas plays. The chalky “frac sand” keeps crude flowing smoothly during hydraulic fracturing, making it one of the most sought-after commodities in Wisconsin and Minnesota.

The budding frac sand industry’s future hinges on the survival of the U.S. shale oil and gas boom. But frac sand’s fate is also tied down to the web of freight railroads that criss-cross the Midwest.

“Rail is really integral to the whole [frac sand] industry,” said Thomas Woletz, senior manager at the Wisconsin Department of Natural Resources. “If there is a bottleneck right now, it’s from the transport infrastructure, not the lack of sand or mines. It’s the lack of ability to get it out.”

North America’s leading freight railroads haven’t failed to notice the appetite for silicate sand. Rail giant Union Pacific Corp. has a “Sand 2 Shale” program in place to expedite delivery to areas such as the Permian Basin and Eagle Ford shales in Texas.

Canadian National Railway Co. recently announced it would speed up its $33 million upgrade of a branch line that runs through prime frac sand territory in Wisconsin’s west-central region. Canadian National said it would focus on the 74-mile stretch between Wisconsin Rapids and Blair, Wisconsin, prepping the tracks to handle heavier loads and faster trains. Canadian National now expects to finish the improvements by December 2014, a year earlier than originally planned.

The rail-sand symbiosis works both ways, however, as seen less than 40 miles down the tracks in Winona, Minnesota. There, a rail loading terminal has temporarily closed its doors and officials report stagnant frac sand traffic in part due to infrastructure restraints.

“We’re basically on a sand bar in the Mississippi River valley, so land is limited,” said Carlos Espinosa, assistant city planner for Winona. “So the ability to create unit trains in the city is limited as well.”

Winona sits at the confluence of several major rail lines, including a Canadian Pacific Railway Ltd. route. In addition to operating the Soo Line along the Mississippi River, in 2008 Canadian Pacific acquired the Dakota, Minnesota & Eastern (DM&E) railroad that runs west from Winona to South Dakota. The railway company did not respond to requests for comment about its Minnesota operations.

“We do have capacity to send out frac sand via rail,” Espinosa said, “but the real room for growth is in western Wisconsin, where they have a lot more land, a lot more area.”

Regulatory advantages

The regulatory environment in Wisconsin is also seen as friendlier toward frac sand miners. The Minnesota Legislature recently allowed local governments to extend moratoria on mining for up to two years, and companies hoping to mine on more than 20 acres of land must now complete a costly environmental impact assessment (EnergyWire, May 24). Critics of the frac sand industry often take issue with increased traffic near mining sites and point to the health hazards posed by silica dust.

Local pushback, infrastructure and regulatory constraints have combined to keep Minnesota’s frac sand industry relatively small. Wisconsin has roughly 105 active frac sand mines, according to the state DNR, while Minnesota can claim eight or nine.

“Everything’s working against [frac sand] in Minnesota right now,” said Dave Christianson, senior planner for freight and rail at the Minnesota Department of Transportation. “And the industrial development in Wisconsin is pretty much picking up all the slack.”

Christianson said many of the richest sand deposits in southeastern Minnesota fall too far away from existing rail lines to be readily developed. While frac sand companies in Wisconsin sometimes truck their product as far as 60 miles to reach rail or barge terminals, shipping directly by rail can save frac sand producers as much as $10 per ton, according to a Sept. 14, 2012, Raymond James report.

That gives frac sand producers in rail-connected cities like Shakopee, Minnesota, or Taylor, Wisconsin, a competitive advantage.

“You can only truck sand a certain distance before it’s not cost effective,” said Martin Lehman, a spokesman for Berlin, Wisconsin-based Badger Mining Corp., which has operations on a Canadian National rail line in Taylor.

Lehman sits on the board of directors for the Wisconsin Industrial Sand Association, a newly formed trade group.

“Rail is a pretty critical aspect of our operations,” he said. “We wouldn’t be able to ship sand to many of the locations that we can economically, so we would be out of a lot of markets without the railroads.”

U.S. railroads shipped 112,000 carloads of industrial sand in 2009, according to the American Association of Railroads, a trade group that tracks freight statistics. By 2012, that number surged to nearly 293,000 carloads — with the AAR crediting much of that increase to demand for frac sand.

Canadian National spokesman Mark Hallman declined to elaborate on its frac sand business in the Midwest, citing competitive reasons.

However, Jean-Jacques Ruest, Canadian National’s executive vice president and chief marketing officer, said the company’s growing footprint in Wisconsin reflects a wider strategy in a May 28 statement.

“We are investing in increased rail capacity on the Whitehall Subdivision [in Wisconsin] to help move more frac sand and to develop a more robust supply chain for our customers in Wisconsin to connect with the oil and gas shale basins in North America,” Ruest said.

ALSO: The White House so far leaves a key climate policy tool on the table, the president says environmental activists are too focused on Keystone XL, ExxonMobil’s CEO calls climate change “a risk management problem,” and Energy Secretary Ernest Moniz explains climate science to a GOP congressman: “I know how to count.” (Reuters, Bloomberg, Cleveland Plain Dealer, ClimateProgress)

***SPONSORED LINK: The Inspiring Efficiency Awards recognize Midwest leaders who deliver groundbreaking advancements in energy efficiency. Apply or provide a nomination today.***

NUCLEAR: As aging nuclear plants shut down, Xcel Energy plans to spend $1.8 billion to keep two Minnesota reactors running; and contrary to the company’s official news release blaming wind, an Exelon executive says cheap natural gas is to blame for derailing the company’s nuclear upgrades. (New York Times, Minneapolis Star Tribune, Forbes)

FRACKING: Illinois’ fracking bill creates a rift among environmental groups. (InsideClimate News)

COAL: The coal industry pins its hopes on exports, and new water pollution rules are expected to have a significant impact along the Ohio River. (New York Times, Columbus Dispatch)

OIL: Amid a major pipeline expansion, Enbridge adds more employees to its offices in downtown Duluth; and pipelines vs. rail is a more complicated question than it appears. (Duluth News Tribune, EnergyWire)

TRANSPORTATION: A French all-electric car sharing service will make its U.S. debut in Indianapolis. (WRTV)

WIND: After a series of mechanical failures, the first wind turbine to be owned by a public utility is up and running again. (Traverse City Record-Eagle)

THE GREAT OUTDOORS: Wisconsin’s DNR works to meet increasing demand for electricity at state park campgrounds. (Wisconsin Center for Investigative Journalism)

COMMENTARY: How a recent court ruling could pose a threat to state renewable standards, and why the shale boom could end sooner than you think. (Christian Science Monitor, Forbes)

(Photo by Duke Energy via Creative Commons)

By Adam James

I have a confession to make. I am one of those folks who consistently write on wonky energy things without ever taking the time to write out simple explanations of the basic concepts or why they matter.

So, this piece will give a brief description of what electricity capacity markets are and how they work.

Part One: What is a Capacity Market?

There is a difference between energy and capacity, and power plants are compensated for both because both are important to maintaining the electrical system in different ways.

Here is the distinction. A power plant generates electricity that you use in your home—and it needs to be paid for that electricity. This happens in the energy market. In these markets electricity is like any other commodity, bought wholesale and resold to consumers at retail prices.

However, some grid operators are experimenting with capacity markets, or “forward markets,” which direct investment a few years ahead of when electricity needs to be delivered. This is important, since power plants are expensive and take a long time to build; adding the additional risk that they may not even be used can obviously discourage investment.  Hopefully, these markets create long-term price signals for all resources.

The basic idea is that power plants receive compensation for capacity, or the power that they will provide at some point in the future. The way these markets are run in the PJM territory, there is an auction every year that has a delivery date three years away. This auction is called the Base Residual Auction. Then, there are smaller balancing auctions every year leading up to the delivery date where bidders can buy or sell their commitments. These are called “Incremental Auctions,” and occur just in case a power plant cannot meet its commitment, and needs to purchase replacement capacity from another power plant.

One quick note here: in these auctions, there is no functional difference between a megawatt of power from a power plant and a megawatt of reduced power from efficiency or demand response. So although I’ve been saying “power plants” to help picture this process, demand-side resources can also bid into the auction.

Part Two: How Do Capacity Markets Work?

Every resource bids into the auction at its total cost of operation. Since power plants depreciate over time, this bid can sometimes be very low if a plant has been around for a long time. This makes sense, since the capital investments in the plant have been paid off and the total cost of operations is mostly employees and fuel. New plants total cost of operation is higher at first, since it would include the capital costs plus the operational costs.

This means that what price a power plant bids into the market can vary quite dramatically. A 30 year old nuclear plant could actually bid in very low and a wind turbine that has zero fuel costs could have a much higher bid.

So what happens is that the grid operator holds an auction based on projections for what electricity demand will be in three years. When I say “electricity demand,” I actually mean peak demand for that entire year, plus a bit extra as a buffer (called a capacity margin).

Let’s look at a practical example, accompanied by a picture.

Pretend that the grid operator had to meet 550 megawatts of demand. This is absurdly low of course, it’s closer to 170,000 in PJM, but the process is much easier to imagine with smaller numbers. The grid operator will hold then hold an auction to try to get the 550 megawatts of demand met at the lowest cost to consumers.

So then every resource bids into the auction in at its total cost of operation. In our hypothetical auction below, I’ve arranged the stack from lowest to highest cost bids, and drawn a line at the point where enough capacity has been acquired to meet demand.

As you can see here, the cheapest resource is one wind turbine bidding in 50 MW of capacity at $30 per MW. But wait! Just because they bid in $30 per MW, that does not mean that the turbine receives 30 per MW. All it means is that the wind turbine is now committed to have 50 MW of power available in 3 years from now. Looking further up the stack, another turbine bids in 50 MW at $50 per MW. Even higher up the stack, you can see efficiency bid into the auction at $130 per MW, and a coal plant bid in at  $150 per MW.

So what compensation do they receive? In this example, all of the resources, including the wind turbine at the bottom, receive $150 per MW. This is called the “clearing price,” and it is set by the most expensive unit needed to meet demand. In this case, that is the coal plant (shown in orange).

This is important to understanding the dynamics between different resources in the market.

In this example, efficiency actually displaced a coal plant (shown in purple) whose total cost of operation was $160 per MW. Think about it this way; if efficiency had not bid into the market, then demand would have been 100 MW higher and that coal plant would have to be called on to meet demand. Then the clearing price would have been $160 per MW.

For what it’s worth, because there is the Base Residual Auction followed by a few Incremental Auctions, there can actually be some weird exchanges. In our example, imagine that the coal plant receives the $150 capacity payment but then goes offline due to equipment malfunction. Suddenly, they are on the hook for 150 MW of capacity that they cannot provide. So, in the next Incremental Auction they sell their 150 MW commitment.

If the clearing price in the Incremental Auction comes in at $130 per MW, the coal plant has (oddly enough) made $20 per MW. This is because they got $150 for something that someone else is now going to do for them for only $130.

The other story here is that in capacity markets, lower cost resources can have the effect of suppressing prices for all of the resources since they ensure that demand can be met at a lower cost. For utilities who own lots of expensive generation, this is bad for business. For a company who owns lower cost resources, it is good. Consumers always benefit from lower prices.

Capacity markets are important. They are the firing line for the electricity system of the future, because they direct and encourage investments in different kinds of assets—whether that is clean energy, fossil fuels, or demand side resources like efficiency. A book could be written on the criticisms of capacity markets, details on how these markets function, and how they can be harnessed more effectively, but this should give a good overview of the nuts and bolts.

Adam James is a Research Assistant for Energy Policy at the Center for American Progress, Executive Director of the Clean Energy Leadership Institute, and a Freelance writer for Greentechmedia.

EFFICIENCY: A closer look at how energy efficiency scores will be incorporated into Minnesota real estate listings. (Midwest Energy News)

***SPONSORED LINK: The Inspiring Efficiency Awards recognize Midwest leaders who deliver groundbreaking advancements in energy efficiency. Apply or provide a nomination today.***

OIL: The U.S. Justice Department and the state of Arkansas file a joint lawsuit against Exxon over the Mayflower pipeline spill. (Reuters)

FRAC SAND: Developers of a proposed frac sand facility voluntarily withdraw their permit and agree to alter their plans after facing strong public opposition at a Wisconsin town meeting. (Winona Daily News)

FRACKING: Local officials in Michigan raise questions about whether proper procedures and safeguards are in place after a drilling operation runs out of water and begins purchasing millions of gallons from nearby towns, more than 100 people pack a public forum on fracking in Michigan, and an Illinois landowner welcomes what could be the state’s first large-scale horizontal fracking operation. (Traverse City Record-Eagle, MLive.com, AgriNews)

NATURAL GAS: Developers of a new natural gas plant near Toledo say it could eventually double in size if demand warrants. (Toledo Blade)

GRID: Energy Secretary Ernest Moniz says he’s developing a cybersecurity council within the Department of Energy to better protect against electronic threats to infrastructure. (The Hill)

CLIMATE: Although the proposal stands little chance of advancing, a Senate panel plans to take up a carbon tax bill later this summer. (The Hill)

WIND: An Oklahoma tribe objects to plans to grant a wind farm an incidental take permit for up to three bald eagle deaths per year. (Reuters)

WASTE-TO-ENERGY: A methane burner is now up and running at the wastewater treatment plant in Winona, Minnesota, part of the town’s broader effort to reduce energy consumption. (Winona Daily News)

BIOMASS: An Ohio company says “roasting” organic materials can produce a low-emission substitute for coal. (Crain’s Cleveland Business)

TRANSPORTATION: A study finds the lifetime costs of electric cars are comparable to their gasoline counterparts. (GreenTech Media)

ETHANOL: An industry-backed study says there is no direct link between the Renewable Fuel Standard and higher food prices. (Des Moines Register)

COMMENTARY: The high cost of coal gasification, and the coming U.S. distributed solar boom. (Forbes, GreenTech Media)

Home buyers in Minnesota can now get a peek under the siding. (Photo by Amy Doran via Creative Commons)

Like an MPG sticker in new car windows, a new home energy efficiency rating is about to start showing up on real estate listings in the Twin Cities.

NorthstarMLS, whose database lists home sales for Minnesota and western Wisconsin, introduced a new field this month for sellers to add a home energy efficiency score.

Home Energy Ratings System, or HERS scores, have become an industry standard for measuring a home’s efficiency, from the furnace to attic insulation.

The new feature will let Realtors, and eventually the public, search and sort home listings based on their efficiency rating. It also added a field to note other green certifications.

The listings service says the move is in response to growing awareness about energy costs, which for an average U.S. homeowner exceed property taxes and homeowners insurance.

MPG for homes

“I don’t think consumers would think to buy a car without having an idea of what your mileage is going to be,” said James Vagle, executive director of MN Green Path, a Twin Cities green-building program.

And yet home buyers have historically had relatively little information about how much they can expect to pay for heating and cooling after they move into a new home.

Utilities will typically disclose the high, low and average bill for the past year, and sellers sometimes provide copies of recent bills if asked, but they can say as much about the owner as the home.

HERS scores give an objective measure of how leaky or tight a home is and how efficient its heating and cooling systems are based on a series of tests and inspections.

Residential Science Resources in Eagan is the largest HERS rating organization in the Twin Cities, scoring more than 200 homes per month, mostly new construction.

Account executive Ross Anderson said the process starts before the builder breaks ground. Building plans are entered into a software program that projects the home’s likely energy use.

Inspectors visit the construction site at least twice to review framing and insulation. After the home is completed, infrared cameras, blower door and duct blaster tests are used to confirm the rating.

A standard home built to meet the 2004 International Residential Code gets a score of 100. A home that produces as much energy as it uses gets a score of zero. The lower the score, the more efficient.

In Minnesota, the energy code is tougher than the 2004 standard, but so are the winter heating seasons. A standard new home built today in the state scores around 80.

Older homes can get a HERS rating, too, but because they were built to older codes are unlikely to have a good score without significant upgrades.

Catching on

Most homes are not rated, though the inventory of homes with HERS scores is growing, especially for new construction.

This spring, in the Builders Association of the Twin Cities’ most recent Parade of Homes showcase, about 30 percent of homes on the tour had a HERS score.

Vagle, who is also public policy director for the Builders Association of the Twin Cities, said home builders are anticipating growing demand for the efficiency score.

“We see value in supporting that apples-to-apples comparison,” Vagle said. “Consumers are going to want to have this.”

NorthstarMLS is also following the lead of other regions, where homes listed with green certifications have sold for a premium, Vagle said. Other states to include HERS scores in home sale listings include Illinois, Nebraska, Arizona, Colorado, and Florida.

Anderson said his company’s ratings business is growing, and that he expects it could surge if Minnesota adopts a proposed building code update that would require blower door tests on new homes.

The price of a blower door test averages around $300, while a HERS rating, which includes a blower door test, costs between $500 and $1,000 for a new home. Utilities often help pay for the audits, too.

Value to buyers

A good HERS score can potentially increase the value of a new home, too. Anderson said appraisers for new homes have been more willing to incorporate the added value of efficiency when the builder can show a third-party certified rating.

Whether the scores raise the value of homes in the eyes of Twin Cities house hunters remains to be seen.

Samantha Strong, founder of a Minneapolis realty, Metamorphosis, that specializes in sustainable homes, said even among her progressive clientele, HERS isn’t a well known metric.

“You have people who geek out on it, but the reality is the general public just wants a house that’s in a good neighborhood that’s safe and that gives them warm fuzzies,” Strong said.

Strong hopes the ratings catch on, and thinks they might if homes listed with HERS ratings end up selling for more in less time than other homes.

Gaining traction may be tough in the short term because of the lack of homes on the market today compared to the number of prospective buyers. Sellers have little incentive to pay for detailed energy reports, and buyers have little time to request information or else they risk losing out to another bidder.

“It’s a tough sell right now,” Strong said, “but I’m sure we’ll hit more of a stable market at some point in the next few years, and then it will help differentiate your home.”

POLITICS: Sen. Lisa Murkowski says an energy efficiency bill will reach the Senate floor “very shortly,” the U.S. Chamber of Commerce backs proposed legislation to streamline energy development on tribal lands, and the White House’s new regulatory nominee vows to speed up energy reviews. (Houston Chronicle, Associated Press, New York Times)

***SPONSORED LINK: Connect with Renewable Energy business leaders, investors, technology innovators, government officials and university educators September 9-11 at RETECH 2013! Midwest Energy News readers receive 10% off with VIP code: MEN10 – register today! ***

OIL: Demand for oil in the developing world has surpassed that of wealthy nations for the first time. (Reuters)

ALSO: North Dakota towns cope with noise from increased rail traffic while state officials study whether oil field waste can be used to mitigate dust on rural roads, and a worker is injured in an explosion at a Michigan drilling site. (Dickinson Press, Fargo Forum, MLive.com)

COAL: A look inside Duke’s new Edwardsport, Indiana coal gasification plant, the largest facility of its type in the world. (Indianapolis Star)

MINNESOTA: Great River Energy says rates won’t increase in 2014 amid “a dramatic turnaround” in electricity demand. (Minneapolis Star Tribune)

OHIO: A new $1 billion pipe mill opens in Youngstown, Ohio to support oil and gas operations in the U.S. and Canada. (Youngstown Vindicator)

TRANSPORTATION: Local officials lobby for federal spending on high speed rail in Illinois. (Decatur Herald & Review)

SOLAR: Wisconsin researchers develop a solar cell that can also store energy. (Forbes)

COMMENTARY: Is Keystone XL the “Kim Kardashian of energy“? (Christian Science Monitor)

The LaSalle nuclear plant in Illinois. (Photo via NRC)

©2013 E&E Publishing, LLC
Republished with permission

By Hannah Northey

Exelon Corp. is scrapping expansion plans at nuclear plants in Illinois and Pennsylvania because of waning demand for electricity and competition with subsidized wind generators.

The country’s largest owner of nuclear reactors announced Wednesday it would sideline plans to add capacity to its LaSalle nuclear plant 75 miles southwest of Chicago and its Limerick plant 20 miles northwest of Philadelphia in a filing with the Securities and Exchange Commission.

Exelon has added about 1,400 megawatts of power to the grid by conducting “extended power uprates” at its nuclear plants, a process that involves installing larger pumps and valves with greater capacity to increase a reactor’s output by up to 20 percent.

That process at the LaSalle and Limerick plants, however, was derailed by market conditions and cheap wind, and Exelon has instead decided to take a $100 million hit in the second quarter, according to the filing.

“We removed these previously deferred extended power uprate projects from our program in response to market conditions and artificially depressed power prices resulting from subsidized wind energy,” Exelon spokesman Paul Elsberg said in a statement. “Extended power uprates are large investments with paybacks toward the end of plant life, and in this instance, we decided that the risk involved did not provide the necessary returns.”

Exelon has been front and center in the debate over whether the government should offer incentives for wind power, and last year was ousted from the American Wind Energy Association over its opposition to extending the production tax credit, a position that put it sharply at odds with the rest of the industry.

The utility’s executives have said wind energy tax credits are allowing companies to give away power for free or at negative prices at a time when gas supplies are historically low. Such factors, Exelon has said, are making it harder for nuclear reactors to compete in competitive markets (E&ENews PM, Nov. 27, 2012).

Exelon is mainly concerned with the federal tax credit of 2.3 cents per kilowatt-hour, which has allowed wind generators to pay consumers to take their electricity at certain points of low demand and excess capacity, such as overnight.

The industry won a one-year extension to the PTC in January and is now focusing on a longer-term strategy that doesn’t depend on the boom-and-bust reliance on federal support. Ongoing negotiations over comprehensive tax reform, which could include a PTC phaseout, are also a focal point (Greenwire, May 24).

AWEA took issue with Exelon’s reasoning today. “Exelon continues to use wind as a scapegoat for its significant financial woes,” said Rob Gramlich, AWEA’s senior vice president of public policy. “They made a losing bet on power market prices, which their earnings reports describe quite clearly. That is not a policy issue, it is a market issue unique to that company.”

Even so, Exelon continues to have a strong position in nuclear power, and Elsberg said the company is still on track to add capacity at its Peach Bottom plant in Pennsylvania and its Braidwood plant in Illinois for an additional 200 MW by 2016.

FARM BILL: The U.S. Senate passed a farm bill Monday with reduced funding for energy programs; the future of those programs still is yet to be determined. (Midwest Energy News)

SOLAR: 723 megawatts of new solar was installed in the U.S. in the first quarter of this year, an increase of 33 percent over the same period last year. (Reuters)

COAL: The Interior Department is failing to collect tens of millions of dollars in lease payments from coal mining on federal lands, according to an inspector general’s report. (New York Times)

NUCLEAR: Two new reactors in Georgia could determine the fate of the U.S. nuclear industry; a Minnesota nuclear plant makes progress in addressing flooding concerns; and FirstEnergy moves ahead with plans to replace steam generators at its Davis-Besse plant, a project expected to cost “in the hundreds of millions of dollars.” (New York Times, Minneapolis Star Tribune, Toledo Blade)

CLIMATE: Ohio-based American Electric Power tops a list of the country’s worst carbon polluters, Senate Democrats coordinate with the White House on climate strategy, and an Oklahoma congressman wants to cut funding for climate research and spend it on weather forecasting. (Forbes, The Hill)

WIND: A new 100-turbine wind farm is planned in Indiana, and Michigan-bound wind turbine components will share space with tourists aboard the S.S. Badger throughout the summer. (Muncie Star Press, Milwaukee Journal Sentinel)

OIL: The Sierra Club sues over the Keystone XL review process, which it says is “plagued by conflicts of interest”; and North Dakota teachers tour the Oil Patch. (Huffington Post, Fargo Forum)

FRACKING: Amish farmers in Ohio, whose religion forbids them from using the court system, struggle to negotiate the process of drilling leases. (New Republic)

MEANWHILE: American Indian leaders say bureaucracy remains the biggest hurdle preventing energy development on tribal lands. (Associated Press)

TRANSPORTATION: The Department of Energy pegs the cost of fueling an electric car at the equivalent of $1.14 a gallon. (USA Today)

TECHNOLOGY: Honeywell develops a thermostat that can be controlled across entire municipalities, South Sioux City, Nebraska, will be the first to test it. (St. Paul Pioneer Press)

COMMENTARY: The dream of nuclear electricity “too cheap to meter” is dead. (SmartPlanet)