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Powering the Mitten: As coal plants shut down, where will our electricity come from?

Marco Bruzzano, vice president for strategy & corporate development at DTE Energy

Marco Bruzzano in Ann Arbor

Marco Bruzzano

James Clift

James Clift of the Michigan Environmental Council

James Clift of the Michigan Environmental Council


The "Mighty Marysville,"  a coal-fired power plant in Marysville, Michigan, has been an iconic fixture of industry along the banks of the St. Clair River since Herbert Hoover was in the White House and Babe Ruth was in Yankee Stadium. At its peak, the plant generated 167 megawatts of electricity—that's roughly enough to power 167,000 homes—and employed 250 people. 

Today, the plant is no more. 

It was decommissioned in 2011 and sold by DTE Energy to a private development company this past May. The development company is is working on deconstructing the plant, cleaning up the land and identifying potential development concepts for the 20-acre riverfront site.

"Maybe a casino, a water park, condominiums, anything is possible," says Randall Fernandez, Marysville's City Manager. "We don't have a downtown, so possibly a town center or other retail establishments. It's going to take someone with deep pockets to develop the site."

What happened in Marysville will likely continue in years to come. In the face of an aging fleet of plants, new EPA regulations for air toxics and carbon, and decreasing natural gas costs, coal plants may well become a thing of the past.

According to data reported by the Energy Justice Network 
and Crain's Detroit Business, five more coal-fired power plants are slated for closures in the next several years in Michigan.



"There are two primary factors (driving coal plant retirement)," says Marco Bruzzano, Vice President for Strategy & Corporate Development at DTE Energy. "First is the age of the plants. About a third of our fleet is 50 years old or more, and in the next 10 years we’ll have about three-quarters of our fleet more than 50 years old. At some point the level of investment that’s required to maintain the plants just makes them uneconomic. Then add on top of that the cost of compliance with new environmental regulations. We are finding ways to comply in the most capital-efficient way possible, allowing us to extend the life of some of our plants into later this decade or into the early 2020s, but it would be difficult for them to continue past that time."

Michigan Environmental Council's James Clift would like to see that timeline expedited.

"One of the big problems with our current regulatory process is that health care costs and damages aren't considered at all," says Clift. "That in no way gets considered in this decision-making process. We would like to see a path forward that controls costs, limits risks, protects the environment and create economic development. We think if we looked at all those criteria, we would clearly be closing a lot more coal capacity." 

A 2012 "Ripe for Retirementreport issued by the Union of Concerned Scientists identified up to 32 coal-fired units in Michigan—3,532 MW of capacity—as uneconomic and ready for retirement. Air pollution from Michigan's oldest and dirtiest coal-fired power plants, according to the report, is responsible for $5.4 billion annually in health damages.

But the study also notes that those old, dirty plants are also responsible for approximately 29 percent of Michigan's generation capacity. Michigan is a coal-heavy state; 54 percent of its electricity was derived from coal in 2012, according to the U.S. Energy Information Administration. Michigan also had more natural gas storage capacity than any other state in 2011 and is rich in natural gas resources.


Meanwhile MISO, the Midcontinent Independent System Operator, has forecasted a shortage of capacity as soon as 2016, Nick Khouri, Senior Vice President for Corporate Affairs at DTE Energy recently told Model D, primarily due to anticipated closures of coal-fired power plants.

So where will Michigan's future power come from, if not from coal?

"Natural gas is the next logical step," says Brian Wheeler, senior public information officer with Consumers Energy, which announced it will retire 7 coal-fired units by 2016. It is replacing much of that capacity with natural gas.

"We're fortunate that natural gas prices have come down a lot over the last five to ten years," says Wheeler


Consumers Energy is also developing wind generation capacity. 

"We are close to opening up our second wind park," says Wheeler. "We have one on Lake Michigan in Mason County and then our second one is opening up in the fall."

According to Bruzzano, three main options come into play as DTE Energy plans for replacing the capacity of its retired coal-fired power plants.

"Gas-fired generation is one, and renewables is another," says Bruzzano. "Then there’s the other part, which is how do we manage demand? Energy efficiency will also continue playing an important role going forward."

Bruzzano says that while renewables are an important piece of the puzzle, they must be supplemented with a more reliable generation source.

"We need to take into account the fact that from a reliability perspective, renewables are intermittent," he says.

Clift argues that solar and wind have strong predictability.

"
For grid operators the only question is whether a energy source is predictable—what power is a energy system operator willing to put on the grid the following day and at what cost?," says Clift. "Wind and solar are predictable and managing the variable nature of those sources have not been a problem for grid operators. MISO has announced that it has had no problem dealing with renewable energy to-date. Note, that multiple states within the MISO footprint have renewables contributing more than 20 percent of their power. And solar power provides power during peak usage times and therefore adds to the robustness of the grid."

So far, DTE has retired about 500 MW of its coal-fired capacity and has developed 858 MW of wind capacity, says Bruzzano. Because of it's intermittency, however, utilities can only count 15 percent of wind capacity for regional reliability targets under MISO standards. The remainder of that lost 500 MW capacity has been supplemented by purchased power from third parties.

Regardless of the type of energy source Michigan switches to, one thing is clear: the transition is going to cost money. DTE's CEO, Gerry Anderson, told Crain's Detroit Business the company will be putting $8 billion into updating the grid in coming years, and expects a $15 billion investment statewide. Keeping rates as low as possible has been, and will continue to be, a priority for the utility industry, says Bruzzano. He believes rates will stay consistent through 2018, but it's hard to say what will happen after that.

"We are entering a period that is similar to what we experienced in the late ‘70s and the ‘80s; there is going to be rate pressure," he says. "In terms of exactly what that means for where rates will go, we’ll know more as we get closer to that time."
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