Holland, Michigan's James DeYoung power Plant began operations in 1939. (Photo by Norm Hoekstra via Creative Commons)

Michigan city plans big bet on natural gas, stirring up controversy

When it comes to renewable energy, as the city of Holland goes, so goes Michigan.

And that thought worries renewable energy advocates.

Holland, like many other small and mid-size cities, generates its own electricity through a municipal utility. And like many municipal utilities in the state and region, Holland’s operates an aging coal-fired power plant that will need to be replaced soon.

As a result, this western Michigan city has been debating how to supply its residents with electricity for the next four decades.

If they follow a 40-year community energy plan developed with public participation in 2011, the city will invest in energy efficiency and a diversified mix of renewables and natural gas. Or they could set that plan aside and follow an engineering firm’s recommendation to build a large natural gas plant.

Critics say the latter option neglects efficiency, overestimates demand, and puts the city’s financial well-being at risk.

Similar debates about energy sources are sure to play out in other small cities with aging coal plants, especially in states like Michigan that require utilities to get an increasing percentage of their electricity from renewable sources like wind or biomass, says Skip Pruss, who is the former director of Michigan’s Department of Energy, Labor, and Economic Growth. Pruss works for 5 Lakes Energy, a Lansing, Michigan, consultancy that advises renewable energy firms.

One big unknown, Pruss and other experts say, is whether utilities like Holland’s will do the careful analysis of energy options that’s needed, then come through with a plan that incorporates renewables and makes sense for the 21st century.

A huge investment

Michigan already has a renewable portfolio standard that requires utilities in the state to obtain 10 percent of their electricity from renewable sources by 2015. And on the ballot this fall is an initiative known as 25 by ’25, which would increase that requirement to 25 percent of electricity from renewable sources by 2025.

Fifty-five percent of likely voters support the measure, according to a recent poll.

Efforts to get proportionally more electricity from renewable energy come at a “very interesting time with regard to energy generating resources,” Pruss said. “We have aging electricity generation resources. The average age of the fleet of coal and nuclear power plants in Michigan is 54 years.”

In that sense, “Michigan is a very good proxy for the country,” he added.

“The whole landscape is rapidly evolving, technologies are maturing, all sorts of risk factors apply that didn’t before,” Pruss said. These include tightened environmental rules, volatility in fuel prices, and trends toward more distributed resources and reduced growth in demand for electricity (load), he explained. What’s more, building a new power plant or installing other power sources represents a “huge investment for a community,” Pruss said.

For all these reasons, both [municipal utilities] and investor-owned utilities need to “carefully address the risk of any investment” in new electricity generation, Pruss said.

Searching for efficiency

Holland originally proposed to build a new coal-fired power plant to replace their current coal plant. But their plan was rejected by state regulators in 2010, and the city went back to the drawing board, launching a planning process to find another source for baseload power.

In collaboration with the energy consulting firm Garforth International, the city conducted an open, deliberate planning process involving both community members and city officials. They came up with a 40-year plan that incorporated retrofits for all buildings for improved efficiency, wind, biogas, solar, and a combined heating and power. Together these changes would slash the city’s per capita greenhouse gas emissions from the equivalent of 24 metric tons of carbon dioxide to 10 metric tons by 2050.

But Holland had short-term needs as well. “We recognized that we have some immediate issues with baseload power supplies,” says Dave Koster, general manager of the city’s municipal utility, the Holland Board of Public Works. “We have an aging coal fleet that’s facing additional regulations. There’s a need for an additional power supply.”

So the city hired another energy consultancy, HDR Engineering of Omaha, Nebraska, to help them suss out their near-term options.

The firm conducted what they called a Sustainable Return On Investment analysis in which they weighted economic, social and environmental considerations, HDR said in its report. They compared eight scenarios, including some that added wind, biomass, landfill gas and solar in various combinations. They chose a scenario in which the city would add only a 114 MW combined-cycle natural gas plant. The city released the consultants’ report, known as an integrated resource plan, at an August 8 public meeting.

In a video posted on the Holland Board of Public Works website, the utility said, “We looked at a lot of options—everything from state of the art solid fuel generation to renewables to purchasing primarily from the grid. One of the most promising solutions comes from combined cycle natural gas technologies. Natural gas is plentiful, affordable and cleaner than other alternatives.”

Marty Kushler, a senior fellow at the American Council for an Energy-Efficient Economy, an advocacy group that focuses on energy efficiency, says that analysis is flawed.

“Any good quality [integrated resource plan] needs to model energy efficiency as a resource just like it models a new power plant,” and HDR’s didn’t, Kushler said. “Every plan I’ve ever seen finds that energy efficiency [programs are] by far the cheapest resource.”

For example, Kushler cites an integrated resource plan developed by the Northwest Power and Conservation Council, which oversees electricity supplies for Washington, Oregon and Idaho. Energy efficiency accounted for 85 percent of the new generation needed over 20 years in their plan, Kushler said.

What’s more, “the consultants didn’t look at green energy creation,” says Susan Harley, Michigan policy director for Clean Water Action. “We would prefer that the [Holland Board of Public Works] take seriously the need for renewables,” she said.

Eggs in one basket?

The utility and the city of Holland say they did exactly that, said Dave Koster, HBPW’s general manager. They took gains in energy efficiency into account when projecting future electricity demand, he said.

Holland already is a leader among municipal utilities in installing renewable sources of electricity, Koster maintained. He touted the city’s combined heat and power system, in which heat from the city’s coal-fired power plant is used to melt snow on downtown roads and sidewalks.

The utility is also exploring using waste heat from the proposed natural gas plant to heat buildings in the downtown district, and provide hot water or steam for the utility’s larger industrial customers. Using that otherwise wasted heat would reduce the need for businesses to fire up furnaces and boilers, so the city would be promoting energy efficiency, Koster said.

What’s more, HBPW is already in compliance with Michigan’s mandate to get 10 percent of its electricity from renewable sources, and it’s about to ink power purchase agreements with two wind energy providers, Koster said.

Pruss, in contrast, gives the city a mixed grade. On the plus side, they already have a combined heat and power system, and he commended the city for the “deliberate and thoughtful way” they brought the public as well as engineering consultants into the planning process.

But a city that scales up its power supply by building a big natural gas plant is putting too many of its eggs in one basket, Pruss said. That’s because natural gas, while currently cheap, will undoubtedly become more expensive over in coming years. To hedge their bet on natural gas, “I think wind energy should be part of the portfolio because it offers low cost, long-term fixed contracts over 15-20 years,“ Pruss said.

“Ultimately when you make decisions on energy, you want to try to diversify the [generating] portfolio, Pruss said.

And if the town does go with the consultant’s recommendation and gas prices skyrocket, that could also keep the town from moving toward green energy, said Susan Harley, Michigan policy director for Clean Water Action.

“In the past everyone saw natural gas as a bridge fuel” to be used in the transition to renewable energy, she said. “What we’re seeing now is a big investment in natural gas that’s limiting the dollars available for renewable energy.”

Koster, however, said the utility’s decision to go with the gas plant is nowhere near final.  The utility is holding several public meetings this month, including a question and answer session on September 24, and its staff is still wrestling with what to recommend to Holland’s city council, which has the final say. There will also be a “capstone event” in late October to reach consensus between the utility and the city council, Koster said. Only then will the city council vote on a plan.

And that’s just the start of a longer process of ensuring adequate energy for the next four decades, Koster said.

“This is going to take time and commitment to a vision of where we want to be as a community.”

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