The Colorado generation and transmission co-op announced a major renewable expansion it thinks can save money.
Duane Highley arrived in Colorado last year with a mission: Transform one of the nation’s heaviest coal-based wholesale electricity providers to something different, cleaner and greener.
As the new chief executive of Tri-State Generation and Transmission, Highley began meeting with legislators and other state officials, whose general reaction was of skepticism and disbelief, he recalled.
“‘Just watch us,’” he says he answered. “We will deliver.”
Last week, Highley and Tri-State took a step toward that goal by announcing plans for a major expansion of renewable generation. The power wholesaler will will achieve 50% renewable generation by 2024 for its Colorado members, up from 32% in 2018. Unlike its existing renewables, much of which comes from federal dams, Tri-State plans six new solar farms and two more wind farms.
With continued retirement of coal plants, Tri-State expects to achieve 70% carbon-free electricity for its Colorado customers by 2030. Those customers represent two-thirds of the wholesaler’s demand across four states.
“The prices of renewables have fallen dramatically in the last 10 years,” Highley said in an interview with the Energy News Network. Solar and wind have dropped “significantly below the operating costs of any other project. It gives us the headroom to make these changes,” he said, adding that he expects downward pressure on rates for member cooperatives.
The politics and the economics of clean energy have aligned. “It helps us accelerate the ride off coal,” Highley said. The temptation, he added, was not to wait, but rather to announce the shift sooner, before details had been lined up.
Colorado utilities that together constitute 85% of the electrical sales have now adopted deep decarbonization goals for 2030. The lesson, said Will Toor, director of the state’s energy office, is that articulating statewide goals and targets for carbon reduction, then creating the regulatory mechanism for moving forward, working with the utilities given their business models, creates enormous opportunities. In this case, he said, it will deliver benefits of clean energy to rural Colorado.
“You could easily have imagined a scenario where utilities and the state were locked in political, legislative and regulatory battles,” Toor said. “But what I think we have seen is a pathway to move forward that will help us to achieve decarbonization goals by working together. That same model works in a lot of states.”
Highley’s work is far from over. To achieve the pivot from coal generation to renewables, he said, Tri-State will need to build transmission, and build it fast in order to hit its 2030 goals. The current process can take 10 to 15 years. This suggests a need to tinker with a Colorado law that delegates permitting authority to local governments for such things as power lines.
Too, if the scorn of environmental advocates has diminished in the last two weeks, wariness remains. One unresolved issue is who’s in charge. The state made it clear that it believes it has authority to regulate Tri-State, not very differently than the state’s two investor-owned utilities, Xcel and Black Hills Energy. But Tri-State filed for rate-setting review by the Federal Energy Regulatory Commission, arguing that it only makes sense for efficiency of wholesale supplier that operates in four states. Others in Colorado, including at least two of the member cooperatives, see this move under Highley’s tenure as a dodge of state authority.
Highley arrived in Colorado last April with 38 years’ experience with electrical cooperatives in Missouri, Iowa, Oklahoma and, most recently, Arkansas. He took the job at Tri-State believing that directors representing the 43 member cooperatives in four states wanted a pivot but, he says now, perhaps not fully understanding the complexities.
For example, when directors last June authorized Highley to use a stakeholder process to create the Responsible Energy Plan, there was with little or no dissent. Directors from member cooperatives in Wyoming and Nebraska, however, made it clear they weren’t interested in subsidizing the climate goals of Colorado and New Mexico. The economics of renewables persuasively made it clear that they will not.
Already, Tri-State had received an offer from Guzman Energy to buy the plants, shut them down, and replace the lost generation. Highley said Tri-State had determined it could accomplish the same thing for less money.
Tri-State in early January announced it would close its one coal plant in New Mexico, the Escalante Generating Station, later this year. By 2030, it will close two generating units at Craig, in northwestern Colorado, in addition to a third unit already scheduled to close by the end of 2025. With that, it will be done burning coal within the two states.
It will continue participation in two coal-burning plants in which it has minority ownership, Laramie River Station in Wyoming and Springerville in Arizona. Importantly, Highley told reporters recently, those states have not adopted goals for greenhouse gas reductions, unlike Colorado and New Mexico.
In place of the lost coal generation, Tri-State will add two new wind projects by 2020 and six solar projects by 2024. One of the solar farms will be on the site of a mine that currently supplies coal for the generating units at Craig.
Still to be resolved is how much electrical generation member co-ops will be able to deliver on their own. Some want more flexibility. A committee of members is scheduled to deliver its report on April 1.
The current contract allows members a maximum of 5% self-generation. One of Tri-State’s long-standing members, Kit Carson Electrical Cooperative of Taos, New Mexico, left in 2016 and has been rapidly building solar farms with the aid of new wholesale supplier Guzman Energy. Colorado’s Delta-Montrose Electric will similarly leave Tri-State on May 1 and join with Guzman with the intent of developing local generation.
One of the new 100-megawatt solar farms is to be in southwestern Colorado, near Durango, the headquarters for La Plata Electric. It’s one of the largest member cooperatives and one of two that have asked for buy-out numbers from Tri-State. For La Plata, the instructive model is Kit Carson. Moments after the announcement, La Plata issued a press release saying that while the co-op supports the decarbonization plan, it wants to be a partner in working with local renewable developers.
United Power, the largest co-op member, responsible for 17% of Tri-state’s load, gave no indication last week whether Tri-State’s latest moves relieved its dissatisfaction.
Highley began work at Tri-State last April 1 after first consulting with several people he was told were the brightest and best minds in Colorado involved in the energy transition. One of them was former Gov. Bill Ritter.
Ritter, elected in 2006, two years after state voters approved the country’s first voter-initiated renewable energy mandate, now operates the Center for the New Energy Economy, which facilitates stakeholder discussions. Ritter, he says, offered the aid of his group in convening environmental advocacy groups and others to create a plan for the pivot. Discussions began last July.
Highley said he met twice with current Colorado Gov. Jared Polis, and also had informal conversations at meet-and-greets. The governor won election in 2018 on a platform of achieving 100% non-carbon by 2040.
“They are figuring out how to make Tri-Sate relevant in the 21st century,” Polis said during the announcement last week at the Capitol. He described Tri-State’s transition plan as one that avoid chaos. “In general, it’s good to avoid chaos,” he said. Tri-State, he suggested, will be “significantly expanding the locally allowed production” of electricity.
With its coal plant closings, Tri-State will reduce carbon emissions from its plants in Colorado 90% by 2030. It will retain several natural gas burning units. Some Colorado consumers will also continue to be supplied by electricity imported from other states, principally Wyoming’s Laramie River Station. This allows Tri-State to predict it will be reducing emissions from Colorado electric sales 70% by 2030.
That improves upon the economy-wide goals for greenhouse gas emissions adopted by Colorado legislators of 50% by 2030. But at this point, cleaning up electrical generation is easier than in transportation, building and other sectors. Tri-State has started working in those sectors but in a very small way.
Tri-State’s pivot toward renewable generation contrasts with the bigger, better known Xcel Energy. The latter, an investor-owned utility, one of the nation’s largest, announced in 2017 that it wanted to close two of its aging coal plants, Comanche 1 and 2, replacing that lost generation primarily with renewables and gas. The “insanely cheap” bids surprised everybody.
Late that same year, Xcel announced a goal for its eight-state service territory of achieving 80% reduction by 2030 as compared to 2004 levels, a level it says it can use achieving existing technology. Tri-State has two goals for 2030: 90% reduction from units it owns and operates in Colorado but 70% reduction in emissions for its Colorado electric sales consumers.
Tri-State will continue to import coal-produced electricity from Wyoming, where it has a minority ownership in the Laramie River Station at Wheatland. The plant, according to a 2018 analysis by the Rocky Mountain Institute, was the only coal plant that Tri-State had a financial interest in that was cheaper than renewables, owing to a very-low priced and long-term contract for coal from the mammoth mines in the nearby Powder River Basin. It could also get electricity from the coal unit in Arizona.
Xcel and Tri-State’s transitions overlap in other areas. Xcel is adding 383 megawatts of existing natural gas generation to its resource mix but also 275 megawatts of storage. Tri-State has no plans for either. Overall, and not just Colorado, 19% of its generating capacity is from natural gas but for 2018 represented just 4% of sales.
Highley said Tri-State has no plans to invest in natural gas generation, although he didn’t reject that as a possibility in the future. Tri-State, he said, still needs fossil generation to ensure reliability during times of low light and, as has happened several times, icing up of wind turbines. “You can’t buy a battery large enough to take you through a bomb cyclone event.”
Still, battery technology and prices could improve. “We are positive on the future of batteries,” he said. “We have seen battery prices fall 20% every year for the last seven years. We know we are not at the end of the curve. We think it is good to wait for a few years, and under our Responsible Energy Plan we will be at 50% by 2024 without adding batteries.” By 2030, he added, batteries will be half of what they are now.
Toor, from the state agency, applauded Tri-State’s decision for no more investment in gas generation. “We do think it’s important to minimize making new investments in fossil generation that will become stranded assets in the future,” he said. “We think [Tri-State’s plan] is very consistent with the governor’s 2050 clean energy goals.”
Early in the 21st century, both Xcel and Tri-State had visons of new coal plants. Xcel, starting earlier and faced with greater growth in energy demand than Tri-State, succeeded, putting on line Comanche 3 in 2010.
Starting with its plans in about 2005, Tri-State ran into turbulence in an unexpected place: the state government of Kansas. In 2007, the state denied a permit on novel and perhaps then unique grounds: the greenhouse gases that would be emitted from the proposed plant near Holcomb. Tri-State finally won that permit in 2017 without moving a bulldozer’s worth of soil. Highley said that Tri-State will not seek renewal of that air-quality permit. In a September 2019 SEC filing it had listed $93.5 million of deferred impairment loss for the Holcomb plant.
Tri-State will also leave money on the table as it begins tumbling the smokestacks. In New Mexico, it will take a one-time impairment loss of $282 million but also will incur $26 million in decommissioning and related expenses through 2022, according to an SEC filing on Jan. 8. In Colorado, at Craig, the two new plants together have a net book value of $447 million. As well, Tri-State expects decommissioning, employee and other expenses to cost $40 million through 2032.
Highley insists that these costs can be swallowed while rates flatten and may even decline. That, he says, is the green energy dividend.
Correction: Bill Ritter was elected governor in 2006. A previous version of this article misstated the year.