The Death of Coal

The Great Energy Shift will not likely be legislated from Washington or emerge wholesale from a Silicon Valley garage. Rather it is happening in fits and starts in places like Arizona and Mississippi, where yesterday two utilities faced decisions on whether to fight the future or embrace it.

In a sign that the future will unfold in unexpected twists and turns, it was the coal-dependent Tennessee Valley Authority that made a bold move, while in sun-blasted Arizona the state’s big utility tried to short-circuit a solar boom.

The government-owned TVA serves some 9 million people in the heart of coal mining country in the southeastern United States, running a fleet of coal-fired power plants that have long been the source of cheap electricity. But yesterday, the TVA board of directors voted to shutter eight of those power plants, taking 3,000 megawatts of carbon-intensive electricity off the grid in the face of intense opposition from coal miners and politicians decrying “Obama’s war on coal.”  That’s the equivalent electricity production of three huge nuclear power plants.

“These were difficult recommendations to make as they directly impact our employees and communities,” TVA chief executive Bill Johnson said in a statement. “TVA must respond immediately to challenging trends in lower power demand, a slow economy, uncertainty in commodity pricing, and tougher environmental requirements, particularly on air emissions.”

In other words, TVA was bowing to reality. Federal emissions regulations make retrofitting aging coal plants prohibitively expensive while pending rules means it’s unlikely any new coal-fired power stations will be built in the years ahead.

So the TVA directors voted to transform the utility into a power provider that will obtain a majority of its electricity from carbon-free sources. The TVA has not yet set a schedule for the retirement of the coal-fired power plants but under the plan approved yesterday, coal will provide 20 percent of the utility’s electricity in the future, down from 38 percent today. Nuclear power plants will generate 40 percent of electricity while natural gas will supply another 20 percent. The remaining 20 percent will be supplied by renewable sources, including hydropower, and energy efficiency measures.

Meanwhile, in Arizona yesterday, the state’s utility regulator turned back a request by Arizona Public Service (APS) to impose steep new fees on homeowners who install solar panels on their roofs. It’s a battle being fought elsewhere in the country as utilities grapple with an existential threat to their century-old business model. As more customers generate their own electricity, utilities face declining revenues while still retaining responsibility for paying for the transmission system.

In Arizona, for instance, there were 900 solar arrays installed on Arizona residential rooftops in January 2009. By June of this year, that number had grown to 18,000 with 500 more photovoltaic systems being installed each month.

Under a regulatory scheme known as net metering, homeowners receive a credit for the solar electricity they send to the grid that is used to pay for the power they use when the sun isn’t shining. In Arizona, that credit is calculated at retail rates and APS argued that penalized homeowners who don’t go solar as the utility will be forced to raise their rates to pay for the transmission system.

“As a result of net metering, residential customers with rooftop solar do not pay for most of the electric service they use,” APS lawyers wrote in a petition to the Arizona Corporation Commission (ACC), the state agency that regulates utilities. “Those costs are then paid by other customers—through higher rates—who can’t install or don’t want rooftop solar. The shifting of costs is unfair. It is also growing with every solar installation, and needs to be addressed now before it becomes to large to fix with a balanced solution.”

APS's solution? Charge solar homeowners an extra $50 to $100 a month.

Solar advocates countered that the utility offered no proof that the solar boom was resulting in higher rates for other homeowners. In fact, they argued, the expansion of solar capacity meant the utility saved money by not having to build additional power plants and transmission lines.

APS and its supporters spent hundreds of thousands of dollar on an advertising campaign but yesterday the ACC rejected the utility’s request, handing it a largely symbolic victory when it approved the imposition of fees that will result in a $3 to $5 monthly surcharge for homeowners who install solar in the future.

Still, that didn’t sit well with the solar industry. “Unfortunately, the utility exploited this debate and then used it as an opportunity to stymie competition, 'stick it' to consumers and bolster its bottom line,” Rhone Resch, chief executive of the Solar Energy Industries Association, a trade group, said in a statement. “No one should be surprised. This is what monopolies do."