Coal Plant Losing Money, But CPS Energy is Keeping it – For Now

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A car exits CPS Energy’s J.K. Spruce Power Plant at Calaveras Lake.

Bonnie Arbittier / Rivard Report

A car exits CPS Energy’s J.K. Spruce Power Plant at Calaveras Lake.

CPS Energy‘s newest coal plant at Calaveras Lake operated at a $135 million loss in 2015 and 2016, according to a new report by a Massachusetts-based utility research firm. The report states that the public utility would save money if it closed the plant and instead invested in renewable energy sources – by purchasing power off the grid or building more of its own wind and solar capacity.

“Furthermore, CPS Energy could lose $100 million more in the next few years if it continues current operations,” said Avi Allison, an economics expert and author of the report by Synapse Energy Economics, on Thursday. The firm’s report was commissioned by the Sierra Club’s Beyond Coal campaign, which seeks to replace coal-based power production with cleaner energy.

But shutting down the plant southeast of San Antonio is not an option, CPS Energy officials said in response to the report, because it provides reliable, baseline energy that wind and solar cannot.

The J.K. Spruce Power Plant’s two units, Spruce 1 and Spruce 2, came online in 1992 and 2010, respectively. CPS Energy already has installed required sulfur oxide (SOx) scrubbers on both units, and Spruce 2 has what’s called Selective Catalytic Reduction (SCR) to reduce nitrogen oxide (NOx) emissions that contribute to the formation of harmful ozone. Officials are considering investing another $130 million in a SCR system for Spruce 1.

“CPS Energy has done a remarkable job of providing low-cost energy in San Antonio that aligns with its mission,” local Sierra Club Clean Energy Organizer Greg Harman told reporters Thursday. But in the wake of intense weather activity like hurricanes Harvey and Irma attributed to climate change caused by humans and the health risks associated with smog and ozone, he said, “we can’t even describe them as being purely natural disasters. … We have a moral obligation to shut these [coal plants] down.”

Click here to download the report.

“We don’t disagree with report’s overall perspective that the market is moving away from coal,” CPS Energy Chief Operating Officer Cris Eugster told the Rivard Report on Thursday. “The challenge of [retiring the plant] is if you shut it down, without energy storage, you can’t run a city on solar today.”

The utility has made great strides in diversifying its energy portfolio, Eugster said, including next year’s shutdown of the older J.T. Deely 1 and 2 coal-fired units – 15 years ahead of schedule – instead of installing $550 million scrubbers. CPS Energy purchased a natural gas plant in 2010 to offset capacity loss from Deely.

Seven years ago, 80% of electricity consumed by CPS Energy customers was from coal or nuclear power plants. By investing more in renewables, natural gas, and other sources, the 2016 energy portfolio is vastly different: about 30% nuclear, 27.6% coal, 24% natural gas, 10.6% wind, 2% solar, and 4.8% purchased power. CPS Energy also has been able to realize a 3% savings from energy efficiency and demand-response initiatives, Eugster said.

CPS Energy acknowledges that the Spruce units cost more money than they produce energy, he said, but they are still needed to “bridge into renewables.”

When demand can be covered by wind, solar, and other sources, the coal plant is dialed down. But peak load times when the wind isn’t blowing and the sun isn’t shining is when the coal plant needs to be ramped up, Eugster said. And the price of natural gas continues to be a factor.

Several economic factors have to align in order for the Spruce units to become profitable, Allison’s report shows.

“As the price of natural gas declined sharply from 2014 to 2015, Spruce capacity factors dropped to less than 50%,” the report states. “At the same time, lower gas prices have led to lower energy prices in the hours in which Spruce has continued to run, thereby reducing revenues during the hours in which Spruce operates economically.”

The Spruce units have a capacity of 1,400 megawatts.

The main barrier for renewables is the inconsistency of production and lack of storage: Sometimes solar and wind farms produce too much energy, sometimes too little, and there is no way to store excess energy. Pilot programs locally and around the world are attempting to solve the storage dilemma.

CPS Energy was awarded a $3 million grant from the Texas Commission on Environmental Quality last year and is currently piloting a 1-megawatt battery at the Alamo 1 solar farm. It’s also working on $10 million, 10-megawatt storage project.

Adding a costly SCR to Spruce 1, the report states, is a “high-risk” proposition and would only add to the annual losses.

The SCR-versus-retirement decision for the plant will be demonstrative of CPS Energy’s dedication to cleaner energy, said Chrissy Mann of the Sierra Club’s Beyond Coal campaign. “[Will it] continue to invest in coal or look to a future without coal? … This is the perfect time to take that next step.”

Pending enhanced technology and regulations regarding SCRs, Eugster said, “we’re definitely in a wait-and-see mode.”

4 thoughts on “Coal Plant Losing Money, But CPS Energy is Keeping it – For Now

  1. Looks like CPS or San Antonio needs to buy some big batteries. The costs are going down every year. Tesla’s powerpacks could be installed in about 3 months from date of purchase.

    • I’m with Andrew — not enough has been done in San Antonio with battery storage or distributed solar and particularly at new San Antonio facilities such as the remodeled convention center ($325m), the new rental car and parking garage facility at the airport ($166m), the new downtown H-E-B ($6.7m) or even the new Frost Tower ($142m) under construction downtown.

      The loss of $135m by CPS Energy in one year at one coal plant is a shocking number. It seems that CPS Energy lost more on coal in 2015-16 than nearly double the estimated cost of a new 60-70 vehicle electric mini-bus system for San Antonio that was pitched to the City that same year (as reported by the Rivard Report) — and which could have served as renewable energy storage and moved more CPS Energy natural gas to electricity production.

      San Antonio lost the chance to land the Tesla battery gigafactory in 2014 in part due to the failure to move faster towards distributed solar, vehicle electrification and other battery storage citywide — ‘cutting edge’ in the U.S. in 2014 but the standard direction for all but San Antonio in 2017.

      CPS Energy’s failure to allow residential and commercial consumers the clear choice of 100% renewable energy in 2017 (the past highly successful ‘windtricity’ program seems all but dead) along with the City’s failure to invest in distributed solar,vehicle electrification and other battery storage not only endangers our air quality (as we encounter a second Ozone Action Day / Air Quality Health Alert in a row), it sets us behind the rest of the nation and weakens our bids for renewable energy powered companies such as Amazon and vehicle electrification pursuers such as Mazda.

      It’s time for CPS Energy, VIA and the City to get with the program of distributed solar, vehicle electrification, battery storage and 100% renewable energy options for all customers (including the City for its operations).


  2. So, the report was commissioned by the Sierra Club, specifically it’s “Beyond Coal” division, who has a stated moral imperative to “have a moral obligation to shut these [coal plants] down.”, and I’m supposed to take it seriously?

    Until storage is available, at a reasonable cost, then the coal fired plants will be used. Cost is the key, as the cost of renewables affects the poor much more than anyone else. A 10 megawatt-hour battery wouldn’t supply 1/10th of the cites needs, and for it’s cost, is inadvisable.

    (BTW, no reputable climate scientist has attributed Harvey or Irma to man made global warming. They have claimed just the opposite in fact.)

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