West Michigan coal plant would get closer look under Consumers agreement

The closure date of a large coal plant along the Lake Michigan shoreline could be moved up under a proposed settlement agreement between Consumers Energy and multiple environmental and energy groups.

In late March, the Jackson-based utility announced it had reached a deal with groups over its long-term energy plan, which includes closing all of its coal units and building out thousands of megawatts of solar energy by 2040. The proposed settlement agreement is subject to approval by the Michigan Public Service Commission, which granted a request for a two-month extension on the commission’s final decision on the plan.

Among the provisions is a requirement for the utility to analyze whether two of the three units at its J.H. Campbell plant in Port Sheldon could be retired before 2031, as the company has proposed in its Integrated Resource Plan. The analysis would take place in the company’s next IRP, expected to be filed in June 2021. Potential closure years could be in 2024, 2025, 2026, 2028 and 2031, and could include all three units.

Closing the units earlier could depend on already declining renewable energy prices.

“It makes the economics of installing renewable energy that much more attractive while at the same time the cost of coal plants keeps increasing,” said John Freeman, executive director of the Great Lakes Renewable Energy Association.

If Consumers pursues an earlier closure date, the company may be able to recoup stranded costs that haven’t been recovered.

“Frankly, it’s a decent trade-off,” Freeman said. “We have got to think long term in the interest of all Michigan ratepayers to get as clean of air as possible and transition to renewables as quickly as possible.”

Consumers spokesperson Katelyn Carey said the plan to retire two Campbell units in 2031 and the third in 2040 remains unchanged in the current IRP. The utility prioritized retiring units at its D.E. Karn plant near Bay City ahead of Campbell for economics and efficiency.

“Modeling results showed we could retire up to two of the (Karn) units and replace the capacity with resources that provided equal or greater customer value,” Carey said. “By also continuing to run Campbell 1 and 2, all three of our coal-fired units would be at a single site. That provides logistical advantages, as well as the opportunity to concentrate staffing and expertise.”

Some environmental groups continue pushing for an earlier closure of all three Campbell units because of the plant’s pollution. The American Lung Association’s 2018 State of the Air report gave Ottawa County an “F” grade for the number of recent high ozone (smog) days. (The group did not collect data on particle pollution.) In 2010, the nonprofit Clean Air Task Force ranked the Campbell plant among the top 10 in the nation for health effects, including mortality, hospital admissions and heart attacks.

Jordan Chrispell, West Michigan clean energy organizer with the Michigan chapter of the Sierra Club, said the plant is the largest source of air pollution in West Michigan. The Sierra Club supports the proposed settlement agreement and “recognizes Consumers Energy’s efforts to retire the company’s uneconomic coal plants and invest in more clean energy replacements, especially in solar energy.”

“Campbell Units 1 and 2 are more than 50 years old and no longer cost effective,” Chrispell said. “Expert testimony has shown that customers would likely save money if Consumers Energy closed Campbell Units 1 and 2 in 2023 and replaced them with wind and solar.

“We cannot wait until 2040 to end the pollution to the air we breathe, the water we drink, and the climate we live in.”

The Sierra Club argued in a recent lawsuit that Ottawa County should be listed by the U.S. Environmental Protection Agency for failing to meet ground-level ozone standards. State regulators and others said the area’s air pollution mostly comes from Chicago and Indiana.

Carey at Consumers Energy noted that Unit 3 at the Campbell plant is “equipped with state-of-the-art air quality control systems” and could continue to run until 2040.

Power contract concerns

As of early April, the Great Lakes Renewable Energy Association board was deliberating on whether to fully support the proposed settlement agreement. Some members hoped to see more of a focus on customer-owned generation.

Other groups that hadn’t yet signaled initial support for the agreement included the Solar Energy Industries Association (SEIA), national solar developer Cypress Creek Renewables and Biomass Merchant Plants.

Some intervening parties’ top concerns with the IRP that was released in June 2018 related to prices paid to independent power producers and a planned competitive bidding process for new generation.

SEIA Vice President of State Affairs Sean Gallagher said in a statement that the group is “considering all of our options” on the settlement, “as there are some elements that raise serious concerns. For example, while the settlement does present some opportunities for solar over the long run, it makes little sense to adopt a ‘plan’ that fails to address the 3,500 MW of planned projects in Consumers’ interconnection queue. A reasonable portion of those projects should be reinstated as part of the IRP.”

Additionally, Consumers had taken an all-or-nothing position that its IRP should be taken as a whole — that rejecting or accepting pieces of it would affect the whole plan. The company had said it might have to entirely rework the plan if its proposal wasn’t accepted.

In February, an administrative law judge who took issue with portions of the plan said it should be rejected by the MPSC based on Consumers’ position. Presumably, this led the utility to negotiate with the other groups. Details of settlement agreements before the MPSC are confidential.

However, the agreement is supported by 11 groups involved in the rate case, including MPSC staff, three environmental groups, the Association of Businesses Advocating Tariff Equity, two independent power producer trade groups and Attorney General Dana Nessel, who had raised concerns about the plan’s effects on ratepayers.

‘Gorilla in the room’

One provision in the agreement requires a 50/50 split of new generation to come from the utility and from competitively bid projects from independent producers. The requirement has support from the Michigan Energy Innovation Business Council, though the group still has concerns over pending projects that could qualify for Public Utility Regulatory Policies Act (PURPA) contracts. PURPA requires utilities to purchase power from independent producers at a set rate if it’s cheaper than what the utility could build.

“While issues relating to the rights and positions of parties … in the PURPA queue have not been addressed, Michigan EIBC is optimistic that these issues can be resolved in another proceeding,” according to the group’s April 5 newsletter.

Rob Rafson, founder of Chart House Energy LLC, a Muskegon-based solar installer, agrees that PURPA remains a concern. He also is skeptical that much new renewable generation will come online in the plan’s first few years as the company focuses on demand-side resources like energy efficiency and demand response.

“This IRP is not addressing the gorilla in the room: There is 3,000 MW or so of proposed capacity under PURPA,” Rafson said. “They’re not addressing any of it. By not doing so, this is going to be a real problem.”