Rural Missouri — Future Watts: The need for more baseload

October 2007

Future Watts

CONTENTS

The need for more baseload
Costly coal-fired power plants are the
foundation of a reliable electric system

by Jim McCarty

Editor’s note: Across the state, electric rates are on the rise. This is the third in a series explaining why this is taking place and what you can do to help manage your energy bill.

• August 2007 — "Great growth means rising rates."
• September 2007 — "The high costs of cleaner air."
• October 2007 — "The need for more baseload."
• November 2007 — "When time is money."
• December 2007 — "Unconventional kilowatts."
• January 2008 — "Spend now, save later."
• February 2008 — "What about transmission?"
• March 2008 — "The high price of fuel"
• April 2008 — "Negawatts"

You flip the switch and the light comes on. You plug in the refrigerator and it gets cold. The temperature rises and the air conditioner kicks on. That’s the way things are supposed to work. Barring an ice storm or strong winds that knock down power lines, that’s the way things do work day in and day out for members of Missouri’s electric cooperatives.

The reason power flows to the light bulb when you flip the switch is because Missouri is blessed by an adequate supply of baseload generation. But as the membership grows, builds larger homes and adds more electronic gadgets, the need for new baseload generation has arrived.
And when these baseload plants are built their cost will be one of the factors driving up the price you pay for electricity.

In the meantime, members will see a series of rate increases over the next 3-5 years caused by many other factors, including increases in the price of fuel used to generate power.

The term baseload refers to power plants that are cheap to run and operate around the clock. They are designed so if you need that light late at night, the energy to operate it will be there.
If a baseload power plant was a car, it would be a minivan: reliable, cheap to operate, and capable of holding the entire family, plus some groceries and maybe even the dog. Like a family with a three-car garage, your electric cooperative has a mix of electricity-generating resources that help meet your needs.

A family might have a minivan or station wagon for the long haul. It might have a pickup truck for the odd job around the farm. It might also have a sports car, fast and easy to handle, that’s only used occasionally.

That’s similar to the way your electric cooperative’s “fleet” of power plants works. For the long haul, Associated Electric Cooperative, the supplier of electricity to all of Missouri’s electric cooperatives except Citizens Electric, generates low-cost power from four coal-fired power plants located at Thomas Hill, New Madrid, Chamois and Oklahoma’s Grand River Dam Authority.

The New Madrid Power Plant is one source of baseload power for Missouri’s electric cooperative members. As energy use grows, however, new baseload power plants need to be built or members will be left in the dark. Associated Electric Cooperative plans to build a new coal-fired power plant near Norborne. These plants cost a lot to build but are cheap to operate.

If it were possible, your electric cooperative would use these projects to meet all of your energy needs. But as energy use increases throughout the day, and especially on the coldest and hottest days of the year, the capacity of these plants can be outpaced by the member load.

That’s when another set of power plants kicks in to meet the need. The far-sighted individuals who do the planning at Associated built intermediate generation plants fueled by natural gas. For Associated, these plants are located at St. Francis in the Bootheel, Chouteau in Oklahoma and Dell in Arkansas.

These plants are cheaper to build than a baseload power plant but much more expensive to operate. For example, in 2006 it cost 4 times more to operate a combined-cycle gas plant than a coal-fired plant. But since these plants don’t operate all the time, they are an important part of the mix.

When electricity consumption really picks up, your electric cooperative has another ace up its sleeve to ensure reliability. Several simple-cycle gas plants — essentially jet engines hooked to a generator — start up. Because these plants are so expensive to operate, they run for short periods that get your cooperative past the times of peak demand for electricity, then shut down. In 2006, simple-cycle gas plants cost nearly 7 times more to operate than coal.

Although wind energy is popular with consumers, it is not considered baseload generation. While Missouri's electric cooperatives will distribute power produced at three northwest Missouri wind farms, the power these turbines produce is not as consistent or as predictable as baseload generation, like coal-fired power plants. In summer and winter, when power is needed most, wind speeds are often at their lowest.

Ensuring the cooperatives have adequate resources to generate the power members use is a task handled by planners at Associated and, ultimately, its board. The board is made up of managers and directors from the cooperatives that own Associated.

Looking ahead, these planners predict the energy requirements of the cooperatives Associated serves will increase 2 percent a year. That’s enough energy to power 30,000 homes.

“Each year the Associated staff conducts what they call a resource plan,” says John Farris, manager of M&A Electric Power Cooperative, Poplar Bluff, and a member of the Associated board of directors. “They go out to every co-op and ask what their anticipated load and growth will be. They put that into a package and say, ‘Here’s what we need, and here’s how we can serve the load.’ A decision is made each year to take care of those needs.”

Farris says it wasn’t long after he joined the board seven years ago that talk turned to the need for more baseload generation. “We always looked at peaking units as a possibility because that is our lowest-cost resource we can put in and something we can put in quickly,” Farris says. “But you can only do so much of that before you have to go to baseload plants, or something that can be run around the clock.”

The board considered all of its options. They considered partnering with another utility to build a plant. They looked at the nuclear option. They studied site locations and, ultimately, proposed building a new coal-fired power plant to be located near Norborne.
That plant is expected to cost $1.7 billion, a figure that is 70 percent higher than estimates from just two years ago.

Utilities rely on coal to fuel reliable baseload power generation. Rising construction costs mean that new plants — like one planned near Norborne — will significantly impact electricity rates.

Driving the cost increases is the simple fact that utilities all across the country are in the same boat as Missouri’s electric cooperatives and are building power plants to stay ahead of the demand. Added to that is global competition with countries such as China and India.

Shortages of steel, concrete and skilled labor to build these plants are causing rates to rise, taking the price for electricity along. “There’s such a shortage of labor and materials that we’ve seen some record high prices,” Farris says. “All utilities will see the same increases we are.”

Managers like M&A’s Farris can remember when the last baseload generation was added 25 years ago. Its construction caused a round of rate increases that cooperative members had to weather in the mid-1980s.

Still, Farris says wise decisions made years ago have put Missouri’s electric cooperatives at a definite advantage.

Missouri consumers pay the 10th-lowest rates in the nation, and that status is expected to continue even as rates inevitably rise.

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