Recognizing the U.S. Cooperative Difference

By Barbara Walz
Sr. Vice President,
Policy & Compliance and Chief Compliance Officer,
Tri-State Generation and Transmission Association, Inc.

Living in the rural U.S. is different than living in urban areas. Without a doubt, rural life has its advantages: no traffic, close to recreation, knowing your neighbors, etc. But living in rural areas is also challenging: driving for hours to get to the nearest shopping mall or doctor; limited employment options; and, for power providers, consistently delivering affordable and reliable electricity. Rural power providers are specifically challenged by low customer density, the need to install more miles of transmission, and diverse load profiles. These hurdles have largely been overcome by the rural electric cooperatives that supply electricity to rural areas in the U.S., but today the nation’s rural cooperatives are facing a major challenge: how to address new regulations on carbon emissions.

The U.S. rural electric cooperative system was born when President Roosevelt created the Rural Electrification Administration (REA) in 1935 to bring electricity to rural communities. Through REA lending programs, communities were able to join together, create a cooperative, and build the necessary electric transmission and distribution lines and generation resources.

Facility

Tri-State relies on coal-fired power plants, such as the Craig Station, to generate its baseload electricity.

The program was, and continues to be, a huge success. Within four years of the end of World War II, the number of rural electric systems in operation doubled, the number of consumers connected to electricity more than tripled, and the miles of energized transmission lines grew more than fivefold. In the 1930s, less than 10% of rural residents had electricity. Today, over 99% of those living in the rural U.S. have electric service.1

Unlike other power suppliers in the U.S., cooperatives are member-owned and governed, and operate on a not-for-profit basis. The benefit of this model is that cooperatives can provide cost-based electricity, and members have a voice in decisions made by their utility. Because all costs are passed directly through to members, cooperative members address new regulations and requirements differently.

TRI-STATE G&T: A WESTERN U.S. COOPERATIVE

Tri-State Generation and Transmission Association, Inc. (Tri-State) is a wholly member-owned generation and transmission (G&T) cooperative serving major parts of Colorado, Nebraska, New Mexico, and Wyoming. The company generates and transmits wholesale electricity to its 44 member-distribution systems (see Figure 1) which, in turn, supply retail electricity in a service area that covers approximately 200,000 square miles with a population of about 1.5 million. The challenges facing Tri-State today largely represent those faced by many rural cooperatives in the larger national network, which collectively provide 13% of power in the U.S.

Walz Figure 1

FIGURE 1. Tri-State member systems map

Through mergers with other cooperatives, consumer growth, and load growth, Tri-State has evolved over the last 60 years from a cooperative that exclusively manages federal hydropower allocations to a cooperative that meets its members’ needs through a diverse portfolio of G&T resources. The company uses market transactions to optimize its position by routinely purchasing power when the market price is lower than its incremental production cost and routinely selling power to the short-term market when it has excess power available above its commitments to both members and non-members. Tri-State also uses spot market purchases during periods of generation outages at its facilities.

An Energy Mix Shaped by the Policy of the Past

Tri-State owns, leases, has undivided percentage interests in, or has long-term contracts with respect to various generating facilities. These generating facilities provide a maximum available power of 2833 MW, including 1866 MW from coal-fired baseload facilities and 967 MW from natural gas-fired facilities. In addition, Tri-State purchases hydroelectric power, under long-term contracts, that provides a maximum available power of 574 MW during the summer and 525 MW during the winter. Tri-State also purchases additional power on a long- and short-term basis, including 172 MW from renewable energy resources such as wind and solar. To deliver this electricity, Tri-State also owns or has interests in approximately 5300 miles of high-voltage transmission lines and 219 substations and switchyards.

Walz Figure 2

FIGURE 2. Capacity by initial year of operation and fuel type (2010)

Like many other U.S. cooperatives, Tri-State’s current generation mix reflects historical energy policies and member needs. Much of the growth in rural Colorado, New Mexico, and Wyoming occurred in the early 1980s. As a result, Tri-State and other rural cooperatives added capacity during this time. In 1978, the U.S. Congress passed the Power Plant and Industrial Fuel Use Act (FUA) to address national security concerns caused by the oil crisis and natural gas curtailments of the early 1970s.2 The FUA restricted construction of power plants using oil or natural gas as a primary fuel and encouraged the use of coal-fired and nuclear power plants. Thus, Tri-State and other rural cooperatives built new baseload generation resources during that period and, therefore, built coal-fired power plants. In 1987, these provisions of the FUA were repealed due to reduced natural gas prices, and, once again, U.S. electricity providers were allowed to use natural gas as a resource for baseload plants. According to the National Rural Electric Cooperative Association (NRECA), in 2012 EIA reported that 37% of the generation capacity serving U.S. cooperatives was coal-based, which produced 70% of the electricity used to serve cooperative members.3 (See Figures 2 and 3 for information, provided by the U.S. Energy Information Agency, on coal-fired power plant capacity built during the time the FUA was in effect.)

Walz Figure 3

FIGURE 3. Capacity of coal-fired generators, by initial year of operation (2010)

Meeting Member Needs in the Current Energy Policy Environment

Markets, regulation, and innovation all play a role in how electricity is produced, delivered, and consumed. Meeting the historical requirements placed on power producers has led Tri-State to have some of the most progressive distributed generation policies in the U.S. The company continues to generate or purchase power produced from a mix of hydropower, solar, wind, coal, natural gas, and oil resources and is also a leader in renewable energy use. Its baseload power plants are equipped with the latest emissions control technologies. Today, Tri-State is reducing CO2 emissions by maintaining highly efficient power plants and investing in renewable energy projects.

It is projected that 25% of the energy delivered by Tri-State to its members in 2016 will be generated by renewables. Since 2010, the company has added nearly 250 MW of renewable energy and plans to add an additional 281 MW by 2017. This investment was recognized by U.S. Department of Energy (DOE) when it awarded Tri-State the 2014 Wind Cooperative of the Year in the G&T cooperative category. Tri-State also supports (financially and operationally) progressive energy efficiency programs offered by our members and has provided technical assistance and financial incentives to its members to develop their own local renewable and distributed generation projects. At year-end 2014, 16 members were participating in this program and 47 projects had been authorized by the Tri-State board, adding up to a combined 68 MW of generation that is either online or in development.

Despite significant investments in renewable energy and energy efficiency programs, Tri-State remains reliant on fossil fuel-based generation to meet demand, maintain reliability, and control costs to our members. This fact drives our concerns with regulations and legislation that could potentially limit these resources.

Preparation for a Carbon-Constrained World

As part of its ongoing comprehensive carbon emission analysis, in 2009, Tri-State initiated an enterprise-wide effort to assess its ability to manage the risks associated with potential new carbon-focused energy policy. The result of this effort was the Greenhouse Gas Management Roadmap that serves as an internal planning tool. The goals laid out in the Roadmap are wide-ranging, including research into clean coal, carbon capture and storage, renewable technologies, generation and transmission efficiency, demand-side management, and research, development, and demonstration initiatives.

The Roadmap is based on Tri-State’s two-decades-long engagement with the Electric Power Research Institute (EPRI), an organization which brings together scientists and engineers as well as experts from academia and industry to address challenges in the electricity industry. As a full funder in EPRI’s R&D portfolio, Tri-State takes advantage of the synergies between EPRI’s broad array of collaborative RD&D programs and has access to all of EPRI’s research results and products.

In recognition of how the Roadmap reflects successful collaboration with EPRI, Tri-State received an EPRI Technology Transfer Award for its leadership in education and information exchange of technology and research results.

SUPPORTING TRANSFORMATIONAL TECHNOLOGIES

Tri-State has long supported research and development in the areas of capturing power plant CO2 and identifying viable uses for it. Tri-State is looking for technological breakthroughs that would allow power plant operators to convert CO2 waste into useful fuels, chemicals, and other valuable products. Such CO2 utilization opportunities have the potential to generate revenue that could help offset the cost of capture and conversion.

In October 2015, Tri-State pledged significant funding for Wyoming’s Integrated Test Center (ITC), which will be hosted at Basin Electric Power Cooperative’s coal-fired Dry Fork Station in Gillette, WY. The ITC will provide a testing facility for researchers working to develop commercially viable uses for CO2 emissions from coal-fired power plants. The goals and potential benefits of the research to be conducted at the ITC include:

  • Developing economically competitive carbon capture and utilization technologies and retrofits for existing and potentially for new coal-fired power plants
  • Identifying technologies with the potential to provide less costly solutions to meeting CO2 regulations (e.g., Clean Power Plan)
  • Transforming the perception that carbon is a waste product and liability to an asset and possible revenue stream

The ITC will be completed in time to host the final phase of the Carbon XPRIZE, which is scheduled to begin in late 2017. The XPRIZE Foundation—whose mission is to bring about “radical breakthroughs for the benefit of humanity” through incentivized competition4—has agreed to be one of the first tenants in the ITC. This international philanthropic group recently announced a $20-million global competition to encourage development of new uses for CO2 (see full article on the NRG COSIA XPRIZE in this issue for more details).

Tri-State is also reviewing the latest energy storage technologies and, when feasible, testing them throughout its system. Through our membership in EPRI and the National Rural Electric Cooperative Association (NRECA) Cooperative Research Network (CRN) Tri-State is supporting extensive energy storage research, including:

  • Developing and field testing of operation safety standards for interconnecting to the system
  • Funding a demonstration project with one of its members to learn about “fast real-world” control of electric water heaters in response to the variability of a nearby wind farm
  • Working with the developer of a prototype 5-kW zinc-air battery with plans to field test it at a member-system site
  • Owning the rights to 40 MW of pumped-storage capacity at the 200-MW U.S. Bureau of Reclamation Mt. Elbert Hydroelectric Power Plant, which is used to meet power demand with increased penetration of intermittent renewable energy in the grid

TRI-STATE’S APPROACH TO THE CLEAN POWER PLAN

Tri-State now faces a potential new challenge: how to meet the U.S. Environmental Protection Agency (EPA) Clean Power Plan (CPP), while continuing to deliver affordable and reliable energy to our member systems. One reason Tri-State opposes the Clean Power Plan is because it does not recognize or even acknowledge the cooperative difference. The EPA ignored that when cooperatives were growing in the 1980s, federal law essentially limited fuel options for new generation to coal. It ignored that cooperatives own a small amount of coal-fired generation compared to our utility brethren, but are relatively much more reliant on, and have more invested in, those units. In addition, the EPA did not take into account that, through the years, cooperatives have invested billions of dollars in increasing the efficiency of those coal-fired units, in addition to investing in renewable energy and energy efficiency programs. The bottom line is that the CPP does not take into account that member-owned cooperatives are regulated differently. The CPP is one-size-fits-all, but does not fit Tri-State or other cooperatives across the nation.

Our response to the CPP has been twofold: (1) Tri-State will work with regulators in the five states in which we operate to develop compliance plans, while (2) challenging the EPA’s legal authority to promulgate the CPP. An initial positive result of the challenges to the CPP came in early February 2016 when the U.S. Supreme Court granted a stay of the controversial rule. This means that the CPP cannot be implemented until the legal challenges have been heard in court. Ultimately, the case being made against the legality of the CPP will likely be heard and decided upon by the Supreme Court—a process that could take more than two years to reach a final outcome.

There has been, and will continue to be, an effort to ensure that the the difference between cooperatives and investor-owned utilities is recognized at the state level. This is necessary because the EPA did not modify the CPP based on comments submitted by Tri-State and other cooperatives that explained this important distinction. While we continue to have great concern with the rule, Tri-State is committed to working with officials in the five states in which we operate to minimize the impact on rural consumers and employees at our power plants. As we work with states, Tri-State will be guided by the following principles:

  • Ensure reliable and affordable electricity supply
  • Recognize the remaining useful life of and impacts of stranded costs for each generation facility
  • Maintain a balanced resource plan
  • Consider all compliance options, not just those proposed by the EPA
  • Recognize capacity and infrastructure limitations of renewable and natural gas generation

As Tri-State participates in the process to evaluate how to achieve CPP-related state goals, we will look for options to ensure that our higher efficiency, low-emissions coal-fired plants remain in our electricity generation portfolio.

In addition to working with states to develop plans, Tri-State will continue to work with numerous trade groups to challenge the EPA’s legal authority to propose the CPP. We believe the EPA is attempting to accomplish emission reductions through changes in the way energy is produced, distributed, and used—and not through the application of emissions control technology on affected power plants. Thus, we believe the CPP essentially makes EPA the primary energy regulator in the U.S.—usurping the authority of the state and federal agencies assigned that task and disregarding the scope of its authority under the Clean Air Act (CAA).

The CAA established EPA as the primary regulator of air emissions within the U.S., and EPA has filled that role for more than 40 years, dramatically cutting emissions of pollutants such as sulfur dioxide (SO2), nitrogen oxides (NOx), and particulate matter from power plants. However, no technology currently exists to reduce CO2 emissions from an existing gas or coal-fired power plant that is adequately demonstrated or commercially available.

In the end, although Tri-State and other cooperatives are different, we do have one thing in common with utilities—a desire to protect the environment while continuing to provide affordable and reliable energy to our members. We simply believe a different approach is needed to mitigate CO2 emissions.

REFERENCES

  1. National Rural Electric Cooperative Association (NRECA). (2015). History of electric co-ops, www.nreca.coop/about-electric-cooperatives/history-of-electric-co-ops/
  2. U.S. Energy Information Agency. (2015). Repeal of the Power Plant and Industrial Fuel Use Act (1987), www.eia.gov/oil_gas/natural_gas/analysis_publications/ngmajorleg/repeal.html
  3. National Rural Electric Cooperative Association. (2016). U.S. Co-ops by the numbers, www.nreca.coop/about-electric-cooperatives/co-op-facts-figures/u-s-co-ops-by-the-numbers/
  4. XPRIZE. (2015). Who we are, www.xprize.org/about/who-we-are

 

The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.
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  1. Pingback: McInnes testifies on Clean Power Plan at Senate Environment and Public Works Committee hearing « Powering The West

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