Energy Efficient Programs Are Best for Nebraska's Future

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By Duane Hovorka

Nebraska electric utilities face important decisions in the coming months that will impact Nebraska’s air and water quality, economy and electric rates for decades to come.

At issue are a handful of power plants that burn coal to generate electricity for Nebraskans. Almost all were built in the 1960s, 1970s and early 1980s, well before modern pollution-control technology like that now required for all new power plants.

The U.S. Environmental Protection Agency has proposed a series of new rules that would require electric utilities to reduce their emissions of sulfur dioxide, nitrous oxides, particulates, ozone, mercury and other pollutants. The rules are designed to improve public health and reduce environmental damage done by coal-fired power plants. The large Nebraska power plants impacted include

  • Gerald Gentleman station, two power plants completed by Nebraska Public Power District in 1979 and 1981 near Sutherland, that together can generate 1,365 megawatts (MW) of power
  • Nebraska City 1, completed in 1979, and Nebraska City 2, completed in 2009, which together can generate 1,328 MW of power for Omaha Public Power District (OPPD)
  • Omaha Public Power District’s North Omaha Station, completed in sections from 1954 to 1968, which can generate 646 MW
  • Sheldon station at Hallam, two units completed in 1961 and 1968, which can supply 225 MW of power to Nebraska Public Power District (NPPD) and Lincoln Electric System (LES)
  • Smaller coal-fired power plants that provide power to municipal utilities at Fremont, Hastings and Grand Island

The differences can be striking. According to Omaha Public Power District officials, the modern pollution-control technology built into the new Nebraska City 2 power plant means it releases one-tenth the amount of pollution as Nebraska City 1 power plant, completed in 1979.

The change can also be expensive. NPPD officials have said the upgrades required at Gerald Gentleman station could cost $1.5 billion or more.

Clean Power Is Cheap Power

Fortunately, there are cost-effective alternatives that are good for ratepayers, communities and our environment.

Lincoln Electric System’s Sustainable Energy Program provides incentives for residential, commercial and industrial customers to make more efficient use of electricity. By replacing old lighting systems, installing high-efficiency heating and cooling systems, replacing inefficient motors and appliances, weatherizing homes and other measures, homeowners and businesses can often reduce their electricity use by 30 percent or more. By scheduling irrigation, air conditioning and other demand-side management measures, load can also be shifted away from the most expensive generating options.

By reducing the amount of electricity they consume, especially on hot summer days when demand is highest and power costs most expensive, these programs save Lincoln Electric System (LES) money. An LES analysis showed that in three years, the $5 million LES invested in the program has reduced the peak demand for electricity by over nine MW. LES officials say the $2 million invested in the program in 2011 will save the utility and its customers $5 million in the future cost of building new power plants.

NPPD has a similar program that has been achieving similar results. In 2010 the $2.5 million invested in NPPD’s EnergyWise program will buy about 4.9 MW of capacity and is saving electricity at about a penny per kilowatt hour, far less than it would cost to generate that power.

The results among Nebraska utilities mirror those in other states, where energy efficiency programs are “buying” capacity at $300,000 to $600,000 per MW. Compared to the cost of building new power plants, at $3 million or more per MW, energy efficiency and demand-side management are a bargain.

Compared with the $1.1 million per MW estimated cost to retrofit Gerald Gentleman, energy-efficiency programs are still half the price. Even after the retrofit, NPPD and other Nebraska utilities would still have to buy the coal to produce the power. Fuel costs would be avoided through energy efficiency and reduced through demand-side management.

Meeting the Challenges

So if energy efficiency and demand-side management cleaner and cheaper than retrofitting old coal-fired power plants, why aren’t Nebraska utilities jumping on board?

The first challenge is scale. Nebraska utilities are limiting investments in efficiency to a few million dollars a year and reaching 1 percent or less of Nebraska homes and businesses with these programs. Meanwhile, they are contemplating investments of $1 billion or more to upgrade old polluting power plants.

Nebraska ratepayers deserve better. Energy efficiency and demand-side management, done on a power plant scale, could eliminate the need to upgrade at least one of Nebraska’s old, dirty power plants. Where electric utilities have embraced large-scale energy efficiency and demand-side management, they have found huge potential. With current Nebraska utility programs reaching so few Nebraskans, the potential in Nebraska is huge as well.

The second challenge is timing. Although new EPA rules have been in the works for years, the Cross-State Air Pollution Rule that is driving substantial reductions in sulfur dioxide and nitrous oxide originally excluded Nebraska utilities from its reach. In 2010 Nebraska utilities were brought under the provisions in a rewrite of the rule, and when the final rule was published in July 2011, the limits that applied to Nebraska utilities were made much tougher.

The EPA says electric utilities must demonstrate compliance with the new rules by the end of 2012 or early 2013. While utilities in the eastern USA have been gearing up to meet the new rules for years, the late addition of Nebraska utilities and the new, lower emission limits have made it extremely difficult for Nebraska utilities to put in place measures needed to make the deadline.

Should Nebraska utilities choose to use energy efficiency and demand-side management as a major part of their compliance strategy—and they should—it will take several years to ramp up existing programs to efficiently make the investments needed to offset power demand. Fortunately, the EPA in the past has been willing to be flexible with compliance timelines where industries are willing to use innovative solutions that would go beyond basic compliance.

According to an EPA analysis, the new Cross-State Air Pollution rules would improve air quality in the eastern half of the USA enough to avoid 13,000 to 34,000 premature deaths, 19,000 hospital and emergency room visits and 400,000 aggravated asthma attacks every year. The reduction in health care costs and environmental damage is projected to total as much as $280 billion per year.

In Nebraska the EPA estimates the new rule will prevent 30 to 80 premature deaths each year and provide $260 million to $650 million in annual benefits.

For decades, economists have recognized that Americans pay twice for their electricity. They pay once for the cost of the power plants and the fuel to run them, through their electric bill. They pay a second time through their health insurance, federal and state taxes, water bill and in other ways for the damage to our health and environment done by the air and water pollution that comes from generating electricity, especially from fossil fuels.

The Cross-State Air Pollution Rule and other new EPA rules are an effort to put those costs where they belong, on the industries that use coal and other polluting fossil fuels.

The decisions facing Nebraska’s electric utilities are not easy, but the choices seem clear. Invest billions to retrofit dirty, old coal-fired power plants, and lock Nebraska ratepayers into higher rates, more pollution and more energy dollars leaving our state. Or put Nebraskans to work through targeted, large-scale energy efficiency programs that save Nebraska consumers and businesses money, improve our health and environment and keep billions of energy dollars in our communities.

 

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