Missouri utility’s ambitious wind energy plan facing pushback wind energy news gas exchange in the lungs happens by the process of

##

Proponents of cleaner energy in coal-reliant Missouri had lofty expectations in 2016, when Algonquin Power & Utilities bought Empire District Electric Co. At the time, Empire claimed it could build 800 megawatts of wind energy, close a 200 megawatt coal plant next April – about 16 years early – and save ratepayers as much as $325 million over 20 years.

The utility said it could do this with a substantial investment from a tax-equity investor, by tapping the federal production tax credit and saving $20 million it otherwise would have to spend to make federally mandated environmental upgrades to the power plant it has proposed closing.

However, the state’s Office of Public Counsel and the staff of the Missouri Public Service Commission are skeptical. They don’t trust Empire’s estimates of the future price of wind on the wholesale market, and they maintain that the utility has structured the deal so that the tax-equity investor – as yet unnamed – will be paid off during the first 10 years, leaving only crumbs behind for ratepayers. The City of Joplin also is worried about the possible loss of 55 jobs at the Asbury coal plant.

In late April, several parties signed on to a revised version of the plan that is now before state regulators. It shrinks the wind project from 800 to 600 megawatts and gives Empire discretion as to when to close the Asbury plant. Empire says it needs to act quickly – at least in part due to the diminishing production tax credit – and is pressing state regulators for an answer by June 30.

“We supported the original plan,” said Henry Robertson, an attorney representing the Sierra Club in the matter. “It’s technically still on the table, but not really. We think 600 megawatts is good, and Asbury’s days are numbered anyway. I’m frustrated with the opposition (the plan) has attracted. It’s very backwards to keep relying on coal and shunning wind.”

Through its subsidiary, Liberty Utilities, Algonquin owns or has an interest in 1,050 MW of wind, 40 MW of solar, 120 MW of hydroelectric and 335 MW of thermal energy capacity, according to Bloomberg. It has wind assets in Illinois and Iowa, among other states. Algonquin would not respond to interview requests.

Algonquin has previously used tax-equity financing, a tool that the wind industry has adopted only in the last few years. The utility envisions finding an investor to provide 50 to 60 percent of the funds needed upfront, “which is a big customer benefit,” according to Robertson, because ratepayers would never have to repay that investment.

Customers could begin to reap some financial benefits after 10 years, at which point Empire indicated it likely would purchase the turbines. Algonquin has asked state regulators to allow it to earn a return on the undepreciated part of the Asbury coal plant, meaning that customers would continue to pay something for a generation source no longer in use.

Algonquin says the economics will work out for customers, largely because it will be able to provide wind power at an extremely low price. It would sell its wind power into the Southwest Power Pool’s wholesale market, and then buy back what it needs.

But the wind market is volatile and certain to become more so, according to Geoff Marke, chief economist for Missouri’s Office of Public Counsel. One prediction he would make: given the large number of wind projects under development, the cost of wind is going to collapse – at times when nobody needs it, like 2 in the morning.

But when Empire customers want power, say in the middle of a July afternoon, so will everybody else. And then the price will skyrocket, he said. In a few years, he predicts that Empire will ask the Public Service Commission for permission to build a gas peaker plant or battery to cover those times when Asbury could have delivered.

Adding to the forecasting difficulties, he said, is the possibility that the SPP will vote this summer to make wind power dispatchable – meaning it could decide to keep some wind production out of the system, if it’s too much to handle. Currently, all renewable generation is automatically accepted into the wholesale market for sale.