Tuesday, March 16, 2010

Colorado Taking Steps to Get Rid of Most Coal-Powered Electricity

Last week, Xcel Energy, a major western utility that provides power for a large part of Colorado, including the highly populated Front Range area, announced that it has struck a prospective deal with the state "to sharply reduce pollutants by retiring, retrofitting or repowering Front Range coal-fired power plants by the end of 2017 and replacing them with facilities fueled by natural gas and other lower- or non-emitting energy sources." 

The deal is in the form of proposed legislation supported by Governor Bill Ritter, a group of legislators and environmental groups called the "Colorado Clean Air-Clean Jobs Act," which will be put in front of the Colorado legislature this year.  As part of the legislation, Xcel will evaluate retrofitting or retiring 900 megawatts of coal-fired generating capacity.  It will also work with the state to develop a plan to reduce nitrogen oxide emissions from coal-fired plants by 80% over the next eight years. 

Interestingly, the press release and some media coverage was notably silent about what's in it for Xcel.  How will the capex for the new plants and retrofits be funded? Obviously ratepayers are responsible for most power plants, but I'm sure there's a sweetener in there for Xcel.  Since the legislation is called the Clean Air-Clean Jobs Act, I'm sure the state offered Xcel something in return.

Whatever the case, it looks to be a good deal for the gas industry if it passes.  Colorado has a very large gas reserve and the state's population should continue to grow strongly over the coming decades.  I spent a few days in Denver for a convention a couple of years ago.  My lingering memory was of blue clouds of pollution in the afternoon and enormous coal trains passing within blocks of the convention center.  Switching from coal to natural gas power could make both of those memories...well, a memory in short order.

No comments: