Kentucky communities face choice: risk new fossil fuel commitments or turn to clean energy

Kentucky Municipal Energy Agency (KYMEA) Weighing New Investments in Coal and Natural Gas Power as One Existing Coal Contract Sunsets in 2022

As the cost of building clean energy systems drops lower and lower, Kentucky’s electric utilities have the opportunity to meaningfully shift their energy mix away from fossil fuels and towards affordable, renewable energy–if only they would take it. This question is playing out right now at the Kentucky Municipal Energy Agency (KYMEA), a wholesale supplier that provides energy to several cities and towns across Kentucky. 

The KYMEA is developing an Integrated Resource Plan (IRP) to determine how to meet its customer’s energy needs over the coming 10 – 20 years. In the process, it is considering whether to invest in new coal or natural gas power contracts to serve its municipal members. These potential investments would pose a significant financial risk to KYMEA’s member-communities, in addition to negative environmental and public health implications.

If you or someone you know live in a KYMEA member-community, your voice is needed to make sure KYMEA invests in a clean energy future, rather than risky fossil fuels.

Background

The KYMEA was formed in 2015 and began supplying power to its eight municipal utility customers in May 2019. In Kentucky, there are dozens of retail electric utilities, including investor-owned utilities (e.g. LG&E, KU, Duke Energy, and Kentucky Power Co.), cooperatives, and municipal utilities. The municipal utilities are scattered across the state and buy their power from various wholesale suppliers, including the KYMEA. They are unique in that they are not regulated by the Public Service Commission, which regulates the IOU’s and co-ops. The legislature exempts municipal utilities from PSC regulation because they are overseen by local boards or elected officials.

The KYMEA buys its power from several power producers and then re-sells it to its municipal utility Members. The large majority of KYMEA’s power comes from coal, with some natural gas, and a small amount of hydropower. The KYMEA currently has a 100 megawatt coal power contract due to expire in 2022. This represents almost one-third of KYMEA’s power supply and gives its Members a chance to reduce the cost, financial risk, and environmental impacts of their energy supply. 

Without community input, the KYMEA may turn to other coal or natural gas resources to replace the expiring contract. Across the country, electric utilities are turning away from coal and natural gas in favor of wind and solar because renewables have become the least-cost option in many places. Indeed, the KYMEA already has a contract for 50 megawatts of solar that’s expected to come online in 2022. However, they are still considering additional coal and natural gas options.

Aside from their environmental and public health impacts, coal and natural gas generation present significant financial risks to local communities. The cost of their competitors, wind and solar, has fallen dramatically in recent years and continues to decline. Meanwhile, large-scale battery storage is now available and its costs are also falling dramatically.

We see this trend in Kentucky, where hundreds of megawatts of coal generation have been retired in the past two years by Owensboro Municipal Utilities and Henderson Municipal Power and Light (HMP&L) [_1]. In July 2020, HMP&L announced a contract for 50 megawatts of solar power, enough to meet 20% of their electricity demand. In Indiana, the “Northern Indiana Public Service Co. (NIPSCO) presented analysis for its 2018 Integrated Resource Plan (IRP), finding it can save customers more than $4 billion over 30 years by moving from 65% coal today to 15% coal in 2023 and eliminating the resource by 2028. To replace retiring coal, NIPSCO found that a portfolio of solar, storage, wind and demand management is the most cost effective, along with a small amount of market purchases from the Midcontinent ISO.”[₂]

While cheap natural gas has had a major hand in driving the shutdown of so many US coal plants, market forces and the need to cut carbon emissions places natural gas at a long-term disadvantage relative to wind, solar, and battery storage. This is now leading some utilities to transition directly from coal to renewables plus battery storage, without building any new natural gas generation. Utilities in three states (Arizona, Colorado and Florida) announced such plans in June 2020 [₃].

These trends point to significant risks to the KYMEA’s members from any new investments in coal or natural gas generation, whether that be new construction or contracts with existing power plants. During this time of rapid change in the energy sector, with renewable energy and battery storage costs rapidly falling; and ever-growing demands to regulate or halt the burning of fossil fuels, any new investments in coal or natural gas carries serious risks for the KYMEA and its member communities. 

KYMEA is accepting public input from its member communities on their Integrated Resource Plan. We know that, without everyday Kentuckians speaking up, the agency may very well go ahead with the investments in coal and gas it is considering. If you live in Barbourville, Bardwell, Corbin, Falmouth, Frankfort, Madisonville, Paris, Providence, Berea, Benham or Owensboro, please follow the "Take Action!" steps to make sure the KYMEA hears what’s best for your community!

Related reading: click here to read an opinion editorial from Andy on this same topic. 

[1]  Integrated Resource Plan Report, Prepared for Henderson Municipal Power & Light, April 19, 2018, GDS Associates, p. 34. Lawrence, K., OMU Stops Producing Electricity After 119 Years, May 30, 2020, Messenger-Inquirer.

[2]  Bade, G., Even in Indiana, New Renewables Are Cheaper Than Existing Coal Plants, October 25, 2018, Utility Dive. 

[3]   Wamsted, D., Utilities Are Now Skipping the Gas ‘Bridge’ in Transition from Coal to Renewables, July 1, 2020, Institute for Energy Economics and Financial Analysis, https://ieefa.org/ieefa-u-s-utilities-are-now-skipping-the-gas-bridge-in-transition-from-coal-to-renewables/ .