Why Do We Need a New Generating Plant
by Jim McCarty
Almost all of us have more than one TV in our homes, maybe even the same for refrigerators. Many replace our inefficient refrigerators, only to move them to the garage or workshop where they continue to run keeping drinks cold.
Associated Electric Cooperative, (AECI) is the generation cooperative that provides Access Energy Cooperative with our power, as well as electric cooperatives in Missouri Dell,
and parts of Oklahoma.
Jim Jura, the manager of AECI, along with the board of directors, have been carefully watching the rapid energy load growth.
Looking ahead, AECI’s planners predict the energy requirements of the cooperatives it serves will increase about 2 percent a year. That’s enough power to supply about 30,000 homes a year. “The system is growing and it’s growing faster than we thought,” Jura says. “No matter what we do, the system is growing so fast we are going to need more generation.”
The number of electric cooperative members has increased nearly 90 percent since 1985. Through 2025, the total number of new members is forecast to grow another 45 percent. Not only are there more members, but those members are using more energy than ever before. Average use for residential, commercial and industrial customers has increased 35 percent since 1985 and is forecast to grow another 14 percent by 2025.
Driving that increase is a plethora of new appliances and gadgets. Virtually everything you buy these days—from cell phone chargers to iPods to computer peripherals—comes with a plug. The number of electric cooperative members who owned a computer went from just 14 percent in 1993 to 60 percent in 2004, mirroring a national trend.
The Environmental Protection Agency Energy Star program estimates that home electronics account for about 15 percent of all residential electricity consumed. That’s a 200 percent increase since 1980.
Air conditioner use also has skyrocketed. Today, 90 percent of new homes have air conditioning. And those units will be required to cool much larger homes.
According to the 2006 census, the average single-family home had 769 more square feet than it did in 1976. Thirty-nine percent have four or more bedrooms, double the rate of 20 years ago. And 26 percent have three or more bathrooms, almost three times the rate from 1986. So not only are there more houses being served by electric co-ops, they are also larger and use more energy.
The good news: Your electric cooperative has plans in place to meet this tremendous increase in demand for electricity. The bad news: New sources of power will certainly cost more to build, and rates are expected to increase in the foreseeable future.
What’s driving current rate increases? For years, AECi had excess energy that could be sold on the open market. Margins made on these sales helped offset rates co-op members paid.
“When the system grows, the members use up the low-cost generation,” Jura says. “That’s fine, because these generation units were built for our members. But it does mean we will have to increase rates a little faster because we won’t have the margins from selling power off the system.”
Other factors that are driving rate increases include dramatic increases in the price of fuel—especially coal and natural gas— that are used to generate electricity. Another issue is the staggering cost of equipment that must be installed at power plants to meet strict new environmental standards.
In the short term, new gas-fired units have been brought on line that can add to the generation mix in times of high energy use, usually on the hottest and coldest days of the year. For example, AECI purchased a mothballed power plant in Dell, Ark., and completed construction on it this spring.
AECI also contracted to buy the entire output of the three wind projects being constructed in northwest Missouri. The first of these, Bluegrass Ridge, is already delivering some power to members.
But in the long term, AECI’s cooperatives will need additional baseload generation which, unlike wind power, can be relied on whenever it is needed. A new coal-fired plant in the works for Norborne, Mo., is expected to cost $1.7 billion. That’s 70 percent more than estimates from two years ago. The last large generation unit built by AECI came on line in 1982. Much has changed since that plant was built, and these factors are driving costs for new power plants through the roof.
“One way I try to put these cost increases into perspective,” says Torres, “is to compare it to the price of a new car. If you priced a new Chevy in 1985, it was probably $14,000. What would that same Chevy cost today? It’s probably double. So how can we expect it to be any different for a new power plant?”
Electric cooperatives are not the only utilities experiencing this combination of high growth and sticker shock over the cost of new generation. Utilities across the country are in the same boat. But AECI’s electric cooperatives today enjoy some of the lowest rates in the nation. And that is expected to be the case in the future, especially with a new emphasis on efficiency. “It’s a given we are going to have rising rates,” Jura says. “Fuel and construction costs are going up. But if we can help members use energy more efficiently, it’s possible bills will levelize and not go up that much.”