The utility that heats and cools downtown St. Paul is phasing out coal in a move that will greatly reduce its carbon emissions.
But District Energy St. Paul isn’t ditching coal under government pressure and isn’t doing it for sentimental reasons. CEO Ken Smith says it comes down to dollars and cents: other power sources are becoming cheaper than coal.
“We’re not mandated to make this change,” Smith said. “If you look at the economic costs of coal, it used to be the least-cost source. It’s no longer the least-cost source.”
So District Energy, which was 100 percent coal power when it was founded in 1983, will now eliminate coal altogether over the next five years.
Coal currently accounts for about one-quarter of District Energy’s energy sources. Natural gas is another quarter, and biomass power is most of the rest.
The move puts District Energy in line with other utilities, such as Xcel Energy, which have also been moving away from coal and trying to cut carbon emissions. Xcel reduced its carbon emissions in the Upper Midwest by about 20 percent over the past decade and plans bigger reductions in the future.
For Xcel and other power companies, government regulation explains some of the move. The Environmental Protection Agency’s Clean Power Plan proposes a 32 percent reduction in carbon emissions from 2005 levels by 2030, though those rules are being challenged in court.
Market forces are playing a big role, too. Renewable energy such as solar and wind power have been plummeting in cost, and natural gas is competing on cost with coal.
Projections from the U.S. Energy Information Administration estimate that by 2020 — when District Energy will abandon coal — conventional coal will cost about $95 per megawatt-hour to build and operate a plant over its life-cycle. Cleaner forms of coal power will be much more expensive, between $115 and $144 per megawatt-hour.
Cost-competitive forms of power in the 2020 projections include normal natural gas ($75), cleaner natural gas ($100), nuclear ($95), biomass ($100), wind ($73), photovoltaic solar ($125), hydroelectric ($84) and geothermal ($48).
“There’s been an advancement of a variety of technologies,” Smith said. “We feel that’s the right time to put a sunset date on it.”
Another factor, Smith said, is that coal equipment requires more maintenance and labor to keep running than equipment for cleaner power types.
Abandoning coal — even if it’s replaced by other fossil fuels such as oil or natural gas — will result in lower carbon emissions. District Energy predicts a 27 percent reduction in carbon emissions from the change, though it hasn’t formalized which power sources will replace coal.
In addition to gas, biomass and solar, Smith said District Energy is exploring less-orthodox ways to heat downtown St. Paul, including capturing heat energy from sewage.
Mayor Chris Coleman praised the environmental implications of District Energy’s move, which he said in a statement would help “deliver the next great energy solutions that reduce our carbon footprint and make us more resilient to changes in our environment and our economy.”
Rep. Pat Garofalo, R-Farmington and the chair of the House committee covering energy and jobs issues, said he didn’t have the full details but liked the sound of District Energy’s move.
“If it reduces pollution and saves money, that’s a good thing,” Garofalo said. “Technology will evolve so energy will get both cleaner and cheaper. We just have to make sure as this happens we’re making smart decisions based on facts and not the fad of the day.”
Follow David Montgomery at twitter.com/dhmontgomery.
