Clean energy policies hamper industrial development

When it comes to heavy industry and manufacturing, low-cost electricity and the power sector are foundational to producing competitively priced goods and products.

The Tri-City area is increasingly on the radar of companies looking for communities to bring new industries and jobs, the kind of jobs that include good wages and benefits and that offer stable, multi-generational employment opportunities.

There are a lot of reasons to love the Tri-Cities, but heavy industry and manufacturing are attracted by the Northwest’s reputation for abundant and inexpensive hydropower.

Low-cost electricity has been the economic engine of the Northwest for decades. But times are changing, and not for the better when it comes to the possibility of industrial development in many Washington communities.

Speaking from experience, I can tell you industrial processes with big job opportunities are often electricity intensive, requiring not only affordable electricity, but large amounts of electricity available 24 hours a day, every day.

Around-the-clock operations put these customers into what is referred to as the “baseload” of an electric utility. While electricity demand can vary over a wide range from day-to-day and month-to-month driven mostly by weather, baseload is the minimum power that must be available on a constant basis.

When electricity is a primary input to a business process, it is nonnegotiable that it must be available and affordable.

Therein lies the rub between economic development opportunities involving electricity intensive industry and Washington State’s Clean Energy Transformation Act, or CETA. CETA is driving development of variable and intermittent wind and solar farms.

While CETA’s 100% non-emitting electricity generation requirement by 2045 may seem like a far-off date, the effects of its post-2025 prohibition on coal-fired baseload generation and punitive financial penalties for using natural gas generation beginning in 2030 are impacting electric utilities like Benton PUD today.

Here’s why. Benton PUD and all electric utilities serving Tri-City area customers of the Bonneville Power Administration, or BPA. BPA is the federal agency responsible for wholesale marketing of the electricity generated by the Federal Columbia River Power System, or FCRPS.

The FCRPS includes 31 hydroelectric dams and the Columbia Generating Station nuclear plant.

The hydro and nuclear plants in its portfolio do not emit carbon, which puts BPA’s utility customers in the driver’s seat when it comes to compliance with CETA’s clean electricity mandates. But BPA has no more “firm energy” available to meet growing electricity demand.

In utility vernacular, “firm energy” is the electricity that can be guaranteed to be delivered.

And while it is not widely understood by the public, the 2023 forecast of total utility customer annual demand eligible to be served by BPA is already 470 average megawatts (aMW) above the 6,736 aMW firm energy capability of the FCRPS, which is limited by low water or drought years.

Hydropower is a flexible, low cost and clean generating technology. It is also highly variable from year-to-year.

So, BPA can only commit to providing firm energy based on the worst water years and then sells surplus hydropower generated during better water years in short-term wholesale electricity markets.

Revenue derived from surplus sales is used to buy down the rates BPA charges for its coveted “Tier 1” product, currently about 3.5 cents per kilowatt-hour (kWh) wholesale. For Benton PUD that translates to a small industrial effective retail rate of 5-6 cents per kWh.

Additionally, while BPA is considering augmenting its Tier 1 portfolio with new generating resources in the next round of contracts beginning in 2028, its utility customers are currently restricted from serving new individual retail customer electricity needs greater than 10 aMW annually with Tier 1 energy.

This restriction, which is referred to as the New Large Single Load (NLSL) policy, was put in place decades ago to keep low-cost hydropower from attracting too much of the nation’s heavy industry to Northwest states.

To put this in context, Benton PUD acquires about 210 aMW of wholesale electricity annually for delivery to more than 57,000 customer meters. So, while 10 aMW is a large number for any one customer, it is common for heavy industry or manufacturing facilities to require many multiples of that.

The bottom line is low-cost BPA hydropower is already spoken for and while wind and solar farms can produce large quantities of intermittent energy on an annual basis, they cannot produce the “firm energy” required by industry.

While it is popular with politicians and media to suggest energy storage is ready for prime time, the capital cost of grid scale batteries needed to firm large amounts of wind and solar are far too high to be affordable for many electricity intensive industries which need costs to be in the ballpark of 5 cents per kWh or less.

I wish I had better news when it comes to attracting industry with big job prospects to Benton County, but I just don’t see how it can be done now that CETA mandates have taken new baseload capable and 50% cleaner-burning natural gas generation off the table.

Benton PUD continues to advocate for a more rational coal-to-natural gas-to-nuclear clean energy policy, but I don’t see natural gas getting a reprieve anytime soon.

On a positive note, Benton PUD supports the development of advanced nuclear technologies, including the small modular reactors, or SMR, being considered for Grant and Benton counties.

Unlike wind and solar power, SMR technology offers the promise of always on non-emitting electricity on a small footprint, and the opportunity to add modules when big industry knocks on the door of Tri-Cities’ economic development interests.

It will take time and some federal assistance to be cost-competitive, and we need to start now.

Rick Dunn is general manager of Benton PUD.

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