Can a coal plant be repurposed?

Congress appropriates $200,000 for study of potential future uses of Craig Station. Plus, can Colorado utilities get pieces of the federal climate funds?

by Allen Best

Congress has allocated $200,000 to allow Tri-State Generation and Transmission to study the feasibility of repurposing the existing coal plant at Craig to test and demonstrate clean and low-emission energy technologies.

Black Hills Energy has taken note of potential federal funding from two giant federal bills, the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act in its clean energy planning.

Xcel Energy also has its eyes on federal money as it looks to transition from coal-based generation. The IRA provides a 10% bonus for production tax credits and 10% points bonus of investment tax credits if an eligible facility is built in an energy community.

All three items were contained in reports submitted to the Colorado Public Utilities Commission in recent weeks in a new proceeding that was initiated in January. Three groups—Western Resource Advocates, the Office of Utility Consumer Advocates, and the Colorado Energy Office—said why not ask the utilities regulated by the PUC to report how they see themselves availing of the extraordinary federal funding.

The 2021 infrastructure law provides $73 billion in funding for power and grid improvements, including money for the electric vehicle sector, clean energy transmission, and cyber security.

The 2021 IRA provides $370 billion, according to the PUC filing (although some analysts have suggested the true potential funding may be double that once all the rules are adopted) in incentives to modernize and decarbonize the energy system.

In essence, the PUC wants to know how the utilities see these funding opportunities shifting and perhaps accelerating their plans in everything from transmission to energy efficiency programs.

The PUC decision acknowledged that the funding programs are “vast, and entities may not yet know each opportunity they may pursue.”

The decision applied to Xcel and Black Hills, who provide both gas and electricity, and Atmos and Colorado Natural Gas, both exclusively natural gas providers.

The decision did not apply to Tri-State or other cooperatives or municipal providers, but Tri-State chose to share its thinking in some detail.

“At this time, Tri-State’s priority areas for pursuit of funding include transmission system investments for grid resilience, distributed energy resource management systems, and distributed generation and storage integration,” said a March 2 letter from Barry Ingold, the chief operating office of Tri-State.

“Tri-State is also evaluating funding availability to support other elements essential to its energy transition, including clean resource investment, stranded asset relief, and emerging technology investments. Additionally, Tri-State is interested in opportunities that are impacted by the transition away from coal.”

In the context of Colorado, that would be Craig, where the three coal-burning units are scheduled to be retired between 2025 and 2030.

The new federal funding for the study of a new energy center at Craig was not part of either of the federal landmark laws, but rather at the behest of a special request funneled through U.S. senators Michael Bennet and John Hickenlooper and the former U.S. Rep. Ed Perlmutter.

Tri-State said this coming study will enable it to understand the subsequent steps and estimated costs that would enable the transition of the site and further support the transition in the Craig community.

Transmission—not surprisingly—ranks high in the specifics of how Tri-State sees opportunities. It sees some possibility for grants for three different projects under the 2022 infrastructure law.

Both Tri-State and Xcel Energy are among the 11 members of the Rocky Mountain Region Transmission Coalition, an effort led by the Colorado Energy Office that is seeking federal funding to study what Tri-State calls an “East-West DC tie interregional transmission project.”

That same effort is focusing on identifying the most beneficial transmission route between the sunshine-laden San Luis Valley and the Front Range.

Xcel also noted the IRA tax credits that will “both increase affordability and drive investment in hydrogen.” Xcel is a partner in the Western Interstate Hydrogen Hub, a coalition of four states that will be submitting a proposal to the Department of Energy in April 2023.

“We are currently exploring plans to incorporate hydrogen into an upcoming proposal for hydrogen-capable combustion turbines,” the company said.

“We have plans to start testing the ability to blend hydrogen into a small area of the natural gas distribution system in Colorado.”

Xcel’s report also describes its attention to other sectors, including energy storage, building electrification, and transportation.,

The two federal laws have funding to accelerate electrification of transportation. But, says Xcel in its filing, together they “likely do not provide all the funding necessary to reach (Colorado’s) EV goal of 940,000 vehicles by 2030 nor (Xcel’s) vision of 1 in 5 electrified vehicles by 2030. Estimates from other organizations indicate that a business-as-usual forecast of EV adoption could increase by about 20% because of the IRA. While such an increase in EV adoption would certainly be material, it would not close the gap between pre-IRA expectations and the amount of electrification needed to meet the state’s clean transportation goals.”

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