Does delaying Nixon retirement make sense?

Sierra Club-commissioned study disputes Colorado Springs talk of keeping coal plant puffing beyond 2029

by Allen Best

Ray Nixon, a power plant south of Colorado Springs, was headed for retirement at the end of 2029. It has been burning coal since 1980.

Might a few more years be milked out of it?

That’s what Colorado Springs Utilities — hereafter called CSU — wants to do while it investigates replacement generation, including nuclear.

The Sierra Club is pushing back on that idea. A study commissioned by the group points out that small modular reactor technology, as is being discussed in Colorado Springs, remains costly.

The organization argues that even if CSU can’t get renewable energy projects rolling by July as necessary to take advantage of federal tax credits, renewable energy or possibly natural gas will remain far less costly.

Starting in January…

The story starts in early January, when CSU served notice that it wanted to delay retiring the plant. A letter to the state’s Air Pollution Control Division reported “unexpected challenges” leading to “significant concerns” about the ability of CSU to maintain reliability and meet obligations with the current Nixon retirement date.”

CSU in late 2023 had solicited bids for generation and storage to replace the electricity that was to be lost at Nixon and prepare for additional demand for electricity. It got more than 200 responses. The bids were very high, though, 60% more than budgeted for wind and 50% more than for solar.

That same letter on Jan. 11, still more than a week before the inauguration of Donald Trump as president, cited tariff changes for solar and battery components, supply chain issues and concerns about adequate transmission by 2030.

“We are assessing alternative paths,” said Travas Deal, the chief executive of CSU, in a blog post in February.

On March 11, CSU sent another letter to the Colorado Department of Public Health and Environment, which has jurisdiction over the air-quality permits issued for its power generating source. This time CSU cited an “urgent need to defer the retirement” of the coal unit because of the unforeseen challenges.

At issue is Colorado’s Regional Haze State Implementation Plan. The question is whether Colorado can meet regional haze standards set by the EPA if the Nixon unit continues to burn coal. CSU insists that Colorado can do so.

Colorado, in an April 11 letter, rejected that assertion. “It is not accurate to say that the announced closure date is not necessary to demonstrate reasonable progress,” wrote Michael Ogletree, senior director of the state’s air quality programs.

In an Aug. 8 blog post, Deal explained that the Nixon unit “still has more time before its true ‘end of life.'” That was very different, he said, than the Martin Drake plant near downtown Colorado Springs, which burned its last coal in 2021. That plant dated to 1925.

Drake coal plant, Colorado Springs, August 2021

The Martin Drake plant burned its last load of coal in August 2021. The complex was later razed and temporary gas-fired units were installed. Top, the Ray Nixon plant, which has three units, of which one burns natural gas. Photos/Allen Best

Deal compared the Nixon unit to a car with plenty of miles left on it. “This is what we are asking to do with Nixon. We know it doesn’t make sense to run the coal-fired unit forever, but we do need more time to run it while we find a sustainable option that also makes sense financially.”

CSU is “committed to a smart transition at a pace that makes sense without sacrificing our customers’ ability to pay their electric bill or meet electric demands on the hottest of days,” he said.

As of September, that dispute remained unresolved.

CSU, in a response to a request for comment from Big Pivots, said last Friday that it remains obligated to retire the Nixon unit by the end of 2029. The response also cited the talking points found in previous letters from CSU to the Colorado Department of Public Health and Environment.

Colorado Springs formally began looking into nuclear energy in June 2024. A utility advisory committee was tasked with examining the technology. The committee in February reported that CSU needed to look into small modular reactors, reported KRDO.

In March, Deal testified before a legislative committee in support of HB25-1040, which later became law. It designates nuclear as a clean energy in Colorado.

“With growing customer demand and the emergence of new technologies like AI and data centers, it is increasingly critical that we have access to firm baseload power, 24 hours a day, 365 days a year, no matter the weather,” Deal wrote in a blog post. “This is an area that renewable resources like wind and solar currently fall short, even with battery energy system storage.”

CSU, he said, was still in the early stages of examining the viability of nuclear energy to achieve the best balance of cost, reliability and zero carbon emissions.

Now comes a report commissioned by the Sierra Club and conducted by Applied Economics Clinic. It rejects the idea of CSU continuing to operate the Nixon unit beyond its scheduled retirement.

Sierra Club report

The study, “Economic Analysis of Options for Replacing the Ray D. Nixon Coal Unit,” used a study period from 2025 to 2049. With that time frame, coal was a non-starter.

As for small modular reactors, great excitement undeniably surrounds the prospects of a next-generation technology. It’s a bit like religion, a subject of believers and non-believers. Many in the utility sector, including those now ardently pursuing renewable energy and associated technologies, believe that nuclear energy may yet provide answers to the riddle of a non-carbonized future.

Costs remain daunting, though. Projected cost of NuScale’s proposed project in Utah rose during six years from of $3.6 billion to $9.3 billion before the project was cancelled in 2023.

Large nuclear power plants have had problems, too. In Georgia, the Vogtle nuclear power plant began generating electricity during 2023 at a cost of $30 billion compared to the $14 billion projected cost when construction began in 2016. In South Carolina, construction of two reactors had been abandoned after $9 billion had been invested and the ceiling of costs remained unclear.

Tyler Comings, the principal economist for Applied Economics, sees no reason to think the cost curve will be bent down in a time that matters to Colorado Springs. In a webinar announcing the study results on Dec. 4, Comings pointed out that the Tennessee Valley Authority expects a new nuclear project it is working on to come in at nearly $18,000 per kilowatt in capacity. That, he said, is close to what he had modeled in the report’s estimated high-cost scenario for nuclear.

See: “They’re smaller, cheaper, but still cost billions. How can LTV fund new nuclear reactors?

In this study for the Sierra Club, nuclear comes in at between $1.38 billion and $1.79 billion, nearly double the lowest-cost portfolio

Lowest cost, at between $707 million and $1.07 billion according to the analysis, would be a portfolio of new solar, wind and batteries. If at the high end, though, replacing Nixon’s coal with gas would cost less.

Eastern Colorado now has many wind farms, including this one north of Kit Carson, and will almost certainly gain many more during the next five years. Photo/Allen Best

Why the study? Matthew Gerhart, senior attorney for the Sierra Club in Denver, said that after CSU began talking about reconsidering the retirement date for the Nixon plant, the utility did not issue a new analysis.

“From our perspective, there was this gap in that CSU was talking about reconsidering Nixon’s retirement date, but we haven’t seen any updated analysis of long-term costs. That’s why we commissioned this study.”

In an interview, Gerhart said that CSU has no legal option but to shutter the Nixon unit or retrofit it to burn gas.

“CSU is required by statute to reduce its carbon dioxide emissions 80% by 2030, and CSU adopted and submitted a Clean Energy Plan to meet that requirement.” he said. “There is no practical way they can meet that obligation if they are burning coal at Nixon past 2029.”

He points to three legal requirements:

SB23-198, which took aim at utilities that legislation in 2019 had avoided, requiring CSU and others achieve 80% reductions compared to 2005 levels by 2030.
Regulation 23 by the Colorado Air Quality Control Commission, which requires Nixon to close by the end of 2029 to meet regional haze standards specified by the federal EPA.
The operating permit issued by the Colorado Department of Public Health and Environment in 2023 for Nixon.

“It’s not a waffle option for them to keep operating that plant beyond 2029, and there is a really significant legal risk for CSU and also economic risks.”

When CSU decided in 2020 to retire the Nixon unit in 2029, the shift to renewables seemed inevitable. That shift was still seen that way in 2022, when the city’s utilities board adopted a resolution affirming the retirement plans.

What others are doing

In the last two years, however, utilities have been girding for what could be a surge in demand caused by hyperscale data centers. As well, supply chains have become problematic, as Deal discussed in his February blog post. They add up to growing concerns about what utilities call resource adequacy, meaning they’re worried about their ability to keep the lights on 99.9% of the time.

“Obviously, things are always changing, but I don’t think that they have changed in any way that justifies not retiring Nixon No. 1,” said Gerhart.

“I think all you need do is ask the question, ‘Is any other Colorado utility saying they can’t retire a coal unit in 2029?’ The objective answer is no. Look at the most comparable utility, Platte River Power Authority, which has Rawhide, a similar-sized coal plant and exactly the same retirement date of 2029. And Platte River has never said a word about changing that retirement date. They are moving full speed ahead. This is only happening at CSU.”

Platte River expects to begin construction of its gas plant in the first half of 2026.

Gerhart also discounts CSU’s statements that it needs Nixon because of projected growth. “If anything, they are experiencing less baseload growth than any other utility, including Xcel, which has much larger forecasted load growth.”

Tri-State plans to continue coal plants in Arizona and Wyoming beyond 2030 but plans to be out of coal in Colorado by the end of 2028. It does, however, plan a natural gas plant at Craig. There, it plans to close three-coal burning units during the next three years.

Xcel plans more gas, and Platte River has started building another gas plant north of Fort Collins. United Power completed a gas plant in August near Keenesburg, northeast of Denver.

“There is really nothing in this report that is surprising, given what utilities have actually been doing, what they have been filing in their resource plans,” said Gerhart.

The Sierra Club and its allies want to see CSU chasing renewables while federal tax credits remain available. Xcel has famously been doing so. It obtained a special permission from the PUC in September to issue an RFP with the goal of getting projects far enough along to be able to qualify for the federal credits before they expire as specified in the One Big Beautiful Bill Act passed by Congress and signed into law by President Donald Trump in July.

Xcel, on Friday, reported to the PUC its recommended portfolio. See: “Elephant-sized plans for eastern Colorado.”

Deal, in his February post, said that wind and solar had become too expensive. Ellen Howard Kutzer, general counsel for the including Colorado Solar and Storage, said during the webinar that there was a “difference of opinion as to what constitutes cost prohibitive.”

“They were more expensive than they were in, say 2022, but certainly were, as Tyler’s analysis I think would show, more cost effective than alternative resources in the marketplace, including thermal resources,” said Kutzer.

Gerhardt said that CSU’s stance misses the question of what prices will be when the tax credits go away.

“It may be that wind and solar prices in the RFP were higher than CSU had thought they might be. But the question is, are they expecting to get lower prices after the wind and solar tax credits expire. That doesn’t seem very likely.”

Delay, he said, will produce higher costs.