Environmental groups are hoping to stop Alabama Power’s plan to construct a new gas unit at Barry Steam Plant in Mobile County — an addition they see as unnecessary and counter to the Southern Company’s stated goal of reducing carbon emissions at its facilities over the next three decades.
The utility filed a petition seeking a “certificate of convenience and necessity” from the Alabama Public Service Commission (PSC) in September that, if granted, would greenlight the company’s plan to move forward with a suite of projects intended to increase its total electricity generating capacity by 19 percent.
The proposal, which would add a fifth gas turbine at Plant Barry, would also expand capacity through the acquisition of the Hog Bayou Energy Center in Mobile and another existing facility in Autauga County. It also includes agreements to purchase a relatively small amount of solar energy from facilities set up in several Alabama counties and would initiate energy efficiency programs to reduce waste.
In its petition to the PSC, Alabama Power makes the case these new additions are necessary to meet the increased demand it has seen during winter months, which the utility says have been more demanding on the grid in recent years. In all, the plan aims to increase that winter reserve capacity to around 26 percent of what is typically produced every year — amounts that can vary based on usage.
A good bit of “proprietary information” is redacted in the public version of Alabama Power’s petition, including statements showing what some individual projects within the plan might cost as well as some of the calculations used to demonstrate why the increase in reserve capacity is necessary at this time.
The company has previously estimated the cost of the whole proposal at around $1 billion, and public filings suggest it would lead to a $4 monthly increase on typical residential bills. Under the PSC, Alabama Power also has a guaranteed return on equity of 13.7 percent — the highest in the country.
Since Alabama Power’s plan to expand its capacity was presented to the PSC last fall, groups like Energy Alabama and the Sierra Club have intervened to challenge it. They’ve questioned whether the increase is necessary, but even if it is, the groups have expressed concern about the increased reliance on gas.
As Lagniappe has reported, Southern Company, which includes utilities in Alabama, Georgia and Mississippi, has been slowly reducing the percentage of its energy produced by burning coal. That’s a big part of the 36 percent reduction in greenhouse gas emissions the company has seen since 2007.
However, environmental groups like the Sierra Club are still concerned about the trend of utilities like Alabama Power replacing the capacity they lose from coal by burning gas produced by fracking.
Stephen Stetson, a representative of Sierra Club’s “Beyond Coal” campaign, says in addition to the process of fracking itself, the potential for methane leaks and other short-term environmental concerns, the construction of new, gas-burning infrastructure extends the use of fossil fuels decades into the future.
If a company spends millions building an asset, they’re going to want to get their money’s worth from it, and that is one of the primary objections the Sierra Club has to adding more gas units at Plant Barry.
“The worst problem is not that they would buy existing assets, because those are going to become obsolete on an existing time table — they’re going to depreciate, they’re going to get older and they will eventually close, even if we’d like to see them closed sooner,” Stetson said last week. “Our number one concern here is that they’re building a new asset, which would be around and in use for decades.”
Alabama Power itself projects a new gas unit at Barry would have a “useful life of 40 years,” and Stetson said that will ultimately delay the company’s “full embrace of clean and renewable energy” like solar and wind, which he claims are cheaper than burning coal or gas.
Southern Company released a plan in 2018 that set a goal to achieving “low-to-no” carbon emissions across its entire footprint by 2050. Utilities around the country have enacted similar goals, though most aren’t binding. Stetson believes those goals could be achieved sooner, but won’t be if gas remains the go to.
Since intervening in the petition to the PSC, Sierra Club has also pitched the argument that betting on gas is not the best economic decision for Alabama Power. As the costs of wind and solar energy production continue to drop, Stetson argues a new gas unit could quickly become a “stranded asset.”
“It would be like you going out today and buying a DVD player,” he said. “You might get some use out of it for a while, but within a couple of years, it’ll be a stranded asset. It will eventually cost more to operate than it would to replace. It will be cheaper using solar to produce the same amount of energy.”
Proponents of gas would likely note “utility scale production” of solar energy would require a significant investment of equipment — panels, batteries and land to put them on. On the other hand, with the explosion of gas produced from fracking in the U.S., it has never been cheaper.
Sierra Club has also challenged the way the PSC has handled some parts of the process and specifically objected to its decision in October to grant Alabama Power’s request to start preliminary construction on the new natural gas unit at Plant Barry while commissioners decide whether to approve it. With that authorization, ratepayers will be on the hook for those costs whether the project is approved or not.
PSC filings also indicate the company began some work on the project before its petition was ever filed and has already inked an agreement with contractors in order to meet its projected completion date of November 2023. The price and several details of that agreement are redacted in public filings with the PSC.
The PSC has a hearing scheduled on Feb. 18 in Montgomery, where it will hear from representatives of Alabama Power, the Sierra Club and other intervenors.
“Although PSC may be likely to approve Alabama Power’s petition, it’s not a done deal and we’re going to intervene with all of the power of Sierra Club,” Stetson said. “We want to present the best possible case so we can show that they don’t need this. They do not need an additional gas plant.”
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