Great Lakes Region Pivots From Fossil Fuels

In shift from coal and oil, water use and quality hang in the balance.

By Codi Kozacek
Circle of Blue

Michigan’s largest electric supplier, DTE Energy, announced in June that it will retire eight coal-fired power units at three of its power plants over the next seven years. The plants generated a quarter of the utility’s electricity last year. Two months earlier, Consumers Energy, Michigan’s second largest electric utility, shuttered seven coal-fired power units at three of its plants.

Taken together, the decisions by Michigan’s two major utilities are momentous. A decade ago both utilities insisted that coal remained the fuel of choice for powering business, industries, and residences in Michigan. With the planned shutdowns, which reduce generating capacity by 2,000 megawatts, Michigan’s two utilities are withdrawing from production almost a fifth of the roughly 11,500 megawatts of state generating capacity fueled by coal.

The coal-fired shutdowns will not be the last. Michigan and other Great Lakes states are joining China, California, Germany, England, and other important industrial regions in a historic pivot away from coal to power their economies. The change in direction has equally significant ramifications for water use and quality. Consumers’ decisions to slash coal-fueled generating capacity, for instance, will cut water use by 40 percent, according to the company.

The consequences of coal plant closures to the Great Lakes, which hold more fresh surface water than any place else on the planet, are already visible. Between 2010 and 2014, electricity generated from coal declined 17 percent in the Great Lakes states, while Ontario closed its last coal-fired plant in 2014. At the same time, wind power more than doubled and natural gas generation grew nearly 40 percent.

Water use for power generation, as a result, has dropped 76 percent in Ohio, 48 percent in New York, and 82 percent in Illinois since 2005, the biggest declines in the country, according to a report published last year by Climate Central.

Coal Use Decline Conserves Water

The reason is that thermal power plants use a lot of water. Power plants in the Great Lakes Basin collectively withdraw 98 billion liters (25.9 billion gallons) of water each day from the lakes and their tributaries, more than three-quarters of the total water withdrawals in the basin, according to a 2011 report by the Great Lakes Commission, an interstate compact agency. The report also found that shifting to a power mix with more renewables and natural gas would reduce water withdrawals by 136 million liters (36 million gallons) per day by 2035, using 2007 as a baseline.

Water quality is at play, too. While most of the water withdrawn for power generation is eventually returned to rivers and lakes, water discharged from power plants is often warmer and can contain pollutants like arsenic, lead, and mercury. Fewer water withdrawals will therefore have knock-on benefits for animals and plants that require colder, cleaner water.

“The speed at which the transition is occurring was largely unanticipated by virtually everyone,” said Skip Pruss, principal and co-founder of 5 Lakes Energy and the former chief energy officer for the state of Michigan under Democratic Governor Jennifer Granholm. “And then the clear thing that is happening is that the pace of the energy transition that is occurring today is accelerating.”

On a large scale, reduced carbon emissions from power plants will help curb global climate change — and with six of the eight Great Lakes states ranking in the top 10 nationally for carbon emissions, their contribution is not insignificant. Climate change is expected to create more frequent and intense storms in the Great Lakes region, making it more difficult for farmers and water managers to reduce nutrient runoff and toxic algae blooms that have shut down water supplies for thousands of people in the Lake Erie basin.

More and more, leaders in government, business, and civil society recognize that clean and abundant water resources are key to revitalizing development and bringing prosperity to the Great Lakes region. The focus on a “blue economy” is also shored up by new environmental values and standards — of which water is a touchstone — that are putting undeniable pressure on legacy fuel sources and energy infrastructure.

The ramifications are clear, too, in the case of Line 5, a 63-year-old oil pipeline that crosses under the Straits of Mackinac, an 8-kilometer (5-mile) channel of water separating Lake Huron and Lake Michigan. The line, which carries oil and natural gas products from Superior, Wisconsin to Sarnia, Ontario, was built during the Great Lakes’ industrial heyday in an era when environmental risks went largely unconsidered. Now, Line 5 is the center of public outcry and a government inquiry over concerns that it could rupture and spill oil into the Great Lakes.

Bending to Change

Driven by a potent mix of deteriorating market conditions for coal and oil, regulations to curb climate-changing carbon emissions and other pollutants, and strong opposition to environmentally risky energy projects, the shift taking place in the eight states and two Canadian provinces is upending in the space of a decade an energy generation paradigm that was entrenched for generations.

The transition shows no sign of stopping or slowing. This summer, the U.S. Supreme Court declined to hear a legal challenge brought by Michigan and 22 other states that sought to stop the federal Clean Power Plan. The decision effectively locks in strict limits on emissions of carbon and other pollutants that will make many coal plants obsolete or uneconomical.

Transition, though, does not come easily in the coastal communities that surround the world’s largest supply of fresh surface water. The Great Lakes region led the industrialization of the United States in the 20th century by relying on coal, oil, and its vast water resources to develop an economy that paid the highest industrial wages in history, pioneered manufacturing practices that put Americans on wheels, and fostered some of the greatest research universities in the world.

The region’s pivot from fossil fuels has largely lagged behind other regions of the country, such as California and the Pacific Northwest. Great Lakes policymakers, born and raised in the prosperity of the 20th century, have been reluctant to embrace new forms of energy and set a decisive path forward. Ohio, for example, became the first state in the country to suspend its mandates to increase the use of renewable energy in 2014, and it is considering legislation to eliminate them entirely.

There is also little sign that government regulators are willing to halt development of new fossil fuel infrastructure, or eliminate old. Over the past three years, Canadian energy company Enbridge, Inc., which operates Line 5, added the capacity to transport an additional 1.6 million barrels of oil per day through its Great Lakes pipeline network. Projects currently planned or under construction, many of them in Minnesota, would carry another 1.5 million barrels of oil per day. All told, that’s nearly four times as much oil as would have been transported by the controversial Keystone XL pipeline, which was cancelled last year by President Obama.

But the combination of environmental pushback and unfriendly economics puts the long-term viability of Line 5 and other oil pipelines in question. It is a phenomenon repeated across the energy spectrum in the Great Lakes region — from old coal plants that are too costly to upgrade to meet environmental regulations, to expensive nuclear plants that raise concerns about waste disposal and possible water pollution. The result is a distinct unsettling of the status quo.

“Lots of changes are occurring very, very quickly,” said Skip Pruss of 5 Lakes Energy. “It’s interesting because there are historians of energy transitions who more or less have been saying that energy transitions are very difficult and take a very long time, if you look at them historically, and that we aren’t going to be able to do this on a timetable that meets the demands of climate change. I would disagree.”

“The continued investment in the development of unconventional sources of fossil fuels and the accompanying infrastructure to develop those resources and bring them to market, given the pace of the energy transition, those capital investments are going to be stranded,” he added. “At least many of them will be.”

Nuclear Hangs On

Another reason that utilities are turning away from coal in many Great Lakes states and provinces is that nuclear energy remains a potent source of electricity. Nearly 30 percent of total electricity generation is sourced from splitting atoms. Nuclear plants generate about half of Ontario’s electricity and have increased in importance as part of the province’s efforts to eliminate coal and develop renewable energy.

Ontario’s Bruce Power is investing $US 13 billion to update its station on Lake Huron, the second largest in the world, while Ontario Power Generation plans a $US 12.8 billion upgrade to its Darlington plant near Toronto.

It is unclear, however, if nuclear will remain an option in the future due to uncompetitive costs, and if Great Lakes residents will approve the underground waste storage solutions being proposed to deal with the growing amount of nuclear waste currently stored on-site at nuclear reactors. In one particularly heated debate, a proposed nuclear waste repository in Ontario, less than one kilometer from Lake Huron, has triggered a fierce backlash from state and federal lawmakers around the Great Lakes. And in Illinois, the nation’s leading nuclear energy producer, three nuclear plants are on financial life support; two of the plants could face closure by 2018 if government subsidies fall through.

Still, the most visible and immediate change upsetting the Great Lakes energy industry is the reduction of coal-fired power. Over the past 10 years, coal use for electricity generation shrank significantly in every Great Lakes state and province. Ontario phased out coal completely, and three Great Lakes States — Ohio, Pennsylvania, and Indiana — cut their coal consumption by 49 percent, 44 percent, and 37 percent, some of the biggest drops nationwide, according to the U.S. Energy Information Administration. The trend persists across the region. Collectively, coal accounted for 46 percent of the electricity generated in the eight Great Lakes states in 2014. While that number belies the region’s persistent reliance on coal, it is a steep decline from 25 years ago, when coal provided 61 percent of electricity in the states.

Coal’s grip on the Great Lakes region will continue to loosen. Utilities in Michigan plan to retire coal-fired power units at eight of the state’s 22 coal plants over the next four years. Across Lake Huron, it’s been two years since the last coal-fired station shut down in Ontario. Neighboring Quebec says it will eliminate coal-fired electricity by 2030.

Most of these plants are more than 50 years old and were nearing the end of their useful lives. Instead of investing large sums to bring them up to date, utilities are turning to natural gas and renewables. These sources of power are increasingly cost effective, with both natural gas plants and wind projects now cheaper to build and operate than new coal plants. The cost of new wind energy projects in Michigan, for example, is half what renewable projects cost in 2009, when the state first implemented its renewable energy standard. Tighter federal regulations on air emissions are also key. The closure of the seven Michigan coal units this spring coincided with the compliance date for the federal Mercury and Air Toxics Standards, which limits emissions of air pollutants including mercury and arsenic.

Further, businesses are beginning to demand that utilities provide access to clean energy. The Las Vegas-based technology company Switch announced last December that it would build a $US 5 billion data center near Grand Rapids, Michigan, which it will power completely with renewable energy. Access to renewables was the deciding factor in determining the data center’s location, according to company executives.

For all of these reasons, the fate of coal is unlikely to reverse.

“On a very big scale, we’re transitioning from the high-carbon energy economy, which was gas and coal and oil, to the low-carbon energy economy that includes a lot of renewables,” said Gary Radloff, director of Midwest Energy Policy Analysis at the Wisconsin Energy Institute. “That kind of big transition clearly has an impact on the energy sector. I think in some ways they’re trying to manage that change, make it slower if you will, and more measured just to allow them to transition. But I think they are going to have to change. We have these legacy systems of, at least in the electrical sector, large base load plants that run primarily on coal. They aren’t really going to last over the long-term. States need to prepare for that change.”

Haphazard Shift To Renewables

While plant closures and consumer demand are locking in a smaller role for coal, it remains unclear what will replace it.

Nearly all of the states and provinces have implemented mandatory renewable energy goals, but they vary greatly in scope. New York and Ontario lead the region, setting ambitious goals to source much of their energy from renewables like wind and solar over the next decade. Last fall, New York Governor Andrew Cuomo announced goals for renewables to provide half of the state’s energy by 2030. Similarly, Ontario plans to have 20,000 megawatts of renewable energy online by 2025, representing about half of the province’s generating capacity. Laws in Minnesota and Illinois both mandate 25 percent of the states’ energy mix will come from renewables by 2025.

Other states have far less stringent requirements. Indiana’s program is voluntary, for example, and sets goals to reach 10 percent renewables by 2025. Despite early success in adopting and meeting their own renewable energy goals, standards are now at risk in Michigan and Ohio. In both states, lawmakers have introduced bills to eliminate renewable mandates. Michigan announced in February that it would suspend compliance with the federal Clean Power Plan, designed to limit carbon emissions from power plants, until federal lawsuits challenging the plan are resolved.

“I think you’re seeing some differences in public posture and private actions, as well as a fair amount of inconsistencies within the state governments,” said Mark Barteau, director of the Energy Institute at the University of Michigan. “Just to take the Michigan example, I think our utilities are supportive of the Clean Power Plan, but are waiting to see if the government says the state will comply. And meanwhile the attorney general is fighting it, and the Supreme Court put it on hold. All the delay is doing is taking away the deadlines. [The utilities] are essentially moving in that direction anyway.”

Overall, renewable energy sources still play a supporting role in the Great Lakes region. Despite rapid installation of wind projects — electricity generated from wind more than doubled in the region over the past five years, and grew 10-fold in Michigan alone — wind still accounted for just 3.6 percent of electricity generation in 2014.

A significant component of further wind development in the region could hinge on approval of offshore farms in the Great Lakes. A 2010 study by the National Renewable Energy Laboratory estimated that the Great Lakes have more than 740 gigawatts of offshore wind potential, but despite gaining traction on the East Coast and in Europe, no offshore farms currently exist in the lakes. Earlier this year, however, the U.S. Department of Energy awarded a $US 3.7 million grant to a pilot wind farm off the coast of Cleveland in Lake Erie. Developers hope to have the project installed by the end of 2018.

A Unique Opportunity

With mainstay fuels like coal undergoing such changes in use, the Great Lakes region has a unique chance to chart a new path forward, according to Barteau. But the mixed signals and lack of clear direction on renewable energy could foil the opportunity.

“One of the challenges is to recognize that, hey, we have had a windfall in our energy with these low energy prices,” Barteau told Circle of Blue. “We are in an era of relatively inexpensive and abundant energy, and the challenge is to utilize some of the money we’re saving to invest in the future.”

“I think it takes public commitment and leadership to really decide we’re going to move down some of those pathways rather than just letting things evolve,” he added.

In lieu of renewable energy, utilities in the Great Lakes are turning to natural gas. Electricity generated from natural gas expanded nearly 40 percent in the region since 2010 and now accounts for one-sixth of total generation. In Michigan, Consumers Energy said it will help make up the generation capacity lost in its coal plant closures this year by purchasing a natural gas plant in Jackson, Michigan. In Ohio and Pennsylvania, two major natural gas producers, natural gas-fired power plants under construction will add 1.9 gigawatts and 1.8 gigawatts of capacity, respectively, by 2018. That’s equal to 6 percent of Ohio’s total electrical generating capacity and 4 percent of Pennsylvania’s total capacity.

Nationally, the U.S. Energy Information Administration expects natural gas to overtake coal as the nation’s primary electricity source for the first time this year. Natural gas power plants use four times less water to generate each megawatt hour of electricity than coal-fired power plants.

The time of natural gas, though, may be over before it really develops a firm footing, according to Skip Pruss. That’s largely because climate change will necessitate the transition to a zero-carbon future, he said.

“Utility CEOs are seeing the end of natural gas,” Pruss told Circle of Blue. “They’ve seen the end of coal, and they are no longer building coal plants in this country. The coal plants scheduled to be built in China and India are now beginning to fall off the planning board. The biggest force pushing this transition is climate change.”