Clean Energy Remains the Best Option for Muscatine Power & Water Customers

By Katie Rock, Campaign Representative for Sierra Club Iowa Beyond Coal

The decision faced by Muscatine Power & Water (MPW), an Iowa municipal utility with industrial customers, illustrates how dynamic the clean energy transition is at this time. MPW announced plans in summer 2020 to transition completely off coal by 2028 in two phases. Phase one would retire a smaller part of the plant in 2022 and replace it with solar; phase two would retire the larger part of the plant by 2028 with its replacement still to be decided.

In December 2020, we offered our analysis showing the economics preferred a clean energy portfolio compared to an expensive new gas plant. You can read that analysis here.

In 2021, MPW moved forward with plans to retire the smaller portion of the plant and build its solar replacement. As those plans progressed, MPW began researching the best options to fully replace the rest of the plant in 2028 while meeting the needs of customers, with the leading option being a modern combined heat and power (CHP) gas plant.

But before plans became final, 2022 brought volatility to both the market for liquid natural gas due to the invasion of Ukraine, and to new construction materials for capital projects. Over the summer, concerns about reliability during times of peak electricity demand caused the board to delay the retirement set for the end of 2022. All of this also caused delays in determining the best replacement options for the remainder of MPW’s coal plant. And then Congress passed the largest climate package in history with both the IIJA and IRA. 

 

 

Despite all the careful considerations, MPW is still weighing the best option to transition from coal as the landscape has shifted. Our message remains the same - a clean energy portfolio is in the best interest of customers. And a large investment in a new gas plant to meet the needs of industrial customers is risky and not in the best interests of the community of Muscatine. 

We updated our analysis from 2020 to compare a clean energy portfolio to a 90 MW combined cycle (CC) gas plant. This matches the size of plant MPW last considered at 60-90 MW. The clean energy portfolio is cost competitive today by a long shot, and gets even more cost competitive by 2028. 

In 2028, a clean energy portfolio is $24/MWh cheaper than the planned gas plant, without including demand response or energy efficiency measures. Our analysis in 2020 showed substantial savings when demand response and energy efficiency were included. 

Admittedly, the model we use does not specifically model combined heat and power power plants, which MPW is considering, so this is using assumptions for a CC instead, meaning this doesn't take into account the revenue from steam. According to MPW’s 2021 annual report, MPW made $8.7M from the sale of steam, or ~$9/MWh if we average that over the generation from Muscatine that year. If the additional benefit of a CHP (i.e., the steam contract) is $9/Mwh, the clean energy portfolio would still be much more cost effective. And, with a clean energy portfolio cheaper in 2028, MPW would not need to push back retirement for improved economics.

Muscatine Power & Water should choose clean energy instead of locking in gas, which would immediately be stranded, at its current planned retirement year (or earlier). A choice for clean energy would be more fair for customers health and pocketbooks.