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Kentucky utility regulators approve a cleaner energy future for LG&E/KU

A closeup of coal stacks emitting pollution.
Ryan Van Velzer
The coal stacks at Mill Creek Generating Station.

This week the state’s largest power companies got approval to build more solar power, a battery storage facility, and a bunch of energy efficiency programs — all of which push Kentucky toward a greener future.

Louisville Gas and Electric and Kentucky Utilities got approval to build and buy around 1,000 megawatts of solar and battery storage, and a smaller amount of natural gas electricity — 640 mw.

That power will replace two coal-fired generating units that are becoming too expensive to operate largely due to federal environmental regulations that protect human health. In a state that still ranks fifth for coal production and gets 68% of its electricity from coal, that’s a big deal.

But LG&E/KU didn’t get everything on their wish list when utility regulators issued their order late Monday.

The three-member Kentucky Public Service Commission (PSC) rejected plans to build a second 640-mw gas unit, saying that it was “premature,” and deferred the retirement of two more coal-fired generating units to ensure reliability.

The net result nudges LG&E/KU’s energy portfolio toward renewables and sets the stage for what utility regulators say is the most affordable, reliable way to secure Kentucky’s energy future.

The Monday night order also averted the possibility that Kentucky would lock utilities into using fossil fuel energy for the foreseeable future due to a new law that presumes fossil fuels are a cheaper, more reliable source of electricity than renewables.

Energy experts in Kentucky say it’s proof of the energy transition in action. Not because utility regulators are demanding carbon reductions (they have no authority to regulate carbon emissions), but because market forces are pushing utilities and regulators toward natural gas and renewables.

“I think the order means that the transition is underway,” said energy researcher Andy McDonald of Apogee Climate and Energy Transitions.

Solar power

The commission’s order allows LG&E/KU to move forward with the construction of two 125-mw solar facilities, one in Mercer County and one in Marion County. It also authorized the utilities to enter into four agreements to purchase solar power from other providers.

Notably, the commission found the solar proposals reduced costs for ratepayers in nearly every scenario they studied.

“Given the significant savings the proposed solar provides for customers, the Commission approves it as an additive source of generation,” the order states.

The PSC also approved a 4-hour 125-mw battery storage facility that will be able to store and dispatch power when needed. Batteries like this are emerging technologies, but they could help overcome intermittency problems associated with renewables, and improve grid resiliency.

The three-member commission recognized this, saying it’s important for LG&E/KU to figure out how these systems work now to keep the lights on in the coming decades. McDonald said it appears the PSC is setting up the possibilities for utilities to house solar and battery power together so that the energy can be dispatched even when the sun isn’t shining.

“That, to me, opens the door to a future case where the utilities might propose to build a solar and battery facility or a system of solar and battery facilities that provide as much or more reliability than a cogeneration unit,” McDonald said. “That's being done. It's happening in other places.”

Demand side management

The cheapest and most environmentally friendly megawatt is the one you never have to generate in the first place, said Byron Gary, Kentucky Resources Council attorney, who represented several groups that intervened in the case.

To that end, the PSC approved LG&E/KU’s plans to offer the largest number of energy efficiency programs in the companies’ history. The programs expand benefits for low-income customers to weatherize their homes, conduct energy audits, and install efficiency measures like smart thermostats. They also received approval for appliance recycling programs. In total, the programs are designed to offset nearly 200 mw of electricity.

Gary said environmental groups wanted even more energy efficiency programs and more said about distributed energy like rooftop solar, but the order still buys time.

“As we move forward, we really think that the future is there on the demand side, reducing that demand, improving the resilience of our grid through distributed energy resources, and not investing in gas plants that will be around for 40 years,” he said.

While individual choices can help lower energy bills and drive down electricity consumption, the fossil fuel and cement industries are responsible for about 70% of man made carbon emissions, according to a report from the Climate Accountability Institute.

Retirements deferred

Utility regulators also wielded the new law to defer the retirements of two coal-fired generating units: Brown 3, which generates 412 mw; and Ghent 2, which generates 485 mw.

LG&E/KU had asked for permission to replace the units with a second 640-mw natural gas combined-cycle generating unit. In this case, the commission said it was too soon to retire the units given future uncertainties.

“Herein, the Commission finds that the retirement of Ghent 2 and Brown 3, two large coal-fired units, is premature given the timing of overhaul costs and uncertainty surrounding environmental compliance,” the order states.

While coal supporters could count this as a win for their generation of choice, it also prevents LG&E/KU from over-building additional fossil fuel infrastructure that could exist for decades — long past 2045 when the utilities have pledged to reach net-zero carbon emissions.

Sierra Club attorney Kate Huddleston said the PSC is acting against the backdrop of further federal environmental regulations.

“In delaying those retirements, it has noted the likely impact of further environmental regulation,” she said. “This decision is not saying that those coal units are going to operate indefinitely. It's just not deciding to retire them now.”

Ryan Van Velzer is the Kentucky Public Radio Managing Editor. Email Ryan at rvanvelzer@lpm.org.

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