In the early days of the U.S. solar market, development was largely focused on the coasts, clustering in sunny climes or in states like California that had incentives to sweeten the deal for developers and utilities.
As the industry matures, though, installations are cropping up on new turf. Texas has seen a bona fide boom, and the Midwest is also experiencing an uptick in the number of utilities acquiring solar and pledging carbon reductions.
That latter trend was further cemented this month, when the Northern Indiana Public Service Company published several requests for proposals seeking 2.3 gigawatts of solar or solar-plus-storage, plus 300 megawatts of wind and an unidentified amount of other resources, which could include fossil fuels.
Nipsco, which serves nearly half a million customers in the “Crossroads of America” state, notes that it’s now at “the crossroads of the future” with respect to its energy choices.
Like a growing number of peers, even in the traditionally coal-heavy Midwest, Nipsco and its parent company NiSource are targeting emissions reductions of 90 percent from 2005 levels by 2030. The utility said the phaseout of coal included in its latest integrated resource plan will save it about $4 billion.
“The driver for how we make decisions is really rooted in economics and costs for our customer,” said Nipsco Director of External Communications Nick Meyer.
The plan is expected to increase the amount of solar currently installed in Indiana — currently just 300 megawatts, with 900 megawatts in advanced development — by more than 600 percent.
The Midwest dethrones King Coal
Nipsco is the second-largest electric utility in the state of Indiana, where nearly three-quarters of electricity comes from coal and another 18 percent from natural gas, according to a 2019 report from Purdue University. The RFPs and Nipsco’s latest IRP will convert the utility’s current capacity from more than half coal to 65 percent solar, wind and battery storage by 2028. The utility forecasts that natural gas will still make up a quarter of its capacity in that year.
By 2028 Nipsco will have retired both of its coal plants, totaling five units. Based on economics alone, that pace is actually modest, said Meyer.
“The lowest-cost option would have been to retire all of our coal much more immediately,” said Meyer. “We felt like…extending the timeframe helped to provide for a more fluid transition versus an abrupt turning everything off right away.”
Nipsco has received pressure to move faster from the Indiana NAACP because the coal plant it will keep open longest disproportionately impacts residents of color.
The utility needs to build out transmission, but Meyer said Nipsco could increase the speed of its transition in future plans if it sees fit.
“There are times today when our existing coal units aren’t running and we’re still able to meet the needs of our customers,” said Meyer.
More and more utilities in the Midwest are seeing the benefits of such a transition. Xcel Energy, headquartered in Minneapolis and serving eight states, was the first large U.S. utility to pledge steep carbon reductions. In December it announced plans to cut its carbon emissions 80 percent by 2030 and to achieve a 100 percent carbon-free mix by 2050.
“Now wind and solar are cheap enough that it’s easier to replace aging coal plants with renewables instead of natural gas,” said Colin Smith, a senior analyst at Wood Mackenzie Power & Renewables who focuses on large-scale solar. “California, we have to remember, really set renewable portfolio standard targets before it was profitable to do so. Now, other states are pushing for renewables, not because it’s environmentally friendly, but because it’s [cost-effective] and has the added benefit of being environmentally friendly as well.”
Duke Energy Indiana in June outlined early retirements for more than 4 gigawatts of coal, planning to replace the capacity with natural gas, wind and solar. Wisconsin’s We Energies in April announced that it is on track to cut carbon emissions 40 percent below 2005 levels by 2023; it plans to increase the target to achieve 80 percent reductions by midcentury. New policies in Michigan compelled Consumers Energy to compose an IRP promising 92 percent carbon reductions by 2040, in part by building about 5 gigawatts of solar through 2030 and even more in the decade beyond that.
Nipsco’s plan is more ambitious than all of them — particularly with no baseload nuclear in the mix — but Meyer said its membership in the Midcontinent Independent System Operator will help ensure reliability.
Collecting bids
Rather than relying solely on stakeholder input and its usual energy modeling for its 2018 planning process, Meyer said Nipsco wanted to shop around to see what was actually available in the market. After initiating a request for proposals alongside its November 2018 IRP, Nipsco received a total of 90 bids: 15 for combined-cycle gas turbine plants, three coal proposals, 14 wind proposals, 11 solar-and-storage proposals and a whopping 35 solar-only submissions.
For the renewable resources, Meyer described a reaction that was the opposite of sticker shock.
“What we didn’t expect to see was the low-cost nature of a lot of those renewables projects,” he said. “We knew renewables costs have been coming down, but we didn’t expect to see them as cost-competitive as they were.”
Seeing the costs laid out, Meyer said, gave the utility essential real-world data to move forward. Over the next two years, Nipsco plans to retire several of its coal units, replace near-term capacity need with energy from the MISO market or short-term PPAs, and move forward with building new renewables and storage.
After its 2018 RFP the company also selected three wind projects, a process it moved on quickly because of expiring tax credits. All three projects, totaling 802 megawatts, will be located in Indiana. NextEra Energy Resources, Apex Clean Energy and EDP Renewables will each develop and build a project.
With its latest RFP, Nipsco wanted to go back to the market and “refresh” its idea of current pricing. Proposals are due by November 20, and Nipsco wants to acquire projects in 2023.
Much of Nipsco’s electric service territory hugs Lake Michigan and overlaps with industrial towns like Gary, Indiana, long known for its steel production. That geography means many of Nipsco’s customers are large industrial or manufacturing companies.
Looking into the next decade, Nipsco cites those customers as a “significant variable” in its resource-planning. Just five industrial customers, which largely work in steel and oil refining, account for about half of the utility’s demand. To understand their future usage, Nipsco said it consulted with its 20 largest industrial customers and modeled energy needs as well as possible around peak demands.
Alongside meeting those needs, Nipsco will have to cope with the plan’s community impact. In a statement made last year after Nipsco announced some coal retirements, La'Tonya Troutman, a volunteer for the Sierra Club’s Northwest Indiana Beyond Coal Campaign and environmental chair of a local NAACP branch, called the utility’s coal retirement plans a “first step toward environmental justice” but noted the importance of community input in the transition.
“Through a series of ‘community conversations’ and associated events that reimagine the industrial corridor, we gathered public opinion about Nipsco and renewable energy,” said Troutman. “Responses included calls for replacing coal with renewables, addressing projected job losses and cleaning up coal ash pits at Nipsco’s existing and decommissioned coal plant sites.”
Meyer said Nipsco is working to consider the “ripple effect” of shutting down coal units.
“We’re proud of the environmental benefits associated with this plan. The carbon reductions that we’re seeing far exceed any prior targets that have been proposed, whether that be the former Clean Power Plan or the Paris accord,” said Meyer. “But…the real driver here is really centered around the economics and costs for our customers and being able to reliably serve them in the future.”
