In recent months, and with San Antonio facing stricter air quality regulations, calls to diversify CPS Energy’s generation portfolio and speed up the closure of the J.K. Spruce coal-burning power plant have intensified.
Those demands come despite the fact that CPS Energy already has committed to shutter one unit, known as Spruce 1, by 2030 and plans to convert the other unit, Spruce 2, to natural gas by 2028.
But that timeline is not fast enough for those urging the utility to more quickly reduce its emissions. In 2020, Spruce emitted almost 6 million tons of carbon dioxide into the atmosphere, according to the U.S. Energy Administration. Carbon dioxide is one of the leading causes of global climate change, as it traps heat in the atmosphere.
Burning coal results in a whole range of pollutants — including mercury, sulfur dioxide and the ozone-forming pollutant nitrogen oxide — that not only contribute to a warming planet but also harm human health. Ozone is a key ingredient of smog, which irritates and damages the lungs and has been tied to chronic conditions such as asthma. The U.S. Energy Administration estimated that Spruce produced roughly 2,300 tons of nitrogen oxide in 2020.
In April, those statistics prompted Councilwoman Ana Sandoval (D7) to demand CPS Energy shutter Spruce “as soon as possible,” given its status as the area’s largest single source of carbon dioxide.
Just days later, a coalition of local advocacy groups including MOVE Texas, Public Citizen and the Southwest Workers Union hosted a panel discussion that included CPS Energy’s interim CEO and President Rudy Garza and Janie Gonzalez, vice chair of the utility’s board of trustees. Environmentalists again called for shutting down the coal plant.
Most recently, Spruce has been a topic of discussion at the utility’s Rate Advisory Committee meetings, where committee members Adelita Cantu, a registered nurse and public health expert, and DeeDee Belmares, a climate justice organizer with Public Citizen’s Texas office, are seeking a speedier retirement than 2030.
But it’s unclear if the municipally owned utility is willing to move any faster, or if it can. It took CPS Energy about seven years to completely wind down its two Deely coal-burning units, a utility spokeswoman said.
CPS Energy says several things need to happen before it can close Spruce and take coal out of its portfolio once and for all: replace the power it will lose, invest in new cleaner technologies that will support renewables and further diversify the utility’s portfoloio, and retrain hundreds of employees.
Replacing lost megawatts
If its current schedule of plant closures remains on track, CPS Energy will have dropped roughly 3,000 megawatts of fossil fuel generation out of its portfolio by 2030. One megawatt is enough electricity to power 200 Texas homes on a summer day.
In addition to its 2030 timeline to shutter Spruce 1, the utility plans to retire both of its Braunig natural gas units by 2024 and both of its Sommers natural gas units by 2030.
To replace that power and add megawatts to meet the region’s continued growth, CPS Energy can either build and generate its own power, buy it through purchase power agreements, such as its recent solar deal with Con Edison, or buy power from the Texas wholesale market through the Electric Reliability Council of Texas, or ERCOT.
The last option carries the most risk. For the next 25 years, CPS Energy customers will be paying off at least $418 million in wholesale electricity costs from the power the utility was forced to purchase during Winter Storm Uri in February 2021.
The best way to keep customers’ bills low and service reliable, Garza said, is to have some amount of energy generation owned by the utility that is “dispatchable” — meaning power that can be ramped up and down — ready to go “when the sun’s not shining and the wind’s not blowing.”
For now, Garza said, natural gas is the best and least expensive dispatchable option.
“We’re not replacing fossil fuels megawatt-per-megawatt with other fossil fuels. We’re bringing new technologies in, and we’re committing to transitioning towards these other technologies that we believe have promise,” Garza said. “We just have to make sure we’re reliable enough so I can ensure the lights stay on.”
CPS Energy is already adding more renewables to its portfolio, some of which will be used to replace that fossil fuel-generated power. CPS Energy launched its FlexPower Bundle plan in 2019, which aims to add up to 900 megawatts of solar, 50 megawatts of energy storage and 500 megawatts of “firming capacity” — likely natural gas — to the utility’s power generation mix over the next 20 years.
Investing in technology
In addition to purchasing renewable power, CPS Energy has said it will need to invest in new technologies like battery storage that would allow it to store and use megawatts generated by solar and wind power when the sun isn’t out or the wind is not blowing.
Other promising emerging technologies include geothermal generation, which uses steam from reservoirs of hot water found below the earth’s surface to produce electricity, and small advanced modular nuclear reactors, which are smaller and cheaper than existing reactors.
Those options are currently expensive, utility officials say, limiting how much the publicly owned utility could invest in them without raising customer bills. Given more time they will likely become cheaper, as solar has over the past decade, making investment a balancing act.
Environmentalists, however, including Belmares and Chrissy Mann, an organizer with the Texas Sierra Club, have said the utility hasn’t created or shared models showing how such investments might impact customers’ bills.
CPS Energy needs to back up its claims with transparent data, Belmares said: “I expect to see models first before they say, ‘This is too expensive.'”
They also question the utility’s decision to convert Spruce 2 to natural gas, noting that gas prices have risen steeply over the past several months. If the trend continues, converting Spruce could be too expensive to make financial sense, Belmares said.
Avoiding sunk costs
Much like a car that still has payments left to be made on it, Spruce construction and maintenance costs are still being paid off, Garza said.
“It’s a billion dollars worth of equipment that we went out and sold bonds for that our bondholders expect us to use,” he said. “So there’s no just parking it with no impact.”
Right now, the coal plant pays for itself through revenue generated from selling its excess power onto the wholesale market. Shutting it down immediately would leave CPS Energy customers paying those sunk costs with no benefit.
Avoiding sunk costs is another reason to convert Spruce 2 into a gas unit, Chief Financial Officer Cory Kuchinsky has said.
But there will be costs no matter what, Belmares said. Customers deserve to see budget models to understand what those costs are — and from there, the decision should be up to the community, she said.
But the community will likely have limited input; its interests are represented through the Citizens Advisory Committee and Rate Advisory Committee, which, as their names imply, can only advise.
Those committees will have the chance to weigh in on generation plans, Garza has said. CPS Energy staff are working to develop several options for the board of trustees to use to help decide the utility’s future generation mix, Garza said. Those options should be ready by December, he said.
“We need a model for some percentage of renewables and some percentage of dispatchables,” he said.
Mann said the utility must be transparent in this process as well. The public should not have to take CPS Energy’s word that the portfolio options drawn up are the best options for the utility’s future, she said.
Retraining employees
Four hundred people are employed across San Antonio’s power plants, 200 of whom work at Spruce, a CPS Energy spokeswoman said. Shuttering the plants over the next decade means the utility will need to retrain these employees if it wants to keep them on.
And it will definitely want to keep them on.
CPS Energy is already facing a serious workforce shortage. Over the next four years, it could lose between 30% to 50% of its 3,000-member workforce, with one out of every two employees becoming eligible to retire by 2026.
“What we don’t want to do is close things down prematurely and not be able to transition those people to other [areas] that we’re going to need them,” said Benny Ethridge, the utility’s executive vice president of energy supply, during a recent Rate Advisory Committee meeting. “It’s very difficult to get a skilled workforce in this area capable of doing what they do in a timely manner.”
CPS Energy must draw up a transition plan as it moves to new technologies so employees are ready to operate them, Ethridge said.
That’s what closing Spruce mostly comes down to: transition plans, Garza said. He has assured environmental advocates the utility will continue to listen to their concerns and will move as fast as it can to shift CPS Energy into the future.
For the interim CEO, all those transition plans rest on two factors.
“It’s all about reliability first and affordability second,” Garza said.
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here. DeeDee Belmares is a member of the San Antonio Report Community Advisory Board.
