The Lafayette Utilities System is making a $400 million bet on a new power generation facility in Lafayette, joining a national trend in response to regulatory pressure that is pushing LUS to end its reliance on coal.
For the first time in almost two decades, LUS is building a new power plant to supply Lafayette’s growing electricity needs. The move was spurred by tougher coal ash rules that will require expensive improvements to LUS’s 42-year-old Rodemacher 2 coal facility outside Alexandria if it is not retired before the end of 2028.
To replace the coal plant, LUS is demolishing the long-closed Louis “Doc” Bonin natural gas plant on Walker Road and installing a modern gas-fueled plant that will be financed by the city-owned utility’s largest bond issue ever, $400 million.
The investment will ultimately add approximately $8 a month to the average residential bill and is a massive bet on the success of LUS’s new Bonin gas plant. It mirrors similar decisions being made by electric utilities around the country, says Joshua Rhodes, a research scientist for the University of Texas at Austin’s Webber Energy Group.
“Coal is really on its way out across the entire country,” says Rhodes. “In fact, there’s not a single coal plant under construction in the entire country, and they’ve been retiring at a pretty rapid clip. It’s not just environmental rules that are driving that — although they are — but a lot of it has been that natural gas is just so much cheaper than coal, and also natural gas power plants tend to be more flexible.”
The new plant’s emissions are one point of concern. Though they will be far less than those produced by the Rodemacher 2 coal unit, they will be released in Lafayette, where LUS already operates two natural gas plants, rather than a sparsely populated area like the one near Alexandria. Any fossil fuel plant will have at least some effect on air quality, though myriad factors play into the overall impact, says Rhodes, and that could be compounded by other pollutants in Lafayette’s semi-urban environment.
But LUS Director Jeff Stewart says the new facility will meet all EPA and state Department of Environmental Quality requirements to operate in a populated area.
“We’re going to follow every permit. We are going to be compliant. I cannot operate a utility that is out of compliance,” Stewart said at a community meeting Tuesday. “I do not want to negatively impact people. I don’t want to put something in that’s going to harm people. We’re going to make sure we do it the right way.”
The uncertain regulatory environment is another concern. For LUS, regulatory changes are the deal breaker forcing the move to a new natural gas facility, and they’re a rare instance of certainty in national energy policy, which has been frustratingly indecisive.
Insulating against that uncertainty has been a key concern for LUS, Stewart tells The Current, though it doesn’t always come before the city-owned utility’s obligation to provide the lowest rates. LUS’s recent efforts to embrace solar power have been hindered by market forces, and its plan for the new Bonin plant puts immediate costs first by opting for a simple cycle turbine design, which is more affordable and scalable than complex cycle turbines, but significantly less efficient.
That may expose the new plant to regulatory risks in the future, according to Rhodes, but Stewart says national reliance on all forms of natural gas power generation should insulate it from much of that uncertainty.
“We deal with regulations all the time. We make 40- or 50-year decisions on four-year windows where one president or political party is in power, and they can propose and make changes,” Stewart says. “I look at the realities of it all. If you eliminate or limit natural gas, you’ll have turned us into an economic disaster, and there are no solutions if you eliminate that.”
The new plant is also being built with an eye toward the possibility of hydrogen conversion, Stewart says, which could help guarantee the 40-year minimum lifespan LUS expects for the facility as environmental concerns grow evermore pressing due to climate change. That’s an option other utilities from Austin to Australia are embracing, says Rhodes, since it doesn’t emit carbon dioxide, which is the primary cause of climate change.
As to whether staking $400 million on a fossil fuel power plant is a safe bet in 2024, Rhodes believes hindsight will tell, though he recommends a diverse portfolio of electricity generation options to insulate from long-term regulatory uncertainty, which LUS is at least trying to pursue with renewable power purchases. In the meantime, he says that uncertainty makes it “hard to read those tea leaves.”
“In 20 years, hindsight might tell you that you should have just built a bunch of solar and batteries,” the scientist says. “But that is hard to know at this point in time.”