Fact Sheet on the Governor’s Coal Plant Agreement with Sunflower Electric

by Craig Volland, Chair, Air Quality Committee, Kansas Chapter, Sierra Club
The Governor has justified his May 4, 2009 settlement with Sunflower Electric Power
Corporation primarily on two premises. First, and most importantly to the Governor, the
settlement broke the impasse in the Kansas legislature and allowed passage of
measures that will promote the use of renewable energy resources in the state.
Secondly, the settlement is subject to conditions whereby Sunflower and partners would
“offset” a substantial portion of the carbon dioxide emissions from the proposed 895
megawatt (MW) coal-fired power plant, Holcomb 2. The purpose of this fact sheet is to
assess the validity of these premises and associated claims.
A. Does the Deal Boost Renewable Energy in Kansas?
The major elements of the legislation (Senate Substitute for HB 2369) in this regard are
the Renewable Energy Standards (RES) Act and the Net Metering and Easy
Connection Act.
1. RES Act. This new law would require affected utilities to use renewable energy
generating capacity equal to 10% of peak demand by the year 2011, 15% by 2016
and 20% by 2020. But what legislators giveth they taketh away in the fine print. For
each MW of renewable generating capacity that a utility installs after January 1,
2000, they get a credit of 1.1 MW toward compliance. Thus the real standard is
9.1% by 2011, 13.6% in 2016 and 18.2% in 2020. In other words they gave the
utilities a 10% discount at the outset.
Next, the legislation says that the enforcement agency, the Kansas Corporation
Commission (KCC), must exempt a utility from penalties for non-compliance if the
company can show that compliance in any year would raise rates by more than 1%.
This renders the Act unenforceable. Almost all the existing generating capacity in
the rate base of major Kansas utilities was installed decades ago and is operated at
2-3 cents per Kwh. New renewable generating capacity starts at 5 cents (wind
farms with the production tax credit) and goes up from there. It is inevitable that
rates will increase more than 1%.
Finally, former Governor Sebelius had already gained from the major utilities a
promise to comply with a 20%-by-2020 RES. In fact most Kansas utilities already
have in the works wind farms that will comply with the 2011 requirement in the RES
Act. Thus we can say that the RES Act will have no significant effect on the
deployment of renewable energy generation capacity in Kansas.
2. Net Metering and Easy Connection Act. Net metering allows a business or a
homeowner to install their own electricity generating unit, such as a solar panel or
small wind turbine, and then get a credit by sending excess power back into the grid.
Again this sounds great until one gets to the fine print:
 This applies only to investor-owned utilities, not to cooperatives like Sunflower
Electric or to municipally owned electric utilities. This means it would not apply to
vast areas in western Kansas with the best wind and solar resources. That’s

where people would most likely want to use net metering, and they can’t.
 The use of net metering is capped at 1% of a utility company’s peak demand.
Based on KCC data for 2008 the sum total of net metering that could be utilized
would be only 67MW. That compares to some 11,000 MW of existing generating
capacity of all types in the state. The KCC is authorized to increase this limit, but
that could be difficult under a future KCC and Governor.
 User credits that accrue over the year are wiped out at year end. Thus users can
never get payment or continuing credit from the company for more power than
they use from the grid in any ear.
3. Competition from Coal Plants. HB 2369 significantly reduces the KDHE
Secretary’s authority to prevent or delay the issuance of a construction permit for
either Holcomb 2 or any other future coal plant. The Governor’s settlement
agreement explicitly allows Sunflower to file for another coal plant permit after April
30, 2011.
It can be argued that opening up Kansas to new coal plants will retard the
development of new wind farms and utility-scale solar thermal power plants because
they would be competing both in cost, and for transmission-line space against large
coal plants. The Holcomb expansion will, at certain times of the year, present a
huge overhang of excess power that can be dumped at below cost onto the market.
The 600 MW of the project owned by Tri-State Generation and Transmission Co.
can be routed to the east when not needed in Colorado.
4. A Big Favor to Sunflower Electric. HB2369 also conveniently allows Sunflower
Electric to exempt itself from regulation by the KCC for the purposes of setting rates.
This is curious given that other Kansas utilities have abandoned their coal plant
proposals due to the high risk from rising construction costs and impending carbon
regulation. Ratepayers in Sunflower’s service area should be very concerned.
Ironically the Colorado Public Utility Commission is considering increasing their
oversight of Tri-State, Sunflower’s main partner in the project. There are provisions
for Sunflower’s ratepayers to petition for a vote requesting KCC supervision.
Conclusion. The Renewable Energy Standard Act provides little or no incentive for the
development of renewable energy in Kansas beyond what was already in place. Other
measures in HB2369 that facilitate the construction of coal plants may actually retard
renewable energy in the state. The Net Metering Act will have a very modest favorable
impact, but is not operative in those parts of the state that have the best wind and solar
B. Would the Deal Offset a Substantial Part of Holcomb 2’s CO2 Emissions?
According to calculations performed by Sunflower Electric and provided to Governor
Parkinson, Sunflower’s proposed 895 Megawatt (MW) coal plant at Holcomb will now
generate 6.67 million tons per year of carbon dioxide down from 10.72 million tons from
the two 700 MW coal units in Sunflower’s previous proposal. Governor Parkinson also
used Sunflower’s calculations to claim that the agreement includes “offsets” to these
emissions amounting to 3.016 million tons or about 45% of the total. These offsets are
individually examined below, the most dubious first.
To begin with, however, Sunflower & the Governor have made a systematic error by

assuming that these offsets, such as new wind farms or energy efficiency measures, will
always displace the carbon emitted from their existing coal-fired generating capacity
(credited at 2150 lb CO2/Mwh). Actually the particular offset, at any point in time, may
actually displace the burning of natural gas or power that they would have purchased on
the open market.
For example, from April through December of 2007, Sunflower’s system purchased 11%
of its power on the open market and generated 13% with natural gas. Power purchased
on the open market often comes from natural gas generators. Burning natural gas
emits half the carbon dioxide per unit of power that coal does. It’s too complicated here
to estimate the real carbon reduction in lb/Mwh, but it’s safe to say the discrepancy, i.e.,
exaggeration, is significant.
1. Two oil fired generating units, Garden City 1& 2 must be permanently
decommissioned from Sunflower’s fleet. An offset of 59,568 tons/yr is claimed.
A look at Sunflower’s website at http://www.sunflower.net/facilities.aspx will show
that these two units are no longer listed in their summary of facilities. They were
also not listed in their 2006 annual report, and they were not listed in DOE’s 2003
Inventory of Existing Generating Units in the US. GC3 is still listed, and it entered
service in 1962, which means GC1 & 2 are even older. Finally the Lawrence Journal
World confirmed that these units have not been used for more than 20 Years!
To include the Garden City1&2 generating units as carbon offsets is patently absurd.
2. Sunflower must use or cause to be used biomass fuel equivalent to 10% of the
heat input to Holcomb 1 & 2. An offset of 945,467 tons/yr is claimed. The
agreement does not specify where this fuel is to be burned. However they need not
proceed with this project if it is found to be technically or economically infeasible.
Technical feasibility is not defined, which in itself indicates that this condition is not
enforceable. Further, the technical feasibility of this proposal is in question.
The sum total of biomass burning must be equivalent to about 126 MW of electricity
generation. According to a recent presentation to the Midwest Section of the Air &
Waste Management Assn by Black & Veatch Consulting Engineers, a biomass
burning operation of this size exceeds anything in regular operation in the United
States. Reaching 10% co-firing in a pulverized coal boiler requires separate fuel
handling facilities and boiler modifications. Also the alkali content of agricultural
biomass such as switch grass may damage the boilers of power plants. Biomass
burning tends to slightly reduce the efficiency of a boiler. It’s obvious why Sunflower
caused this technical feasibility escape-clause to be included in the agreement. It is
easier to burn biomass in cyclone boilers but candidates have not been identified.
Economic feasibility is defined as meaning that the cost of biomass fuel may not
exceed 200% of the cost of coal. According to Sunflower’s presentation to the
Kansas Energy Council the cost of Wyoming PRB coal delivered to Holcomb,
Kansas, is about $25.00/ton. That translates to $1.50 per million BTUs. According
to our preliminary research, wood waste could meet a $3.00 per million BTU cost
threshold, but there is little wood waste available anywhere near Holcomb.

The cost of agricultural biomass would likely be several times that of PRB coal. This
is due to the high cost of collecting and transporting such a diffuse resource. For
example, Alliant Energy Co., which has experimented with burning switch grass,
estimates it would take 50,000 acres to produce enough biomass to produce 35 MW
of power and it would involve as many as 500 farmers. Also, Sunflower will be
competing in the future against increasing demand for biomass needed for cellulosic
ethanol production. Further, burning biomass in a utility boiler requires additional
auxiliary power
Thus there is legitimate concern that Sunflower will ultimately be excused from this
important performance requirement due to the cost of biomass fuel which may
exceed the specified threshold. When both technical and economic contingencies
are taken together, we conclude that it is unlikely that Sunflower Electric will ever
burn an appreciable amount of biomass to serve as a carbon “offset” for Holcomb 2.
Even if they did, the claimed offsets do not take into account the reduced boiler
efficiency, the additional auxiliary power needed for the operation, nor the large
quantities of fuel needed to collect the biomass in the first place.
3. Sunflower to use “reasonable efforts” to advance a Bioenergy Center & Algae
Reactor. An offset of 825,000 tons/yr is claimed. The dubious nature of this
enterprise has been noted on the Sierra Club website
(http://www.kansas.sierraclub.org/Wind/AlgaeReactors.htm). It is in a very early
stage of development and would be prohibitively expensive. It is highly unlikely that
this project will ever displace any of the carbon emitted by Holcomb 2.
4. Sunflower must accelerate RES compliance from 2020 to 2016. An offset of
135,605 tons/yr is claimed. This calculation contains two errors. First, Sunflower
has already contracted for 124 MW of wind power. They calculate that the additional
requirement will be 20% of their members’ peak of 800 MW which would yield an
additional requirement of (160 – 124) = 36 MW. But the actual 2020 RES is 18.2%
not 20% (See under section A-1 above). Thus the extra wind required by the RES
Act is only 21 MW, not 36 MW.
Secondly, Sunflower had already committed to meet former Governor Sebelius’s
voluntary RES of 20% in 2020. So the net advantage from the settlement
agreement is 21 MW of wind for four years. But Sunflower calculates the offset as if
this provision will offset emission for the 50 years or more that Holcomb 2 is in
operation. That’s comparing apples and oranges.
In all fairness, Sunflower deserves some credit for buying 75 MW of wind power
from TradeWind Energy’s Smokey Hill Wind Farm in response to pressure from
renewable energy advocates and the Sebelius Administration. So alternate views
on this offset claim are possible.
5. Sunflower must spend 1% of gross revenues for energy efficiency programs.
An offset of 376,680 tons/yr is claimed. While this would be a step forward there is
no performance standard or goal specified. Former Governor Sebelius’s original
compromise offer included a requirement for 100 MW of energy conservation.
Apparently Governor Parkinson abandoned this performance standard. Sunflower
says they will achieve 40 MW under this performance requirement.

experimental Bioenergy Center toward the 1% requirement. In fact Sunflower may
reduce expenditures for energy efficiency to only 0.5% of gross revenues if they so
choose. There is no guarantee that the Bioenergy Center will ever offset a single
pound of carbon. Nonetheless 40 MW is probably a reasonable estimate for this
6. Sunflower and/or partners must build new wind farms in Kansas equivalent to
20% of the “net capacity” of Holcomb 2. An offset of 674,257 tons/yr is claimed.
Net capacity refers to output after deducting the parasitic load (to run controls etc),
so it’s not clear just how many MW we are talking about here, since the 895 MW
coal plant is referred to as “nominal capacity” in the agreement. If one applies a
typical de-rating for parasitic load, this offset should be at least 165 MW of new wind.
Although the language in the agreement is ambiguous, this new capacity is
supposed to be in addition to any requirement for Sunflower and Midwest Energy to
comply with a statewide Renewable Energy Standard (RES). This offset appears to
be substantially valid.
Conclusion. Only the energy efficiency and the (20% of Holcomb 2) new wind
requirement can be considered valid. Thus, at best, one can expect only about 15% of
the 6.7 million tons of carbon dioxide per year to be offset under the Governor’s
C. Other Issues in the Settlement Agreement.
1. Sunflower must use “reasonable efforts” to build two 345 kV transmission
lines to Colorado. They have until 5 years after the start up of Holcomb 2 to
accomplish this. Given that it would take a year or more to both obtain the new coal
plant permit and to clear appeals, and four years to construct, these lines need not
be in place until 2020 or beyond. This prospect hardly supports the Governor’s
claims that this will be a boon to wind power in Kansas
The original Sunflower – Tri-state proposal envisioned two 600 MW coal plants that
would run output through three 345 kV transmission lines. (A third plant at Holcomb
was to serve Kansas and a partner in Oklahoma and Texas). One 345 kV line would
run from Holcomb to Burlington, Colorado and two 345 kV lines would run from
Holcomb to Lamar, Colorado. Last year the third coal plant was dropped along with
one of the lines to Lamar, Colorado. Tri-state was to take 100 MW from one of the
remaining two plants plus all the 700MW from the other. The two remaining
transmission lines were to be beefed up to 500 kV capacity. The current settlement
calls for 600 MW of the 895 MW coal plant to go to Colorado via two transmission
lines that have been downsized to 345 kV each. It appears that Tri-state is more
interested in sizing the transmission lines to fit their coal power needs than
accommodating wind power from Kansas to Colorado.
Nonetheless if we compare the ratio of coal plant to transmission line capacity in the
original plan to the current set up, it suggests that, on average, a modest 200 MW of
wind capacity could be served by the two 345 kV transmission lines. That would be
helpful. Also, connecting to the western grid in Colorado would help reduce the
intermittency of wind power production since, if the wind is not blowing in Colorado,

it may be blowing in Kansas and vice versa.
On the other hand Colorado has developed their own substantial wind industry, and
the vast majority of the market for Kansas wind is in the population centers to the
east. Also if, as expected, Sunflower tries to build a second new plant, the 200 MW
of spare capacity on the lines would quickly be displaced by more coal power. So, in
the larger scheme of things, these lines will provide only marginal help for the
Kansas wind industry.
2. Efficiency of the boiler. According to the handout supplied to legislators by the
Governor’s office, Holcomb 2 is described as an “ultra supercritical coal generating
unit.” However the actual agreement signed by the Governor describes the unit as a
“super critical coal generating unit.” Thus Sunflower is under no legal obligation to
use a more efficient ultra supercritical boiler. The difference could be as much as 4
efficiency points (42% vs 38%) or about 11%. That’s a lot of extra carbon.
In any event “supercritical” is not a concise term and covers a range of boiler
efficiencies. Sunflower claims to have reduced their CO2 emission rate in the new
proposal to 1850 lb/Mwh from 1900 lb/Mwh in their earlier plan. However this
prospect is not enforceable in the agreement. Boiler efficiency needs to be defined
in terms of actual boiler design.
3. Modifications to (existing) Holcomb 1. The agreement requires that Sunflower
agrees, without changing the existing permit limitations, to meet lower limits for
oxides of nitrogen and sulfur dioxide emissions from Holcomb 1. Also Sunflower
must install new mercury controls on Holcomb 1 such that the total of mercury
emissions from H1 and H2 will not increase from the 327 pounds emitted in 2005 by
Holcomb 1. This firms up a verbal commitment made by Sunflower during the
Holcomb 2&3 permit proceedings.
4. Escape Hatches in the Settlement Agreement. The agreement includes a
number of “escape hatches” for Sunflower that evokes considerable skepticism
about the outcome of this enterprise. For example, Sunflower’s performance is
conditioned upon receiving all the governmental approvals necessary for it to
perform the terms of the agreement including the recovery of all costs through its
rate structure. The construction of this large coal plant and other elements of the
program are likely to generate substantial rate increases both for Sunflower’s
members in western Kansas and also for Tri-state’s members in Colorado.
For example, under a new governor & in the interests of reducing these rate
increases, the KCC might allow financing of the coal plant but disallow the new wind
farms and energy efficiency. Sunflower would thus be excused from satisfying the
promised carbon offsets that were part of the agreement.
Of course the new legislation allows Sunflower to exempt itself from KCC regulation.
It’s unclear how this would play out. What happens if the Colorado PUC refuses to
allow Tri-State to recover its costs? There are a number of other contingencies that
would allow Sunflower to escape its obligations if permit or legal proceedings
changed the setting for this agreement, even in a minor way.

Overall Conclusions.
The Governor’s claim that his settlement with Sunflower will boost the use of renewable
energy in Kansas is substantially unfounded. The RES ACT is generally unenforceable
and adds nothing to the voluntary program that was already in place. The Governor has
vastly exaggerated the extent to which the settlement compensates for, or offsets, the
6.7 million tons of new heat-trapping greenhouse gas emissions that would be
generated by Holcomb 2 in the state of Kansas. The settlement and the associated
legislation contain ambiguous language and numerous escape clauses whereby
Sunflower may avoid some future performance requirements. Thus, we can only
conclude that this settlement is a serious step backward for the environment of Kansas
and elsewhere.

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