Indiana's Rejection of New Gas Plant Is the Canary in the Coal Mine

We hear a great deal about the transition from fossil-fueled centralized electricity generation to large-scale and distributed renewable generation on the East and West Coasts of the US. But generally, not much is heard from the country's heartland, which has traditionally been coal country. A recent decision in Indiana could be the canary in the coal mine, hinting at a broader transformation in all parts of the nation.

Vectren, an electric and gas utility in Indiana, proposed a new $900 million, 850 MW natural gas-fired power plant. In the past grid reality, that would have seemed like a no-brainer for regulators to approve, especially in the Midwest. However, electricity growth has slowed in the past 10 years due to economic factors and the increased energy efficiency of electric end uses like lighting and air conditioning. At the same time, renewable resources like solar and wind, along with energy storage, have exhibited large drops in cost and are more competitive with fossil plants. This combination of factors led the Indiana Utility Regulatory Commission to unanimously reject Vectren’s proposal.

Another Example from an Unexpected Place

A similar example can be found in Virginia, part of the traditional coal belt across the central US. There, the State Air Pollution Control Board recently adopted a rule to reduce CO2 emissions by 30% by 2030. While not as aggressive as other typically more-progressive states, it is notable that Virginia would make this announcement. Dominion Energy, the largest utility and generator in the state, began shutting down two coal-burning units earlier this year due to aging infrastructure and growing resistance to the use of fossil fuels. These moves may open the way for Virginia to join the Regional Greenhouse Gas Initiative, a market-based carbon cap-and-trade program made up of nine East Coast states. 

Reasoning Behind the Rejection

Indiana regulators are worried that the plant could become a large, stranded, uneconomic asset if the trends outlined above continue, with demand slowing down and alternative resources competing with or beating the gas unit’s economics. In addition, the regulators cited that such a single large investment would not minimize these risks as much as smaller-scale options might. This is something every regulator and utility should analyze before new investments are made.

Opponents may be able to laugh it off if California or Massachusetts take these types of actions, but when coal states like Indiana and Virginia make the news, the transformation has hit the mainstream. On May 14, an upcoming Guidehouse Insights webinar, DER Integration Is Critical to Planning the Future Power System, will address these changing resource needs on a global scale.