Endicott Generating Station in Litchfield, Michigan, will burn its last lump of coal by June 1, after 33 years of service to the five municipalities of the Michigan South Central Power Agency. The power plant’s 74 full-time employees will be laid off, 33 of which are from Hillsdale County.
The coal power plant will close as a result of decreased costs of natural gas. American Municipal Power Inc. in Ohio will make up for Endicott’s closure with its production of hydroelectric power, which is coming online now and almost doubles the MSCPA’s goal of hydropower sourcing. The Hillsdale City Council approved a resolution Feb. 15 allowing the MSCPA to hire its lowest bidder as another source of electricity beginning Jan. 1, 2018, when the agency predicts its communities will need more watts. These changes will not alter the electrical costs for those living in Hillsdale, Board of Public Utilities Director Mike Barber said. Approximately 22 percent of Hillsdale’s electric energy will be provided by hydropower by the end of the year.
“Endicott is closing in the interest of economics,” MSCPA General Manager Glen White said. “In today’s world, the price of natural gas energy is cheaper than what we can actually produce it for in a smaller coal-fired power plant.”
Endicott provides some of the electrical power of the city of Hillsdale, village of Clinton, city of Coldwater, city of Marshall, and Union City in Michigan. Other sources of power the MSCPA currently uses are natural gas, another coal plant, and hydro power other than AMP’s, as well as some solar power for those in Coldwater.
Formal discussion of retiring Endicott began about a year ago, White said. While some of its employees will continue to work for the MSCPA in different departments, others will receive severance packages upon being laid off.
The agency, however, is aiming to provide networking opportunities to help their employees find other opportunities through statewide organizations that assist with getting people jobs.
“They’re great people; it’s the right thing to do,” White said. “They’ve been dedicated people for a long, long time. We hate it as bad as anybody that we have to shut down the plant.”
The city’s unemployment rate is currently 4.4 percent, which means Hillsdale has plenty of jobs, said Mary Wolfram, director of the city of Hillsdale’s economic development. These opportunities, however, may not support the abilities of many of the power plant workers.
“The employees of the power plant have very specific utility, power plant skillsets,” Wolfram said. “That’s a very specialized field.”
Litchfield City Manager Douglas Terry said he hopes many workers will stay in the area.
“The best thing the city can do is work with South Central Michigan Power Agency to help with that transition, especially with training,” Terry said. “We would hope they would continue to reside here.”
Environmental concerns did not play a role in the decision to close Endicott, White said. It is one of the cleanest coal power plants in the Midwest, Terry added.
“Environmentally, the power plant has always done a responsible job of controlling emissions,” Terry said.
Nonetheless, carbon emissions from the transportation of coal by railroad will diminish, as well, Wolfram said, adding that pipelines transport natural gas.
“It’s just cleaner technology, if gas prices stay low,” Wolfram said.
White said MSCPA does not know what it will do with the Endicott plant. It does have infrastructure to create energy from natural gas, and the size of the property could allow it to become another type of generator. Currently, however, it is too small to make profit from production of energy from natural gas, White said.
“It does have some good opportunities,” White said, “and I’m hoping in the long term, that’s what we will end up with.”
With the greater supply of natural gas, prices have slid and made coal-powered electricity uncompetitive, he added.
Natural gas costs about $2 per million British thermal unit while coal is just over $3 per million Btu. Additionally, Endicott uses 12,500 Btus to create a kilowatt of electricity. Modern natural gas facilities use half of that — about 6,500 Btus, White noted.
“Now that gas is cheaper and is more efficient in terms of combustion, that really puts coal at a disadvantage,” White said.
Hydropower costs depend on water flow and the distance water travels to have enough power to turn the pump’s turbines, making fuel costs low, White noted. Such electricity, however, is more expensive in capital — $5,000 to $7,000 per kilowatt until the mortgage is paid off. Additionally, it’s $10 per megawatt for maintenance and labor.
The last coal plant constructed in the United States was $4,000 per kilowatt for capital and $23 per megawatt for variable costs, though this value is less than most as fuel was onsite and did not need transportation, White said.
Wolfram added that the city of Hillsdale’s BPU, then, could provide power with less money, which could cause a positive economic impact.
No plans are set to change the charge rates of utilities, Barber said. The average household in Hillsdale pays $86.20 for electricity.
AMP began outputting hydropower to the MSCPA’s five municipalities in January from new pumps on existing Ohio River dams. All 11 pumps spread across four locations along the river will be functioning by the end of the year.
“It’s green, has low carbon impact,” White said. “The good side of hydro is the pumps last a long, long time.”
While hydropower is initially expensive because of the pumps’ mortgage, it produces electricity cheaply. Hydro pumps that MSCPA already owns have been working for 100 years, White said.
MSCPA forecasts AMP’s hydroelectricity will cover the lapse in energy production from Endicott until 2018, when the organization will need 25 more megawatts during peak-time energy usage, due to the municipalities’ growth, especially in Coldwater, the greatest energy user. The highest rate of electrical usage typically occurs during the summer as people turn on the air conditioning. The agency will work with AMP to find the lowest bidder to provide the power.
Barber and White both predicted the supplier will use natural gas, though the contract does not specify.
Terry expressed concern over the stability of gas prices.
“As a nation, we’re becoming so dependent on one fuel that it lessens the security and reliability of our nation’s supply,” Terry said. “Diversification of fuel is, I believe, very important.”
In the past, forecasts for natural gas supply were unpredictable in the long term, White said. The horizontal drilling technology, however, creates fixed pricing of energy rates for two, seven, and 12 years into the future due to an abundance of natural gas supply. This allows for flexibility and reduced risk when buying market purchases and purchase power agreements to supply the electricity, White said.
“We’re seeing those prices depressed for a long time out,” White said. “We’re thinking this is a good time to lock in a piece of what we need for the future.”
The city of Hillsdale is taking advantage of the natural gas prices, too. It is looking into rebuilding two generators that run off natural gas and fuel oil at its power plant to use in emergencies, like ice storms or high-price periods.
As for Endicott, it might have to wait a while before producing electricity again.
“We would hope, one day, South Central Michigan would be able to use that property for some sort of electrical production,” Terry said.