Energy Policy in Kentucky

By John Gregory | 8/13/19 8:00 AM

It’s a claim that Donald Trump has made several times during his presidency, including at a rally last November in Huntington, W.Va.

“We’ve ended the war on beautiful, clean coal,” the president said, “and we’re putting our coal miners back to work.”

But even with his orders to roll back environmental regulations on coal and coal-fired power plants, President Trump’s pledge to revive the coal industry has fallen short. Coal jobs continue to evaporate as the industry absorbs more bankruptcy announcements by coal producers. In Kentucky some 6,400 people worked in coal in 2018, down from 18,000 just eight years ago, according to the state Energy and Environment Cabinet. Production has dropped as well, from 109 million tons in 2011 to about 40 million tons last year.

To explore the future of coal and other energy issues facing the commonwealth, KET’s Kentucky Tonight spoke with Lonnie Bellar, chief operating officer for LG&E and KU Energy; Tom FitzGerald, director of the Kentucky Resources Council; Matt Partymiller, co-owner of Solar Energy Solutions and president of the Kentucky Solar Industries Association; and Tyler White, president of the Kentucky Coal Association.

 

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Winners and Losers in Coal
The news for coal isn’t all bad. The Kentucky Coal Association’s Tyler White says employment in West Virginia has grown thanks to strong demand for the metallurgical coal (used for steel making) that’s mined there.

“We have not seen those same effects in Kentucky, especially eastern Kentucky because of a lot of the market factors that are going on,” says White.

Because of pollution regulations, many power generators have switched from coal to natural gas, which is a cleaner burning fuel source and is generally cheaper thanks to modern extraction techniques. Power plants with pollution control devices called scrubbers that can remove emissions like sulfur dioxide still burn coal, but have switched to higher-sulfur coal supplies from western Kentucky and the Wyoming basin. Those reserves lie closer to the surface and are cheaper to mine than the dwindling seams of low-sulfur coal found under the hills in eastern Kentucky.

“The majority of Kentucky’s coal production is now coming from western Kentucky,” says White. “In fact there’s one mine in western Kentucky… that produces a third of the state’s coal production.”

While many politicians and miners blame coal’s decline on environmental regulations enacted by President Barack Obama and other former presidents, Tom FitzGerald of the Kentucky Resources Council says market forces have been a bigger factor. He says fuel sources that are less expensive and require fewer power plant modifications to burn cleanly will have the advantage over coal mined in eastern Kentucky

“You could go back and remove every restriction that was imposed under the 1990 Clean Air Act, which was the last bipartisan piece of environmental legislation,” says FitzGerald, “and you would still see what you’ve seen in the Appalachian region, which is a decline in production based on the unit cost of producing that next ton of coal relative to the cost of producing coal in western Kentucky.”

Helping Displaced Miners
Production declines in eastern Kentucky contributed to the recent bankruptcy filings for Blackjewel and Cambrian Coal, which impacted more than 2,000 miners combined. Blackjewel has come under intense public scrutiny for failing to pay its miners for work they performed before the company laid off its workforce and its owners sought Chapter 11 bankruptcy protection.

White says neither Blackjewel nor Cambrian are members of the Kentucky Coal Association. He says there are responsible ways for companies to pursue bankruptcy while allowing miners to continue to work.

Unpaid Blackjewel miners have blocked a train loaded with $1 million worth of coal from leaving one of the company’s former mine sites in eastern Kentucky. The protest, which started at the end of July, has garnered national attention.

FitzGerald says Blackjewel’s treatment of its miners is “unconscionable.”

“They are treated as disposable when in fact their blood and their sweat has been the backbone of the industry and of Kentucky’s economy for a lot of years,” he says.

With job losses decimating many coal-producing areas, FitzGerald says lawmakers should focus on helping displaced workers and revitalizing mining communities. He says more coal severance tax funds should be returned to coal-producing counties instead of being used elsewhere in the state. He also advocates for placing some of the severance proceeds into a trust fund targeted for coal community redevelopment.

FitzGerald also hopes Congress will pass the Reclaim Act, which is legislation sponsored by Sen. Mitch McConnell and Rep. Hal Rogers. It would take a portion of the money that coal companies pay into an abandoned mine lands (AML) reclamation fund and devote it economic diversification projects in struggling Appalachian communities.

“The nice thing about spending that AML money in Kentucky is ultimately it’s going to jobs on the ground to reclaim the failures of the earlier generations and to try to put this land back in to some productive use,” says FitzGerald.

The Kentucky Coal Association has not taken a position on the Reclaim Act, according to White. He says the organization supports coal communities, but he warns that levying more fees on a struggling industry would be counterproductive. White agrees with keeping severance funds within coal producing counties, but he also says the tax has made coal mining in the commonwealth less competitive.

“Only 40 percent of Kentucky’s coal burned is actually coal from Kentucky,” says White. “That’s because it can be mined in other places cheaper, and a part of that is they don’t have a severance tax.”

With the number of black lung cases among miners on the increase, FitzGerald wants state legislators to reverse a 2018 law that severely limits the number of doctors allowed to make a black-lung diagnosis in workers’ compensation cases. White says the coal association supports the limit as they maintain that only qualified lung doctors should be allowed to diagnose a lung disease.

Keeping the Lights On
Despite economic and regulatory challenges to the industry, coal continues to be the dominant power source in the commonwealth.

“We, last year, burned coal for 85 percent of our generation,” says Lonnie Bellar of LG&E and KU Energy. “So it’s a very important part of our generation mix.”

Statewide, 75 percent of the electricity generated in Kentucky last year came from the burning of coal. Nationally, that number is now below 30 percent, according to Bellar.

Even though LG&E/KU has retired several generating units in recent years, Bellar says production capacity is not a concern for the company. In fact he says the company doesn’t need any new generating facilities.

“Energy efficiency has taken over in a huge way,” says Bellar. “So as we look at our 15- and 20-year plans, we expect our energy consumption to be fundamentally flat, and we have plenty of resources to provide to our customers.”

Kentucky has some of the lowest average electricity prices in the nation, which can help attract manufacturers to the commonwealth. But that doesn’t mean consumers always see low electric bills. FitzGerald says even though people are using less energy, they are paying more for it, which he attributes to over-capacity in the system.

That’s especially true in eastern Kentucky. White says that’s because coal companies consume huge volumes of electricity to run their mining equipment. When mines close, utilities still have to pay for that generating capacity, so the cost burden shifts to residential and small business customers to make up the difference.

Large-Scale Solar Farms
One area where LG&E/KU is expanding is into solar. Bellar says the company already operates the largest solar farm in the state, a 10-megawatt facility in Mercer County. He says LG&E/KU is also reviewing proposals for a new solar complex that could generate 200 megawatts of power.

Solar projects in the works across the commonwealth are expected to generate as much as 6 gigawatts of renewable energy, according Matt Partymiller of the Kentucky Solar Industries Association. He says that’s fueling a demand for workers.

“Right now we have job postings up to hire anyone with electrical skills, anyone willing to work in the construction trades,” says Partymiller. “We have jobs that are certainly starting for reasonable blue-collar wages, $30,000 and up, and some of our more skilled, non-college educated workers can be earning $100,000 a year.”

Coal advocates have downplayed solar as an energy source. White says consumers demand stable and reliable power that’s available whenever they want it, and intermittent sources like solar and wind simply can’t provide that reliability.

“Coal still has a place in this nation and will have one for a long time with regards to providing that resilient base-load power,” says White.

Improvements in battery technologies could change that, however. Electricity generated by the sun can be stored for later use in large-scale batteries. FitzGerald says that’s leading some utilities to cancel plans for new fossil fuel-based generating stations so they can invest that money in more in solar arrays and battery storage capacity.

Bellar says LG&E/KU is testing a 1-megawatt battery at its Mercer County solar complex. He says battery technology holds promise, but is still not cost efficient enough to warrant more investment by his company.

“If you look at our utility, 50 percent of the energy consumed in the winter time is consumed at night,” Bellar says. “So having batteries to cover that would be very cost prohibitive for our system at this time.”

Residential Solar Issues
Solar advocates lobbied against a state law passed earlier this year that could make it harder for homeowners to get a speedy return on their investment in solar panels.

Senate Bill 100, known as the net metering bill, gives the state Public Service Commission the authority to set the rate for which rooftop solar customers will be credited for the excess power they generate and feed back into the public electrical grid.

Utility companies want the credit to be equal to the wholesale value of electricity instead of the retail value that rooftop customers currently receive.

Partymiller says the legislation also sets an unreasonably low cap on solar generating capacity that will ultimately limit renewable power growth in the commonwealth.

“Once solar accounts for 1 percent of Kentucky’s peak power requirements, net metering is done,” says Partymiller. “So any business looking to come in and invest in solar is looking at a cliff that’s really just a few years out.”

The bill doesn’t take effect until January of 2020, and FitzGerald says the PSC is seeking public comments ahead of a formal hearing in October to discuss the value of solar power.

LG&E/KU lobbied for the bill, arguing it creates a more level playing field between utilities building solar arrays and small-scale solar producers. Bellar says his company supports the net-metering concept, but the rules simply needed to be updated.

“If a customer over-generates [and] puts power back into the grid, we see at this current time a fair value as being what it would cost us to produce that,” he says.

Bellar says the 645 LG&E/KU customers who already generate their own solar power will be grandfathered in under the new law, as will other existing residential solar producers around the state.

In addition to addressing the solar credit rate, Partymiller says the state also needs to explore other economic policies and interconnection issues that currently hamper solar energy development in the commonwealth.

“We need to be thinking about what [do] utilities look like in the future, and maybe there are some regulatory changes that need to happen,” says Partymiller. “Maybe we do need to pursue some different policies that start to deregulate the grid.”