By Robbie Clark
Central Kentucky’s advantageous proximity to a large chunk of the country’s population has attracted lots of manufacturing companies looking to save on transportation costs to their markets. But the state’s low electricity costs – lowest in the eastern U.S. – are a big enticement also.
According to a cost report released by the U.S. Energy Information Administration in 2015, Kentucky’s average retail price was listed at 7.26 cents per kilowatt-hour – the fifth lowest in the country.
These low electric costs are a direct result of Kentucky’s coal production. In 2014 Kentucky’s coal output was 77 million tons, just behind Virginia and top-producing Wyoming, which mined 196 million tons. But a downward trend in production isn’t promising. Even though Kentucky is the third-highest coal producing state, the amount delivered annually continues to fall. The 2014 numbers are down 55.5 percent from the state’s peak production in 1990 when Kentucky mined more than 173 million tons.
Market Review of Central Kentucky 2016-17
Falling coal production is influenced by available inventory, competition from newly cheap and plentiful natural gas, and environmental regulations. The Environmental Protection Agency’s Clean Power Plan is causing alarm in the electricity generation industry, even though the Supreme Court in February 2016 ordered the EPA to halt enforcement until a lower court settles a lawsuit against the plan. If it goes forward, the goal is to lower power plant sulfur dioxide emissions 90 percent from 2005 levels and nitrogen oxides by 72 percent – meaning coal-fired power plants will be the most directly affected.
Electricity companies, looking at rising coal costs and expensive updates to bring their power plants in compliance with the Clean Power Plan – Louisville Gas and Electric and Kentucky Utilities as a whole has been investing more than $6 billion toward environmental upgrades – are exploring alternative power sources to keep Kentucky’s electricity rates low.
KU, part of LG&E since being acquired in 1998, serves 546,000 electricity customers in 77 Kentucky counties, including all of Central Kentucky, plus five counties in Virginia. In spring 2016 the company unveiled a new solar power plant in Mercer County that has the ability to power about 1,500 homes. The E.W. Brown Generation Station, Kentucky’s largest solar facility, is projected to produce 19,000 megawatt-hours of energy annually. The now operating facility, approved by the Kentucky Public Service Commission in December 2014, stretches across 50 acres of the plant’s property, which also includes coal, natural gas and hydroelectric generation. When fully completed, the 10-megawatt system’s more than 44,000 solar panels on fixed-tilt racks will be positioned to optimize the available sunlight for producing energy.
Another innovative undertaking LG&E and KU has initiated is the state’s first natural gas combined cycle generating unit, Cane Run 7. Located on the Ohio River southwest of Louisville, the power plant generates electricity through two gas turbines and uses the exhaust heat from those units to generate steam and produce additional electricity using a steam turbine. The single NGCC unit replaces the bulk of the 800 megawatts of coal-fired generation that was retired as a result of stricter environmental mandates.
Other utilities in Central Kentucky include the East Kentucky Power Cooperative, a Winchester-based not-for-profit company formed in 1941. It generates electricity for 520,000 commercial and residential customers in 87 counties.
Kentucky American Water, the state’s largest-investor-owned water utility, provides water to 128,000 customers in 11 counties, including Fayette. Columbia Gas services 135,000 customers in 30 counties.