As coal plants and coal mines continue to shut down across the U.S., coal workers are getting hit hard. While the transition has brought lower-carbon electricity and cleaner air, it’s also meant lost jobs, company bankruptcies, and false political promises about revitalizing the industry.
One state is looking at a more proactive way to help coal workers transition to the new energy economy — by using private capital and the bond market.
Last week, a new bill was introduced into the State House in Colorado, called “The Colorado Energy Impact Assistance Act,” sponsored by Representatives Chris Hansen and Daneya Esgar (both Democrats).
The bill seeks to create bonds that utilities could use to refinance retired and expensive coal plants. The ratepayer-backed bonds would be commercial-grade, with low interest rates, and would enable utilities to save money by retiring coal plants and reinvesting in natural gas, solar or wind farms. Fifteen percent of the savings would be used to help displaced workers and offset lost property tax revenue.
“The plant closures that have happened in Colorado have been very hard on the communities, and we haven’t had any resources to help them out. This is an urgent policy need in our state,” Representative Hansen told GTM in an interview this week.
Close to half of Colorado’s 11 coal plants, which provide 60 percent of the state’s energy, have retirement dates set. Older coal plants are becoming increasingly expensive to operate, compared with natural gas and clean energy.
Colorado has a renewable energy mandate. But utilities haven’t traditionally been incentivized to retire older plants early, even if it’s more expensive and dirtier to run them.
That’s because utilities are compensated for the infrastructure they build. Closing an older plant early, before the end of its designated life, is often a money-losing move.
The mismatch explains why clean energy advocates have been calling for a bill like Hansen’s — to help make the energy transition more economic for utilities, as well as communities. Hansen called the bill a “win, win, win,” for utility customers, displaced workers and utilities.
Uday Varadarajan, a principal with the Climate Policy Initiative who worked on the analysis behind the bill, said the use of ratepayer-backed bonds has a long history in the U.S., particularly in the electricity market restructuring of the 1990s. “There’s been $50 billion worth of these types of bonds issued over the last 25 years,” said Varadarajan.
Currently Duke Energy has been using them in Florida to decommission nuclear plants. Michigan, too, plans to use them for retiring coal plants. “Because these are regulated monopolies, it make sense to make sure that stranded assets are taken care of,” said Varadarajan.
If the bill in Colorado is approved and helps out Colorado’s utilities and coal workers, it could become a model for other states to transition their energy markets. “We hope that this bill and ideas like it can be a template for what we might be able to do for other places across the country,” said Varadarajan.
The details of the job retraining and support programs for coal workers would be decided by a seven-person board appointed by the governor, as well as a local advisory committee.
The Colorado bill is set to go before the House Transportation and Energy committee next Wednesday. It will need to pass the committee, and the House, then the Senate, and finally get signed by the governor to become law.
The bill is an example of innovative types of private financing that are being considered to help build out new energy infrastructure. Another example is PACE financing that funds solar panels and energy-efficiency upgrades on homes and commercial buildings through tax assessments.
“With the right kind of thinking, novel financing can play an important role in catalyzing the transition,” said Varadarajan.
“We’ve got the chance to build new tools here,” said Hansen.
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