Show-Me Energy: Decommissioning Power Plants Part 2

Posted on by Avery Frank

The decommissioning of coal plants is happening across the nation. Senate Bill (SB) 757 would mandate that prior to closing an electricity-generating power plant, there needs to be a new power plant ready to replace it with equal or greater nameplate capacity This bill is being proposed as an attempt to try to smoothen this energy transition for Missouri consumers. In the near future, many Missouri plants such as Rush Island in Jefferson County (2024), Sioux in St. Charles County (2032), and Labadie in Franklin County (half 2036, half 2042) will be taken offline (The years in parentheses signify Ameren’s preferred timeline to close these plants.)

If you clicked on this post without reading Part 1, I encourage you to go back and read Part 1. In that post, I defined some of the energy jargon used in this debate. This post will focus on the provisions of SB 757.

Does SB 757 address capacity factor and dispatchability?

The bill does not explicitly mention capacity factor or dispatchability. Here is a passage from the bill text:

The new replacement reliable electric generation shall be equal to or greater than the full nameplate capacity of any existing electric generating power plant and shall be certified as an equal or greater amount of reliable electric generation by the Missouri public service commission and the regional reliability organization in which the electric utility company operates. (emphasis added)

Unless the public service commission comes up with its own system of power accreditation, it seems this bill will hinge on the actions of our regional reliability organizations.

While I will not go into all of the specific details, the two main regional energy organizations in Missouri—Midcontinent Independent System Operator (MISO) and Southwest Power Pool (SPP)—have outlined their resource accreditation process for rating power sources and individual power plants (you can read MISO’s method here). MISO’s plan “informs long-term investment and retirement decisions by accurately representing the capacity value of a resource in the prompt year.”

What a statement like that means is that MISO (and SPP also) account for capacity factor and value on the grid by examining different yearly, monthly, and daily variables—all with declared intentions to “maintain reliability.”

However, we should still be cautious, as utilities also can miscalculate or serve other agendas. For example, California has dramatically increased its amount of renewable energy sources in the past 10 years, which now account for up to 42% of its net electricity generation. In the same timeframe, California has cut its nuclear supply by over half, down to 8%. As a result, the dispatchability problem has reared its ugly head in recent years, as in 2020 California had power outages due to insufficient energy for the first time in over 20 years. Sadly, 2020 wasn’t the end of California’s power struggles, as problems have continued. California’s regional reliability organization, California Independent System Operator (CAISO), has even at times called for residents to “use less power between 4 and 9 p.m.” Whether it was due to miscalculation or prioritizing other agendas, Californians are struggling because of a lack of dispatchability and reliability.

That brings me to my main questions concerning SB 787. Can Missouri citizens confidently rely on these regional reliability organizations (MISO, SPP) to protect their energy needs? Will these organizations continue to prioritize both capacity and dispatchability? Is there a way to ensure that other agendas are not prioritized over our energy needs?

On its face, this bill appears to add protection for Missourians, but these questions are worth answering. If there is any possible room for interpretation, shouldn’t it be made clear that both nameplate capacity and dispatchability must be taken into account?

Show-Me Energy: Decommissioning Power Plants Part 1

Posted on by Avery Frank

As the legislative session hums along, one bill worth paying attention to is Senate Bill (SB) 757, which would bring protection for Missouri citizens’ energy needs. SB 757 would mandate that prior to closing an electricity-generating power plant, there needs to be a new power plant ready to replace it with equal or greater nameplate capacity (see discussion below). The goal of this bill is to ensure that Missouri’s energy grid is not compromised during a future energy transition.

In light of Ameren’s recent declaration that all coal plants will be decommissioned by 2045, this bill seems to add a level of accountability and protection, and could help prevent officials from undertaking actions that would compromise the energy needs of Missourians.

To make an energy grid truly reliable; we need both sufficient capacity and dispatchability.

Prior to examining SB 757, let me explain what these terms actually mean. I will examine the provisions of the bill in my next post.

First, what is nameplate capacity?

In simple terms, nameplate capacity is the amount of energy a power plant can produce if it is operating at 100 percent power all the time. So, if a coal plant is “rated” at a nameplate capacity of 1,000 megawatts (mw), that means 1,000 mw is the maximum the plant could produce—but that is not what it actually generates.

If the nameplate capacity isn’t what the plant generates, how much electricity do plants actually generate?

That answer depends on the type of energy source, the weather, the time of year, and the strategies used to generate energy. I wrote an earlier piece on all the types of energy sources in the United States that you can read here.

Another key variable that determines how much electricity is actually generated is something called “capacity factor.”

Capacity factor, in simple terms, is the percentage of time that a power plant is operating at maximum power (its nameplate capacity).

The capacity factor is not the same among different energy sources. For example, nuclear power plants operated at maximum power 92.7% of the time in 2021—meaning nuclear power had a capacity factor of 92.7%. Coal plants had a capacity factor of 49.3% in 2021, natural gas was 54.4%, wind was 34.6%, and solar photovoltaic (solar panels) was at 24.6%.

Let’s say five different types of plants have a nameplate capacity of 1,000 mw (enough to power around 565,000 homes). Here’s how the capacity factor would affect rates of electricity generation:

Now that we better understand capacity, what is dispatchability?

Dispatchability is essentially an energy source’s ability to be “dispatched” to the grid’s consumers whenever they need it. Energy is neither created nor destroyed, meaning that when we “use” energy, that energy has to be coming from somewhere.

There are a few main “baseload resources” that have ample dispatchability: nuclear, coal, hydroelectric, and natural gas. On the other hand, intermittent resources such as solar and wind have times of day and certain weather conditions where they lack production, meaning they have less dispatchability.

How does dispatchability come into play in decommissioning power plants?

The reason we produce energy is to power things society needs and wants—and we are living in a world where we want and need electricity 24/7. In an internet-driven society, we want to stream movies at night, meet on Zoom for work meetings, play video games, mine bitcoins, or potentially even have a “metaverse.” The growing number of data centers that power these activities devour large swaths of energy, and they have to be operating constantly. If electric vehicles become more popular, we will have millions and millions of individuals using an immense amount of energy overnight to charge them.

This is where some of the dilemma lies. The energy demand market is trending towards 24/7 energy, while many proposed replacement plants are intermittent and don’t produce energy at night, when it is cloudy, or when there is no wind.

Here is a table taken from the Midcontinent Independent System Operator (MISO), which shows the dispatchability of solar and wind and where loss of load occurs. The numbers 1–24 on the x-axis represent the hours of the day, and the y-axis represents the months of the year.

The top “loss of load” graph shows the times where both renewables struggle to be dispatchable when paired together. Some states like California have experienced this dispatchability problem and have tried to mitigate it with the vast expansion of battery infrastructure. This is a fine enough idea and does help with improving reliability. However, there is no realistic path to mass expansion for the needed battery infrastructure to maintain reliability if renewables continue to be scaled. The battery technology also still has problems that need to be ironed out. We should not bet our energy future on battery technology given all the existing issues.

That bet would be too risky, as it could potentially lead to utilities or the government dictating when individuals and businesses may use electricity— such electricity rationing.

In order to achieve dispatchability and maintain reliability, the replacements for coal cannot just be renewables—we need nuclear and other baseload energy sources. Even if you believe that renewables should be the primary energy source, there should be a highly dispatchable and reliable source backing them up.

Now that we understand the two legs that grid reliability needs to stand on, we can turn back to SB 757 in my next blog post.

A New Ballpark Could Cost KC Taxpayers Billions with Patrick Tuohey

Posted on by Susan Pendergrass

Susan Pendergrass speaks with Patrick Tuohey about the stadium funding debate in Kansas City. The Royals want a sales tax extension to pay for their new ballpark, potentially costing taxpayers between $4.4 billion and $6.4 billion. The Chiefs are also seeking tax dollars for upgrades to Arrowhead.

Listen on Apple Podcasts 

Listen on SoundCloud

Patrick Tuohey is senior fellow at the Show-Me Institute and co-founder and policy director of the Better Cities Project. Both organizations aim to deliver the best in public policy research from around the country to local leaders, communities and voters. He works to foster understanding of the consequences — often unintended — of policies regarding economic development, taxation, education, policing, and transportation. In 2021, Patrick served as a fellow of the Robert J. Dole Institute of Politics at the University of Kansas. He is currently a visiting fellow at the Yorktown Foundation for Public Policy in Virginia and also a regular opinion columnist for The Kansas City Star.

Produced by Show-Me Opportunity

John Sherman’s Proposed Entertainment District Is Bad for Everyone Else

Posted on by Patrick Tuohey

John Sherman, the owner of the Kansas City Royals, said in an announcement the other day:

I believe in my gut that the timing is right for the Royals to become residents of the Crossroads and neighbors to Power & Light, 18th & Vine and Hospital Hill, helping to further connect the cultural center for our great city.

What’s important to note is that Sherman plans to include an entertainment district in the construction. Mike Hendricks of The Kansas City Star adds: “The imagined $1 billion-plus ballpark would be bordered on the east by office, retail and residential development, which would be a potential source of revenue for the team.”

No one should doubt that this publicly funded stadium with all the additional accouterments would be good for John Sherman. But will it be good for his neighbors?

Remember that all sorts of research and many economists make it clear that sports stadiums “are really poor public investments.” Part of the reason that the economic impact studies released by proponents of such efforts are flawed is that they count only the new spending at the new location—not the reduction of spending elsewhere. In a 2017 report, the Federal Reserve Bank of St. Louis concluded: “economists generally oppose such subsidies. They often stress that estimations of the economic impact of sports stadiums are exaggerated because they fail to recognize opportunity costs.”

Consider the Power & Light District. According to the Regulated Industries Division of Kansas City, Missouri, the number of liquor licenses (a gauge of how many restaurants and bars are operating) and employee health cards (a proxy for the number of people employed at bars and in food service) remained flat citywide for a decade after subsidies were awarded.

The Power & Light District didn’t create new jobs or businesses. It merely moved them from elsewhere in the city to downtown. And it moved them from places where the city, county, and school districts were collecting property, sales, and income tax revenue to a place where those taxes are diverted back to the developer to offset the cost of construction.

Even if you consider the Power & Light District on its own merits, it has failed to be successful. Thomas Friestad reported last year in the Kansas City Business Journal that Kansas City has had to meet multimillion-dollar debt-service obligations because the district does not generate enough revenue to pay its own debts. Those payments have ranged from $6 million to $17 million, amounting to over $160 million since 2006.

Just as with the Power & Light District, John Sherman’s entertainment district will not create new economic activity. It will only move it from elsewhere in the city. On game day, fans who now stop at grocery and liquor stores on their way to tailgate may instead go to bars at the stadium. That is not new activity—just different activity. Fans who might have gone to Power & Light, or to other places in the Crossroads District, may now go to the bars that Sherman owns. That is not new spending—just different spending. This is exactly what happened when Ballpark Village opened in St. Louis; it cannibalized other existing businesses.

The economic impact studies that will inevitably be produced to tout this new entertainment district will likely only count the new spending in the new location—not the loss of spending elsewhere.

To the degree that the Royals’ new entertainment district leeches spending away from Power & Light—which seems like it may be the intent of Sherman’s gambit—Kansas City taxpayers will face even higher annual debt obligations than now.

A publicly funded downtown stadium and entertainment district will be good for John Sherman. It won’t be good for anyone else.

Beware the Medicaid Hole

Posted on by Elias Tsapelas

All signs are pointing toward Medicaid blowing an enormous hole in Missouri’s next budget unless state lawmakers take action now to avoid the financial ditch.

For years, I’ve written about how big of a problem the Medicaid program is for Missouri’s budget. More recently, I’ve discussed our state’s broader budgetary troubles. Medicaid has long been Missouri’s single largest budget item, and the size of the program continues to only increase. Since 2020, program enrollment has increased by more than 40%, with more than 1.4 million Missourians now on the rolls. Additionally, Medicaid’s total cost has grown by nearly 80% in just four years, from approximately $10.8 billion to $19 billion.

One saving grace over this period of skyrocketing growth is that state taxpayers have been spared from the brunt of the cost increases due to an enormous injection of federal funds. This doesn’t mean that state taxpayers aren’t paying more for Medicaid today than ever before. In fact, state spending on the program has increased by more than 70% since 2020. But during that time, Missouri also experienced a tremendous run of state revenue growth, which, taken together with the increased federal funding, has meant that Missouri’s lawmakers have staved off addressing the long-running Medicaid cost problem. Going into next year, things are going to change drastically.

The federal government has ended its “enhanced” pandemic-era match for Medicaid funding. Typically, the federal government pays roughly 65% of Medicaid enrollee’s healthcare bills, but from 2021 until very recently, Missouri has received an additional 5% for adopting Medicaid expansion, and an additional 6.2% to help cover the increased program costs from the pandemic. Missouri lawmakers will have to replace the extra federal funds with state tax dollars.

This means that, without action, state lawmakers should expect the general revenue cost of the Medicaid program to increase significantly next year, likely by at least several hundred million dollars. And given that recent reports suggest that state tax revenue growth is expected to remain relatively flat, it’s possible the cost of Medicaid might even increase by more than the state’s tax collections. If that were to happen, unless reforms were made to the Medicaid program, significant budget cuts to other state spending priorities such as education, roads, or public safety would be needed to finance Medicaid’s cost growth.

Unlike the COVID-19 pandemic, the coming budgetary shortfall is entirely predictable. The federal government gave states more than a year’s warning for when it would be reducing Medicaid payments, but Missouri’s elected officials have thus far chosen not to prepare for that reality. Successfully reforming Medicaid will take months to implement, which means that time is running out if policymakers want to make the changes necessary to steer our state clear of the budgetary shortfall that’s ahead. Let’s hope state lawmakers realize this sobering truth before it’s too late.

Missouri Needs Better Stewards

Posted on by Elias Tsapelas

Is Missouri’s budget trajectory unsustainable? Yes, but given the discussions in Jefferson City over the past few weeks, you’d think it wasn’t.

As my colleague Patrick Tuohey recently wrote, the rosy budgetary picture painted by Governor Parson during his final State of the State address was, at best, misleading. Missouri’s budget has nearly doubled over the past five years, and the governor’s more than $50 billion recommended spending plan for next year requires dipping into cash reserves to make ends meet.

In other words, it will be up to Missouri’s General Assembly to begin turning the tide on government spending, which will likely be easier said than done for several reasons.

First, the federal government is winding down its COVID-19 and infrastructure spending. This means that unless Missouri begins scaling back the services that have been propped up with federal cash, state taxpayers can expect to soon be on the hook for a higher level of government services than they were just a few short years ago. While the reduced federal funding will impact some parts of state government more than others, the Medicaid program is sure to need hundreds of millions of new state tax dollars.

Second, state tax revenues aren’t expected to grow at the rate they have in recent years. Fortunately, higher revenue collections over the past few years allowed Missouri to accumulate significant cash reserves, but some of those reserves have already been spent and the governor’s budget recommends spending more. There should be no expectation that Missouri’s tax revenue growth or remaining cash reserves will be able to fill the budgetary hole the federal government leaves behind, let alone cover the inflationary cost increases required to continue funding the state’s other spending priorities.

Given the harsh budgetary realities Missouri is facing, it’s especially troubling that Governor Parson and the general assembly are reportedly considering expanding the state government’s role even further. For example, Governor Parson is recommending funding—in a budget that relies on one-time cash reserves to maintain balance—childcare and teacher pay programs that will likely become new long-term spending obligations.

In a perfect world, Missouri taxpayers wouldn’t have to ask their elected officials to be good stewards of the state’s finances. Policymakers would prepare for rainy days and take future spending obligations into account when they craft the yearly budget, ensuring the state’s revenues and spending are on sustainable trajectories. Unfortunately, that doesn’t appear to be happening right now. For now, Missourians are going to be left hoping that something changes between now and the end of the legislative session.

The Connection Between Farmland Assessment and Teacher Pay Increases

Posted on by David Stokes

How does Missouri farmland being underassessed (for tax purposes) relate to proposed state requirements for higher minimum teacher salaries being a de facto subsidy to rural Missouri?

Well, it does. Stick with me on this.

Last year, Missouri’s budget included an appropriation increasing the minimum Missouri starting teacher salary to $38,000, funded primarily by state tax dollars and not local school taxes. This year, officials are proposing legislation to raise it even higher, with the same primary funding from the state. Where do you think those state tax dollars are going to come from, and where is this new fund to increase starting teacher salaries going to be spent?

It is more difficult for rural school districts to fund themselves with property taxes because of the high percentage of agricultural property in those areas. (I’m not saying it’s impossible, just more difficult.) Whether you like it or not, farmland is underassessed in Missouri(most farmers presumably like it). It is hard to raise the revenue necessary for a small school district with a tax base starting out so low. Since tax rates are the same for various classes of property (except in St. Louis County), setting a rate high enough to raise enough funds from farmland would mean incredibly high taxes on the more accurately assessed homes and businesses in those communities.

Urban and suburban school districts, for the most part, aren’t starting their teachers out at $25,000. At Indeed.com, every job opening I saw for City of St. Louis public schools started at $46,000. In this blog post, James Shuls goes into more detail on this discrepancy. (James goes into even further detail on the problems of funding rural school districts here.)

Where do the taxes that fund much of Missouri government and, by obvious extension, this new state teacher fund, come from? As this map shows, our larger urban counties produce an outsized percentage of Missouri’s economic activities. St. Louis County alone produces over 25% of the state’s GDP. State income and sales tax collections are going to largely align with those totals.

If you were a voter in rural Missouri, and you were told that you could vote for a local tax increase or have the state pay for salary increases for your school district, what would you pick? We would all pick the latter.

This issue will play out similarly to the sheriff salary issue of about 15 years ago. There, the state decided to increase sheriff’s deputy salaries by adding a fee to process service around the state. The problem was that St. Louis County, which has a county police department and a sheriff’s department that is not a law enforcement agency (trust me on this, I used to be a county sheriff), was ineligible for the funds even though it generated more fees from process service than any other county in the state. Yes, lawsuits were filed over it, but they failed (unfortunately).

I like low taxes. If rural Missourians want low taxes, I’m all for it. But we should not establish a system where rural teacher salaries are paid for (mostly) by taxpayers in urban and suburban areas. The combination of low assessed farm values and a desire for low tax rates in rural areas should not be addressed by taking money from urban areas. I recall signs along I-70 years ago on farm fences objecting to using state funds for sports stadiums in St. Louis. Those signs were correct then, and they still are now, but it works both ways.

Let’s Be Honest about the New Stadium Tax in Jackson County

Posted on by Patrick Tuohey

On April 2, 2024, Jackson County voters will be asked to approve a new 3/8 percent sales tax to support improvements to “funding for park improvements consisting of Arrowhead Stadium and its surrounds, and a new Major League Baseball stadium in Jackson County.”

Proponents present this as an extension of that tax and not a new tax.

They are wrong. It is a new tax.

First, think of this logically. If the county legislature did not act—or if the voters reject the measure—the current sales tax would expire on September 30, 2031. The legislature is seeking voter approval exactly because this is a new legislative action to impose a new tax.

Second, let’s examine the original tax approved by voters in 2006. The legislation does not contemplate an extension. It does not set up any mechanism by which the tax could be extended. It simply imposes the tax and states that it will expire after 25 years.

Third, the legislative language Jackson County voters are being asked to approve this time around would sunset the existing tax (the original tax would end—the two taxes would not run concurrently) and explicitly states this is a new tax. Per Section 2: “Subject to the approval of the voters of the County, the new levy will begin upon the date first imposed and continue for a term of 40 years . . . ” (emphasis added)

Even the title of the ordinance confirms that we are being asked to impose a new tax:

AN ORDINANCE submitting to the qualified voters of Jackson County, Missouri, at a special election to be held on April 2, 2024, a question authorizing Jackson County to impose a countywide sales tax of three-eighths of one percent for a period of forty years for the purpose of retaining the Kansas City Royals and Kansas City Chiefs sports teams in Jackson County, Missouri. (emphasis added)

Perhaps supporters of the measure believe that voters are more likely to extend a tax than they are to vote on a new tax. But that is a political concern. Their claim is campaign messaging, not the facts of the measure on the ballot.

Journalists covering this issue should resist parroting talking points and stick to the basic facts: Jackson County residents are being asked to impose a new levy on themselves. It’s that simple.

State of the State: Leading with Intentionality for School Choice

Posted on by Avery Frank

In his final State of the State Address, Governor Parson highlighted a key part of government policy. He said:

A society grows great when old men and women plant trees . . . the shade of which they will never know or sit in.

I think this can be applied to our education system. We need great men and women to plant trees, yes. However, we also need great men and women to tend to them and help them grow. There are a few examples nationwide of this exact scenario happening—particularly in states such as Iowa, Florida, Arkansas, and Tennessee. To help our students flourish through school choice and educational reform, there needs to be a governor with a plan and a commitment to planting trees and cultivating our next generation.

Governor Huckabee Sanders proposed an ambitious education reform plan to the state legislature. Arkansas’ LEARNS ACT pairs teacher salary increases with curriculum protection and the establishment of a universal school voucher program. Passing this bill took a lot of hard work and a lot of horse-trading, but a determined governor was able to get it done.

Governor Reynolds proposed a plan to make “no child limited by their income or zip code” in Iowa. It was a priority of her administration. She sought to educate the public on her proposal and garner support. The end result was a victory for Reynolds—Iowa’s education savings accounts will be expanded to all students statewide. The governor proposed the bill, and she also continued to make it a priority for the state all the way to her final signature.

Governor Lee has gone to bat for his proposed expansion of Tennessee’s statewide school choice program, which would create opportunities for students to attend the school that best suits their needs. He was recently berated at an address advocating for major change to Tennessee’s educational status quo. Nevertheless, the governor has made it his priority to move this legislation across the finish line. Governor Lee has decided that the battle is worth it.

While no guarantee of success, it seems that the trend for getting major education reform passed is a determined governor who is willing to put his or her weight behind school choice. The question is whether we have such a governor.

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