Solar-powered steel mill blazes trail for green energy transition

Source: By Derek Brower, Financial Times • Posted: Tuesday, October 12, 2021

A plant threatened with closure in a Colorado town is hiring again after switching to renewables

Solar panels at the Bighorn Solar project, which sits next to the Comanche coal-fired power station outside Pueblo in southern Colorado
Solar panels at the Bighorn Solar project, which sits next to the Comanche coal-fired power station outside Pueblo in southern Colorado © Derek Brower

Later this week, a huge new solar array on Colorado’s southern High Plains will officially launch — and proponents of a global energy transition will have a new beacon for their cause.

The $285m Bighorn Solar array, developed by Lightsource BP just outside Pueblo, the city that made much of the rail track that snakes across America’s west, will be one of the largest solar facilities east of the Rockies.

The electricity it generates will help Pueblo make the “cleanest steel and engineered steel products in the world”, according to Evraz, the Russian mining conglomerate that owns the city’s 140-year-old steel works.

Bighorn launches just as a global energy crunch sparks debate about how quickly — or not — the world should replace fossil fuels with renewables.

For its developers, including oil supermajor BP, the project is a shining example of the energy transition. For people in Pueblo, known for crime and high poverty levels, it may be simpler: Bighorn will sustain jobs.

“Pueblo is an important story of the energy transition,” said Morgan Bazilian, a former climate negotiator for the EU who is now director of the Payne Institute at the Colorado School of Mines, in Golden, and co-authored a paper about the city’s experience.

“There are still problems with gang violence and poverty, but the people are forging a new path.”

While the array itself will only employ a crew of just four or five to monitor the 750,000 panels, the cheap electricity will underpin Evraz’s $500m plan to expand the mill. It already employs 1,000 people and will need another 300 as it adds facilities to make longer rail tracks.

Without the cheap solar, the Russian company would have moved the operation elsewhere.

“These are good, union-paying jobs,” said Pueblo’s mayor, Nick Gradisar, whose father and grandfather both worked at the mill. The possible closure of the plant loomed over the city a few years ago. Now some certainty has arrived.

“The steel workers have got a guaranteed price of energy,” said Gradisar. “They don’t need to worry about the price of coal going up or down.”

The 300MW of power from the array’s 750,000 panels will feed the expansion of Pueblo’s steel mill
The 300MW of power from the array’s 750,000 panels will feed the expansion of Pueblo’s steel mill © Derek Brower

Lightsource BP, utility Xcel Energy and Evraz have not disclosed the commercial terms of the agreements underpinning the solar facility, which has been installed on Evraz’s land close to the steel mill.

But Lightsource BP can generate the electricity for less than $0.03 per kilowatt-hour, well beneath the price of electricity from fossil fuel sources, said Kevin Smith, the company’s chief executive in the US.

The company will sell its power to Xcel under a 20-year contract and Xcel will then sell the power “behind-the-meter” to Evraz.

The electricity will power almost 90 per cent of the energy needed by the mill, including the electric arc furnace that pulsates at its heart, melting more than 1m tonnes of scrap metal a year.

The make-or-break issues facing the COP26 climate summit

“It was a solution for Evraz to stay in the state, for us to continue to drive and lead the energy transition, for us to be a really good community partner with Pueblo, long term,” said Alice Jackson, president of Xcel’s Colorado business, referring to the deal.

The new project tallies with Xcel’s strategy, unveiled four years ago, to slash its CO2 pollution by 2030 and supply only emissions-free electricity by 2050.

The plan included an accelerated schedule for shutting generation at the giant Comanche coal-fired power station, Colorado’s largest, whose hulking mass and towering smoke stacks loom over Bighorn’s array. Two of the three units will close by 2025 and the third will be phased out after 2030, decades earlier than planned.

For BP, which owns half of Lightsource BP, Bighorn underlines the company’s strategic shift into clean energy, said David Lawler, head of the UK oil company’s operations in the US.

Better known in the US for its petrol stations, offshore drilling and the Deepwater Horizon oil spill, BP last year pledged to begin reducing crude production, cutting emissions — including rampant flaring in countries such as the US and Iraq — and providing renewable electricity.

“For those who are wondering what BP is doing we think this is the best example of the transition that we’re going through,” said Lawler.

“That’s what’s happening in Pueblo — a green economy,” he said. “Recycling the steel, and then green electricity running that . . . it’s a virtuous green cycle is what it is.”

The Bighorn project would generate the 8-10 per cent returns BP says it seeks as it ploughs money into new renewable energy assets — lower than the returns on offer from oil and gas projects, but less volatile, Lawler said.

Energy is the world’s indispensable business and Energy Source is its newsletter. Every Tuesday and Thursday, direct to your inbox, Energy Source brings you essential news, forward-thinking analysis and insider intelligence. Sign up here.

While the US Congress fights over President Joe Biden’s proposals to render American electricity carbon-free by 2035, Colorado, a Democrat-run state but with deep conservative veins, appears to be moving ahead regardless of federal direction — and despite some local opposition.

“I work for the people of Pueblo, not the people of Paris,” Lauren Boebert, the gun-toting Republican US Congresswoman whose district includes Pueblo, wrote on Twitter earlier this year. She has also railed against the “war on coal”. Boebert did not respond to a request for comment.

Still, new clean energy developments have sprouted around her district. A 120MW photovoltaic facility came online in 2016 and Xcel is installing another 650MW of solar capacity elsewhere in Pueblo County, due online next year.

The world’s largest wind tower manufacturing plant, owned by South Korea’s CS Wind, sits just south-east of the city.

Analysts say the momentum behind this transition will carry on despite any political opposition, or slow federal progress in advancing the Biden decarbonisation plan.

“For Pueblo this is about jobs and resources and keeping a social fabric,” Bazilian said. “And it’s happening despite the lack of support from the district’s Republican house representative.”

This article has been amended to correct the location of the Colorado School of Mines, which is in Golden, not Boulder