Pennsylvania Sets Brisk Pace of Development for Natural Gas Power Plants

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--As plans evolve to shutter tens of thousands of megawatts of generating capacity in the PJM Interconnection (Audubon, Pennsylvania), developers of natural gas-fired power plants are busy signing contracts and breaking ground for new electric generation in that region. Project activity is particularly active in Pennsylvania, where Industrial Info is tracking 12 grassroot generation projects, repowerings and unit additions totaling more than 8,400 megawatts (MW), with a total investment value (TIV) exceeding $8.4 billion.

PJM is the regional transmission organization (RTO) that coordinates the wholesale delivery of electricity to parts of 13 states and the District of Columbia. The PJM region includes as many as 61 million people living in an arc from Illinois to Ohio, New Jersey North Carolina and Tennessee.

About 20,000 MW of coal-fired generation in PJM is expected to be retired by 2016, according to an estimate made by Panda Energy International Incorporated (Dallas, Texas) officials, as they kicked off construction of the 829-MW Moxie Patriot Generation Power Plant in August 2014. That plant, being built in Lycoming County, is scheduled to be operating by mid-2016. At their construction kickoff event, Panda officials also noted that the average age of about 70,000 MW of generation in PJM was 56 years.

Three months before they broke ground on the Liberty generator, Panda officials began constructing an identical 829-MW project in Bradford County, Pennsylvania. That plant, called Moxie Liberty, is expected to be generating electricity by early 2016. Both generators will be cooled by air, not water, which will prevent discharges into the Susquehanna River and preserve water there for other uses.

Panda officials note the Liberty and Patriot projects are slated to burn gas from the nearby Marcellus Shale formation, making them among the first, if not the first, generators to be fueled by gas from that formation. It is expected that other power plants in the PJM area will use at least some portion of the plentiful gas supplies being extracted from that formation, but other developers have not specified a gas source for their projects.

For more information on how development of the Marcellus Shale has spurred other industrial development, see June 2, 2014, article - Gas Infrastructure Build-Out Driven by Marcellus Production Surge. For more on the jobs impact of Marcellus Shale development, see December 10, 2014, article - Marcellus Shale Development Creates Thousands of Skilled Craft Jobs.

Both Panda plants will use Siemens AG (NYSE:SI) (Munich, Germany) H-class gas turbines, which are projected to achieve operating efficiencies of 60%, making them among the most efficient generators in the U.S. Engineering, procurement and construction (EPC) services for both plants will be provided by a joint venture between Gemma Power Systems LLC (Glastonbury, Connecticut) and The Lane Construction Corporation (Cheshire, Connecticut). Gemma Power Systems is a wholly owned subsidiary of Argan Incorporated (NYSE AMEX:AGX) (Rockville, Maryland).

The Liberty and Patriot plants are among the largest gas-fired generators under development in the Keystone State. Two factors that are driving the pace of power plant development there are the proximity to low-cost natural gas from the Marcellus Shale and federal environmental regulations, which are hastening the retirement of older, coal-fired power plants.

The Mercury and Air Toxics Standards (MATS) rule, issued by the U.S. Environmental Protection Agency (EPA) (Washington, D.C.), is widely expected to lead to the closure of tens of thousands of megawatts of coal-fired generation across the country. But that may change: The U.S. Supreme Court recently agreed to hear a challenge to MATS, with a decision expected by mid-2015.

Other large gas-fired power plants under development in Pennsylvania are:

• Westmoreland County Generating Station, a twin of the Lebanon project, is being developed by Tenasksa. Located in Westmoreland County, that project is scheduled to begin turning dirt in mid-2015. The plant also is scheduled to be operating by the third quarter of 2017.
• Lackawanna Energy Center, a 1,000-MW grassroot generation project scheduled to be built in Lackawanna County. Under development by Invenergy Thermal Development LLC (Chicago, Illinois), this $1 billion project is scheduled to break ground in mid-2016, and be operating by mid-2018.
• York Energy Center, a 760-MW, $760 million project, with construction scheduled to begin in mid-2015 and conclude in late 2017. That project is being developed by Calpine Corporation (NYSE:CPN) (Houston, Texas). It is scheduled to be built alongside the existing York Energy Center, in York County. Chicago Bridge & Iron NV (NYSE:CBI) (The Hague, Netherlands) is providing EPC services to that project.
• Berks Hollow Energy Power Station, an 850-MW project scheduled to be built in Berks County. Under development by Berks Hollow Energy Associates LLC (Saint Louis, Missouri), the project is expected to begin construction in early 2016 and be operating by late 2017.

In late December, PJM asked the Federal Energy Regulatory Commission (FERC) (Washington, D.C.) if the RTO could pay generators to keep open some plants scheduled for retirement in early 2015, to ensure there are adequate supplies of electricity to meet electric demand. PJM was seeking permission to pay owners to keep as much as 2,500 MW of generation in service through the winter of 2015-16. During last year's Polar Vortex, about 40,000 MW of plants in PJM--about 22% of capacity across the region--were forced offline, either because equipment froze or because gas supplies were curtailed. Electric prices in PJM shot up during the extreme cold snap.

"PJM is concerned about having sufficient resources during the winter of 2015-16, given planned environmental-related retirements and the record of generator unavailability last winter," said Ray Dotter, a PJM spokesman. "PJM is checking with generation owners to see if any retirements can be delayed." For more on this issue, see January 6, 2015, article - PJM Aims to Keep Older Plants Open, Cites Grid Reliability in Eastern U.S.

"We don't expect all of these generation projects to be built according to schedule, but the combination of low gas prices and a large number of plant retirements in the PJM area suggests that a higher-than-usual percentage will get built," said Brock Ramey, Industrial Info's research manager for North American Power. "While some critical issues are still hanging fire--such as the Supreme Court ruling on MATS--developers need to begin putting iron in the ground in the near term if these projects are going to be ready when they are needed."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.