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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Electric utilities have announced the closure of dozens of coal-fired power plants, totaling thousands of megawatts (MW) of capacity in response to two recent power-plant emissions regulations from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.).
EPA finalized its Cross-State Air Pollution Rule in early July. This spring, the agency also released a draft rule on reducing power-plant emissions of mercury and other hazardous air pollutants using Maximum Available Control Technology (MACT). The agency is expected to finalize its MACT rule later this year.
Power-plant closure decisions are expected to accelerate in the coming months, as utilities complete their cost analyses of complying with the Cross-State rule and continue analyzing the agency's draft MACT rule. Coal-fired plants that remain open will need to install equipment to lower sulfur dioxide (SO2), nitrogen oxides (NOx), mercury, particulates, and other emissions. This is expected to lead to as much as $12 billion in environmental-control work for engineering, procurement and construction (EPC) firms, equipment makers and service providers.
By 2014, the Cross-State rule will lower power-plant emissions of SO2 and NOx by 73% and 54%, respectively, from 2005 levels. Phase I of the new rule goes into effect next January. Phase II, due to go into effect in mid-2014, focuses more on NOx emissions than SO2 emissions. Industrial Info is tracking 887 coal-fired power plants that will be affected by this rule.
The Cross-State rule, formerly known as the Clean Air Interstate Rule, applies to coal-fired generating units, mainly located east of the Mississippi River. The final rule required Texas power plants to make year-round reductions in SO2 and NOx emissions. Prior drafts of the rule had proposed regulating emissions from those plants only during the summer. For additional information, see August 9, 2011, article - Luminant Approaches EPA About Environmental Regulations.
Complying with the Cross-State rule will cost utilities--and their customers--about $17.8 billion per year, according to a May 2011 study prepared by NERA Economic Consulting for the American Coalition for Clean Coal Electricity. This sum includes compliance costs, fuel price impacts, and costs of replacement energy and capacity. NERA's estimate was significantly higher than EPA's estimate of the cost of the rule: The agency projected it will add about $800 million annually to the $1.6 billion in capital costs per year that utilities are already paying to comply with earlier versions of the Cross-State rule.
EPA's draft MACT rule, issued in March and expected to be finalized during the fourth quarter, will reduce power-plant emissions of mercury by 78% and particulate emissions by 31%. The EPA estimated that 1,350 coal- and oil-fired generators larger than 25 MW will be affected by this rule.
American Electric Power Company Incorporated (NYSE:AEP) (Columbus, Ohio) has said it would retire nearly 6,000 MW of coal-fired generating capacity in response to the Cross-State and MACT rules. AEP plans to close three units of its Glen Lyn Power Station in Virginia and one unit at the Clinch River Power Station, also located in Virginia. Two other units at Clinch River will be converted to natural gas. AEP said it plans to spend $6 billion to $8 billion across its system to bring its power plants into compliance with EPA regulations. AEP Chief Executive Mike Morris said that the utility's electricity prices will increase between 10% and 35%.
The new EPA rules has also caused Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) to retire its six-unit, 862-MW Walter C. Beckjord Power Station in New Richmond, Ohio, by January 1, 2015. Duke has said it plans to spend $5 billion to $6 billion across its system over the next decade complying with new EPA power-plant emissions regulations.
Georgia Power Company (Atlanta, Georgia), a unit of The Southern Company (NYSE:SO) (Atlanta, Georgia) said it would close two units at its Hartlee Branch Power Station in Milledgeville, Georgia, by the end of 2013. The units started producing power in the mid-1960s.
Earlier this year, CPS Energy (San Antonio, Texas) decided to close its J.T. Deely Power Station, an 871-MW generator, by 2018--about 18 years before the end of its useful life. And the Tennessee Valley Authority (Knoxville, Tennessee) has decided to close 18 coal-fired generators totaling 2,700 MW of generating capacity by 2017, rather than install pollution-control equipment on the units. For more on TVA's decision, see the April 20, 2011, article - TVA Decides to Retire 18 Coal Generators, Finish at Least One Nuclear Unit.
Some utilities decided it made sense to install pollution-control equipment on their generators. Shortly before EPA finalized the Cross-State rule, Northern Indiana Public Service Company (Plainfield, Indiana), a unit of NiSource Incorporated (NYSE:NI) (Merrillville, Indiana), awarded Babcock & Wilcox Company (NYSE:BWC) (Charlotte, North Carolina) a $54 million contract to design and supply two wet flue-gas desulfurization (FGD) units and related components. The scrubbers will be installed on two units of NIPSCO's Rollin M. Schahfer Power Station in Wheatfield, Indiana. Schahfer's Unit 14 has a generating capacity of 465 MW, while Unit 15 has a generating capacity of 515 MW.
With the finalization of the Cross-State rule and the EPA's move to finalize the MACT rule, utility officials in over two dozen states will have to decide whether to close or retrofit dozens of other generators. Power plants in Texas, Ohio, Kentucky, Indiana and Kansas are expected to be hit hard by the new EPA rules.
The Electric Reliability Council of Texas (ERCOT) has said the new regulations might cause the lights to go out in the Lone Star State. Energy Future Holdings Corporation (Dallas, Texas) is said to be considering reducing the output at some of its power stations as a way to comply with the 2012 start date of Phase I the EPA Cross State rule. Officials at Westar Energy Incorporated (NYSE:WR) (Topeka, Kansas) have said they don't have enough time to meet Phase I of the new rule. Dayton Power and Light Company, a unit of DPL Incorporated (NYSE:DPL) (Dayton, Ohio), has not yet completed its cost-benefit analysis of continuing to operate the O.H. Hutchings Power Station in Miamisburg, Ohio.
But one Indiana electric utility, Vectren Corporation (NYSE:VVC) (Evansville, Indiana), is not singing the blues about the new EPA rules: The utility said it will not have to make any significant capital investments to comply with the Cross State rule, and it may escape additional capital outlays for complying with the MACT rule. Vectren has installed about $410 million of emissions-control equipment on its power stations over the past decade. The utility said that 100% of its coal fleet is scrubbed for SO2, 90% is controlled for NOx, and its coal-fired generators are substantially controlled for mercury and particulates.
"Our significant investment in emissions control equipment for this region is paying off and will ensure we comply with this new rule," said Carl Chapman, Vectren's chairman, president and chief executive. "More than a decade ago, we chose to move forward with these investments to improve the air quality for our region, which has positively impacted southwestern Indiana's quality of life and serves as an advantage from an economic development standpoint," added Chapman. "As such, our customers' rates increased throughout the past 10 years to reflect the cost of these investments. However, we now find ourselves in a position to comply, while other regional utilities may be required to consider retiring some uncontrolled coal generation units or make significant investments to lower emissions."
View Plant Report - 1514289 1500639 1013762 1012104 1000169 1512876 1010239
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR'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.
EPA finalized its Cross-State Air Pollution Rule in early July. This spring, the agency also released a draft rule on reducing power-plant emissions of mercury and other hazardous air pollutants using Maximum Available Control Technology (MACT). The agency is expected to finalize its MACT rule later this year.
Power-plant closure decisions are expected to accelerate in the coming months, as utilities complete their cost analyses of complying with the Cross-State rule and continue analyzing the agency's draft MACT rule. Coal-fired plants that remain open will need to install equipment to lower sulfur dioxide (SO2), nitrogen oxides (NOx), mercury, particulates, and other emissions. This is expected to lead to as much as $12 billion in environmental-control work for engineering, procurement and construction (EPC) firms, equipment makers and service providers.
By 2014, the Cross-State rule will lower power-plant emissions of SO2 and NOx by 73% and 54%, respectively, from 2005 levels. Phase I of the new rule goes into effect next January. Phase II, due to go into effect in mid-2014, focuses more on NOx emissions than SO2 emissions. Industrial Info is tracking 887 coal-fired power plants that will be affected by this rule.
The Cross-State rule, formerly known as the Clean Air Interstate Rule, applies to coal-fired generating units, mainly located east of the Mississippi River. The final rule required Texas power plants to make year-round reductions in SO2 and NOx emissions. Prior drafts of the rule had proposed regulating emissions from those plants only during the summer. For additional information, see August 9, 2011, article - Luminant Approaches EPA About Environmental Regulations.
Complying with the Cross-State rule will cost utilities--and their customers--about $17.8 billion per year, according to a May 2011 study prepared by NERA Economic Consulting for the American Coalition for Clean Coal Electricity. This sum includes compliance costs, fuel price impacts, and costs of replacement energy and capacity. NERA's estimate was significantly higher than EPA's estimate of the cost of the rule: The agency projected it will add about $800 million annually to the $1.6 billion in capital costs per year that utilities are already paying to comply with earlier versions of the Cross-State rule.
EPA's draft MACT rule, issued in March and expected to be finalized during the fourth quarter, will reduce power-plant emissions of mercury by 78% and particulate emissions by 31%. The EPA estimated that 1,350 coal- and oil-fired generators larger than 25 MW will be affected by this rule.
American Electric Power Company Incorporated (NYSE:AEP) (Columbus, Ohio) has said it would retire nearly 6,000 MW of coal-fired generating capacity in response to the Cross-State and MACT rules. AEP plans to close three units of its Glen Lyn Power Station in Virginia and one unit at the Clinch River Power Station, also located in Virginia. Two other units at Clinch River will be converted to natural gas. AEP said it plans to spend $6 billion to $8 billion across its system to bring its power plants into compliance with EPA regulations. AEP Chief Executive Mike Morris said that the utility's electricity prices will increase between 10% and 35%.
The new EPA rules has also caused Duke Energy Corporation (NYSE:DUK) (Charlotte, North Carolina) to retire its six-unit, 862-MW Walter C. Beckjord Power Station in New Richmond, Ohio, by January 1, 2015. Duke has said it plans to spend $5 billion to $6 billion across its system over the next decade complying with new EPA power-plant emissions regulations.
Georgia Power Company (Atlanta, Georgia), a unit of The Southern Company (NYSE:SO) (Atlanta, Georgia) said it would close two units at its Hartlee Branch Power Station in Milledgeville, Georgia, by the end of 2013. The units started producing power in the mid-1960s.
Earlier this year, CPS Energy (San Antonio, Texas) decided to close its J.T. Deely Power Station, an 871-MW generator, by 2018--about 18 years before the end of its useful life. And the Tennessee Valley Authority (Knoxville, Tennessee) has decided to close 18 coal-fired generators totaling 2,700 MW of generating capacity by 2017, rather than install pollution-control equipment on the units. For more on TVA's decision, see the April 20, 2011, article - TVA Decides to Retire 18 Coal Generators, Finish at Least One Nuclear Unit.
Some utilities decided it made sense to install pollution-control equipment on their generators. Shortly before EPA finalized the Cross-State rule, Northern Indiana Public Service Company (Plainfield, Indiana), a unit of NiSource Incorporated (NYSE:NI) (Merrillville, Indiana), awarded Babcock & Wilcox Company (NYSE:BWC) (Charlotte, North Carolina) a $54 million contract to design and supply two wet flue-gas desulfurization (FGD) units and related components. The scrubbers will be installed on two units of NIPSCO's Rollin M. Schahfer Power Station in Wheatfield, Indiana. Schahfer's Unit 14 has a generating capacity of 465 MW, while Unit 15 has a generating capacity of 515 MW.
With the finalization of the Cross-State rule and the EPA's move to finalize the MACT rule, utility officials in over two dozen states will have to decide whether to close or retrofit dozens of other generators. Power plants in Texas, Ohio, Kentucky, Indiana and Kansas are expected to be hit hard by the new EPA rules.
The Electric Reliability Council of Texas (ERCOT) has said the new regulations might cause the lights to go out in the Lone Star State. Energy Future Holdings Corporation (Dallas, Texas) is said to be considering reducing the output at some of its power stations as a way to comply with the 2012 start date of Phase I the EPA Cross State rule. Officials at Westar Energy Incorporated (NYSE:WR) (Topeka, Kansas) have said they don't have enough time to meet Phase I of the new rule. Dayton Power and Light Company, a unit of DPL Incorporated (NYSE:DPL) (Dayton, Ohio), has not yet completed its cost-benefit analysis of continuing to operate the O.H. Hutchings Power Station in Miamisburg, Ohio.
But one Indiana electric utility, Vectren Corporation (NYSE:VVC) (Evansville, Indiana), is not singing the blues about the new EPA rules: The utility said it will not have to make any significant capital investments to comply with the Cross State rule, and it may escape additional capital outlays for complying with the MACT rule. Vectren has installed about $410 million of emissions-control equipment on its power stations over the past decade. The utility said that 100% of its coal fleet is scrubbed for SO2, 90% is controlled for NOx, and its coal-fired generators are substantially controlled for mercury and particulates.
"Our significant investment in emissions control equipment for this region is paying off and will ensure we comply with this new rule," said Carl Chapman, Vectren's chairman, president and chief executive. "More than a decade ago, we chose to move forward with these investments to improve the air quality for our region, which has positively impacted southwestern Indiana's quality of life and serves as an advantage from an economic development standpoint," added Chapman. "As such, our customers' rates increased throughout the past 10 years to reflect the cost of these investments. However, we now find ourselves in a position to comply, while other regional utilities may be required to consider retiring some uncontrolled coal generation units or make significant investments to lower emissions."
View Plant Report - 1514289 1500639 1013762 1012104 1000169 1512876 1010239
Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR'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.
