AEP Unit to Spend $940 Million to Scrub Big Sandy Power Station

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Kentucky Power Company (Frankfort, Kentucky) will spend about $940 million to install dry flue-gas desulfurization (FGD) equipment at Unit 2 of its Big Sandy Power Station in eastern Kentucky. The decision, announced earlier this month, represents a reversal of thinking for this subsidiary of American Electric Power Company (NYSE:AEP) (Columbus, Ohio). Previously, Kentucky Power planned to close both coal-burning units at Big Sandy and replace the lost output by constructing a new 640-megawatt (MW) natural gas-fired combined cycle generator on the site.

Kentucky Power's current plan, announced earlier this month, is to scrub emissions at the 816-MW Big Sandy Unit 2 and close the 278-MW Unit 1 by the end of 2014, although the utility said it is continuing to "evaluate alternative options" for Unit 1, which began operating in 1963. As part of its decision to install a dry scrubber at Unit 2, it has cancelled plans to build a new natural gas generator on the plant site, Kentucky Power spokesman Ronn Robinson told Industrial Info in an interview. That cancelled gas generator project carried a total investment value (TIV) of about $700 million.

The utility is installing the equipment at Unit 2 to comply with the recently finalized Cross-State Air Pollution Rule (CSAPR) issued by the U.S. Environmental Protection Agency (EPA). The rule remains the subject of intense legal maneuvering, as dozens of firms have filed lawsuits to stay implementation of the rule, which is scheduled to become effective in two weeks, on January 1, 2012. For more on CSAPR, see October 13, 2011, article - EPA Proposes Technical Changes to Finalized Cross-State Air Pollution Rule.

Although AEP is one of many utilities seeking to stay the new EPA rule, it decided to install a dry scrubber on Big Sandy Unit 2 now--in part to ensure it had access to the equipment and skilled labor needed to construct the project. Utilities have warned that CSAPR could lead to a surge in demand for a limited pool of scrubber manufacturing capacity and skilled labor, which could drive up the price of those projects and potentially cause some utilities to miss their compliance deadlines.

Kentucky Power has not selected an engineering, procurement and construction (EPC) firm for the Big Sandy dry scrubber project. Robinson told Industrial Info that the Big Sandy plant installed selective catalytic reduction (SCR) equipment to reduce emissions of oxides of nitrogen oxide (NOx) around 2003. That means the utility won't have to install additional NOx-control equipment there to meet the requirements of CSAPR.

As many as 700 construction jobs will be created when the dry scrubber project kicks off around mid-2013, once the required regulatory permits are received. Kentucky Power expects the scrubber to be operating in 2016. The project could push up the utility's monthly average residential electric bills by 31%. The utility serves an estimated 173,000 customers in eastern Kentucky.

"Kentucky Power looked long and hard at the best way to meet its environmental obligations at Big Sandy Plant, and after much study and analysis, the scrubber system emerged as our least-cost option," Greg Pauley, president and chief operating officer of Kentucky Power, said in a statement. "By investing in the plant and the new scrubber system, we will be able to comply with environmental regulations, as well as retain local jobs. It will also enable Big Sandy Plant to continue burning millions of tons of coal each year and ensure that Kentucky Power remains a large part of the area's economy for years to come."

Pauley continued: "In this trying economy we are conscious of the impact any rate increase will have on our customers. However, this investment is in the best interest of our communities overall and will permit job retention, a significant contribution to the tax base and the continued use of coal, which employs so many individuals in eastern Kentucky. Customers should know that Kentucky Power will make every effort to bring the project in on time and within budget, thus lessening any further rate impacts."

The dry-scrubbing technology can remove up to 98% of sulfur dioxide (SO2) emissions from a power plant's flue gas stream. That technology also can remove some oxidized mercury from the flue gas stream, Robinson said. Several years back, a plan was floated to install about $30 million of mercury-reduction equipment at Big Sandy. But Robinson said that the project is no longer active.

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