AES Beaver Valley Power Plant Mulls Shutdown vs. Natural Gas Conversion

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Researched by Industrial Info Resources (Sugar Land, Texas)--Another coal-fired power plant owner is debating whether to convert to natural gas or face an impending plant closure in the next few years. This time, it's AES Corporation's (NYSE:AES) 125-megawatt (MW), coal-fired Beaver Valley Cogen in Beaver County, Pennsylvania. Natural gas conversion became a topic of conversation for the plant after it lost its only electric customer last year. However, no serious discussions have taken place.

Beaver Valley also disappointed at a capacity auction for Valley Forge that was hosted by PJM Interconnection Incorporated, the grid operator for Pennsylvania and 12 other states. Beaver Valley was not picked as a baseload generator, and its prices proved too high to be successful in the bid. Consequently, AES filed with the Pennsylvania Department of Environmental Protection for permission to add burner inserts into three of the boilers, allowing Beaver Valley Cogen to burn natural gas either in addition to the coal or to replace it altogether. The permit could be issued early this February.

Additionally, AES filed with PJM for approval to close the plant on June 17, 2017, in order to pursue other options if it cannot make the natural gas conversion possible.

The plant employs 35 people and produces steam and electricity; the steam is purchased by BASF and NOVA Chemicals. The two companies have been notified that their contracts expire in July. However, contract renewal is possible.

A power-purchase agreement was signed with West Penn Power in 1987. The agreement was set to expire at the end of 2016. However, after West Penn became part of FirstEnergy Corporation (NYSE:FE), it decided to buy out the contract early in January 2013. FirstEnergy said it was paying higher prices than it would pay at other plants, so it chose the early contract termination as its best financial option.

Beaver Valley will struggle to stay afloat after losing West Penn, its main electric customer. For the time being, it is being used as a peaking power station and is only running on demand during peak hours. PJM said on its website that the 2017 closure of the plant would affect reliability issues, but none that could not be addressed by that time.

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