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Released April 03, 2017 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Barring an 11th-hour miracle, the largest coal-fired power plant in the Western U.S., the Navajo Generating Station (NGS), will close at the end of 2019, a victim of the changing economics of the power industry.
The plant's operator and 42.9% owner, Salt River Project (SRP) (Tempe, Arizona), last month said NGS' five owners voted to close the plant because it could no longer compete with cheaper, gas-fired generation. NGS, a three-unit, 2,250-megawatt (MW) power plant located in northern Arizona, was brought online in the 1970s. In recent years, a diverse group of stakeholders called The Working Group had been in protracted negotiations with the U.S. Environmental Protection Agency (EPA) (Washington, D.C.) over bringing the plant into compliance with federal regional visibility regulations. For more on those negotiations, see October 18, 2013, article - Navajo Generating Station Looks for Favorable EPA Rule on Emissions Reductions.
In mid-2014, EPA issued a final rule for NGS regional haze compliance that called for shutting down one of the plant's three generating units and installing selective catalytic reduction (SCR) equipment on the other two in 2030.
But economics, not environmental regulators, will force NGS' premature closure, SRP said February 13 in announcing the owners' decision.
"The utility owners do not make this decision lightly," said Mike Hummel, SRP's deputy general manager, in a statement. "NGS and its employees are one reason why this region, the state of Arizona and the Phoenix metropolitan area have been able to grow and thrive. However, SRP has an obligation to provide low-cost service to our more than 1 million customers, and the higher cost of operating NGS would be borne by our customers."
In announcing the closure, SRP cited a study from the National Renewable Energy Laboratory (NREL), which found, in part, that "Electricity produced at NGS is currently more expensive than electricity purchased on the wholesale spot market," and that "price trends examined suggest a turnaround might be years away, especially if natural gas prices remain low."
Besides SRP, NGS' other owners are: U.S. Bureau of Reclamation (24.3% owner), Arizona Public Service Company (Phoenix, Arizona) (14%), NV Energy (Las Vegas, Nevada) (11.3%) and Tucson Electric Power Company (Tucson, Arizona) (7.5%). The Los Angeles Department of Water & Power (LADWP) (Los Angeles) had owned a stake in NGS, but a recent California law barring the import of coal-fired power into the Golden State forced LADWP to sell its share. NV Energy also is trying to sell its stake in NGS under a requirement in Nevada law.
As big a headache as closure of NGS might be, it's not the only power plant problem on SRP's plate: federal air visibility regulations may compel it to either close one unit at its Coronado Generation Station (CGS) or install equipment to reduce emissions of oxides of nitrogen (NOx) there. CGS is a two-unit, coal-fired plant with 773 MW of generating capacity. SRP is the sole owner of CGS, which is located in eastern Arizona. That plant has been operating for more than 35 years.
A draft federal implementation plan to improve visibility in Class 1 areas would force SRP to close one of CGS' two units by yearend 2017. A counter-proposal from SRP would allow both units to remain open while producing greater visibility improvements, the utility said. The EPA is said to be considering SRP's counter-proposal. SRP recently told the Arizona news media: "EPA must approve this alternative interim strategy offered by SRP before the end of 2017 to avoid a unit closure. We are working closely with the EPA, in hopes of a successful conclusion to this process."
SRP reportedly has installed about $200 million of pollution-control equipment at CGS Unit 1 since 2009. To meet EPA visibility standards, SRP would need to invest an additional $110 million of NOx-lowering equipment at CGS Unit 1.
The story playing out in Arizona has been playing out in the West and across the nation for years: tougher environmental regulation coupled with abundant, low-cost natural gas-fired generation, are forcing the premature closure of coal-fired generation.
Even if President Donald Trump could somehow intervene to keep NGS or CGS open, which observers say is a long shot at best, there's nothing he can do to offset the compelling economics of high-efficiency, gas-fired generation. However, Trump recently signed a broad executive order that instructed the U.S. Environmental Protection Administration (EPA) (Washington, D.C.) to withdraw and rewrite the Clean Power Plan (CPP). The order also yanked the Department of Interior's (DOI) (Washington, D.C.) plan to reassess the federal coal-leasing program and overturned several executive orders and presidential memoranda on climate change signed by then-President Barack Obama. For more information, see March 29, 2017, article - Trump Begins Process of Undoing Obama's Climate Change Measures.
Like their brethren in the East and the Midwest, operators of coal-fired generation in the West and Southwest have been closing plants or selling their stakes in them to comply with various state regulations. In recent years, operators have decided to close thousands of megawatts of coal-fired generating capacity in the region, including the Mohave Power Station and Reid Gardner Power Station (both in Nevada), and the Four Corners Power Station and San Juan Generating Station (both in New Mexico). Additional closure decisions could be on the horizon, depending on gas prices, gas production trends, the cost of renewable generation, the outcome of CPP litigation or changes to environmental regulations that could be enacted by the Trump administrations' new leadership at the EPA.
In the same way that widespread availability of low-cost gas, coupled with tougher environmental regulation, drove plant closure decisions in the East and Midwest, power generators in the Southwest can draw on rapidly expanding gas production from the Permian Basin, located in West Texas and southeastern New Mexico, to fuel new gas-fired generators. Gas production from the Permian area is expected to reach about 8 billion cubic feet per day (Bcf/d) in April, predicted the U.S. Energy Information Administration (EIA) (Washington, D.C.).
Click on the image at right to see gas production from the Permian Basin.
SRP and another electric utility in the state, Arizona Public Service Company (APS) (Phoenix, Arizona), are developing new gas-fired generation. SRP has a gas-fired peaker on the drawing board, a multi-phase 900-MW plant, while APS is planning to add a 510-MW unit at its Ocotillo Power Station. And dozens of renewable energy plants, mainly wind and solar, valued at nearly $9 billion, also are under development in the Grand Canyon State.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
The plant's operator and 42.9% owner, Salt River Project (SRP) (Tempe, Arizona), last month said NGS' five owners voted to close the plant because it could no longer compete with cheaper, gas-fired generation. NGS, a three-unit, 2,250-megawatt (MW) power plant located in northern Arizona, was brought online in the 1970s. In recent years, a diverse group of stakeholders called The Working Group had been in protracted negotiations with the U.S. Environmental Protection Agency (EPA) (Washington, D.C.) over bringing the plant into compliance with federal regional visibility regulations. For more on those negotiations, see October 18, 2013, article - Navajo Generating Station Looks for Favorable EPA Rule on Emissions Reductions.
In mid-2014, EPA issued a final rule for NGS regional haze compliance that called for shutting down one of the plant's three generating units and installing selective catalytic reduction (SCR) equipment on the other two in 2030.
But economics, not environmental regulators, will force NGS' premature closure, SRP said February 13 in announcing the owners' decision.
"The utility owners do not make this decision lightly," said Mike Hummel, SRP's deputy general manager, in a statement. "NGS and its employees are one reason why this region, the state of Arizona and the Phoenix metropolitan area have been able to grow and thrive. However, SRP has an obligation to provide low-cost service to our more than 1 million customers, and the higher cost of operating NGS would be borne by our customers."
In announcing the closure, SRP cited a study from the National Renewable Energy Laboratory (NREL), which found, in part, that "Electricity produced at NGS is currently more expensive than electricity purchased on the wholesale spot market," and that "price trends examined suggest a turnaround might be years away, especially if natural gas prices remain low."
Besides SRP, NGS' other owners are: U.S. Bureau of Reclamation (24.3% owner), Arizona Public Service Company (Phoenix, Arizona) (14%), NV Energy (Las Vegas, Nevada) (11.3%) and Tucson Electric Power Company (Tucson, Arizona) (7.5%). The Los Angeles Department of Water & Power (LADWP) (Los Angeles) had owned a stake in NGS, but a recent California law barring the import of coal-fired power into the Golden State forced LADWP to sell its share. NV Energy also is trying to sell its stake in NGS under a requirement in Nevada law.
As big a headache as closure of NGS might be, it's not the only power plant problem on SRP's plate: federal air visibility regulations may compel it to either close one unit at its Coronado Generation Station (CGS) or install equipment to reduce emissions of oxides of nitrogen (NOx) there. CGS is a two-unit, coal-fired plant with 773 MW of generating capacity. SRP is the sole owner of CGS, which is located in eastern Arizona. That plant has been operating for more than 35 years.
A draft federal implementation plan to improve visibility in Class 1 areas would force SRP to close one of CGS' two units by yearend 2017. A counter-proposal from SRP would allow both units to remain open while producing greater visibility improvements, the utility said. The EPA is said to be considering SRP's counter-proposal. SRP recently told the Arizona news media: "EPA must approve this alternative interim strategy offered by SRP before the end of 2017 to avoid a unit closure. We are working closely with the EPA, in hopes of a successful conclusion to this process."
SRP reportedly has installed about $200 million of pollution-control equipment at CGS Unit 1 since 2009. To meet EPA visibility standards, SRP would need to invest an additional $110 million of NOx-lowering equipment at CGS Unit 1.
The story playing out in Arizona has been playing out in the West and across the nation for years: tougher environmental regulation coupled with abundant, low-cost natural gas-fired generation, are forcing the premature closure of coal-fired generation.
Even if President Donald Trump could somehow intervene to keep NGS or CGS open, which observers say is a long shot at best, there's nothing he can do to offset the compelling economics of high-efficiency, gas-fired generation. However, Trump recently signed a broad executive order that instructed the U.S. Environmental Protection Administration (EPA) (Washington, D.C.) to withdraw and rewrite the Clean Power Plan (CPP). The order also yanked the Department of Interior's (DOI) (Washington, D.C.) plan to reassess the federal coal-leasing program and overturned several executive orders and presidential memoranda on climate change signed by then-President Barack Obama. For more information, see March 29, 2017, article - Trump Begins Process of Undoing Obama's Climate Change Measures.
Like their brethren in the East and the Midwest, operators of coal-fired generation in the West and Southwest have been closing plants or selling their stakes in them to comply with various state regulations. In recent years, operators have decided to close thousands of megawatts of coal-fired generating capacity in the region, including the Mohave Power Station and Reid Gardner Power Station (both in Nevada), and the Four Corners Power Station and San Juan Generating Station (both in New Mexico). Additional closure decisions could be on the horizon, depending on gas prices, gas production trends, the cost of renewable generation, the outcome of CPP litigation or changes to environmental regulations that could be enacted by the Trump administrations' new leadership at the EPA.
In the same way that widespread availability of low-cost gas, coupled with tougher environmental regulation, drove plant closure decisions in the East and Midwest, power generators in the Southwest can draw on rapidly expanding gas production from the Permian Basin, located in West Texas and southeastern New Mexico, to fuel new gas-fired generators. Gas production from the Permian area is expected to reach about 8 billion cubic feet per day (Bcf/d) in April, predicted the U.S. Energy Information Administration (EIA) (Washington, D.C.).
Click on the image at right to see gas production from the Permian Basin.SRP and another electric utility in the state, Arizona Public Service Company (APS) (Phoenix, Arizona), are developing new gas-fired generation. SRP has a gas-fired peaker on the drawing board, a multi-phase 900-MW plant, while APS is planning to add a 510-MW unit at its Ocotillo Power Station. And dozens of renewable energy plants, mainly wind and solar, valued at nearly $9 billion, also are under development in the Grand Canyon State.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
