NRG Draws Kudos, Criticism for Plans to Repower Coal Plants with Natural Gas

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--NRG Energy Incorporated (NYSE:NRG) (Princeton, New Jersey) is being praised by elected officials in Pennsylvania and Ohio for its decision to repower more than 1,000 megawatts (MW) of coal-fired generation in those states that had been slated for closure by their previous owner. But the company is drawing a more mixed response in upstate New York, where its plan to repower an aging coal plant is being opposed by an unusual collection of environmental organizations, business interests and a distribution company with a lot to lose if that repowering goes forward.

Late last year, NRG completed its merger with GenOn Energy Incorporated (Houston, Texas), a merchant generator with power plants across the U.S. Prior to the merger, GenOn had decided to close several of its power plants, including the Avon Lake Power Station, a 753-megawatt (MW) coal and oil-fired generator in Avon Lake, Ohio; and the New Castle Power Station, a 330-MW, coal-fired generator located in West Pittsburgh, Pennsylvania. For more information on that decision, see March 1, 2012, article - New Coal-Fired Power Plant Closures Announced.

But earlier this summer, NRG reversed its predecessor's decision and said it made economic sense to keep those plants open and repower them with natural gas, David Gaier, an NRH spokesman, said in an interview. Repowering those units with natural gas avoided the need to install pollution-control equipment to comply with the U.S. Environmental Protection Agency's draft Mercury and Air Toxics Rule (MATS), which dramatically lowered allowable emissions of mercury, acid gases and toxic metals from coal-fired power plants. For more on that regulation, see May 30, 2013, article - U.S. Coal-Fired Power Plants Weigh Options for Compliance with Mercury and Air Toxic Standards.

"We're in the business of generating electricity, not closing power plants," Gaier told Industrial Info. "After the GenOn transaction closed, we took a second look and decided if there's a gas supply and the economics are right, we would move forward with repowering coal-fired generation with gas." Both Avon Lake and New Castle were slated to be deactivated by April 2015.

In late June, NRG's decision to repower Avon Lake and New Castle was welcomed by elected officials from Ohio and Pennsylvania. In a statement, Pennsylvania Governor Tom Corbett said: "I am appreciative of NRG Energy's CEO David Crane and his team for their commitment to Pennsylvania families and workers. This (repowering) announcement demonstrates the positive impact safe and responsible natural gas development is having on Pennsylvania's economy." In a separate late-June statement, U.S. Representative Marcy Kaptur (D-Ohio) said: "We're definitely excited about NRG's plans to keep the (Avon Lake) plant open and generating cleaner energy. NRG management really looked at the plant with fresh eyes. They really went over (it) with a fine-toothed comb. The market was there. Two big factors were access to low-cost natural gas and boilers that could easily be retrofitted."

NTG's Gaier cautioned that many factors have to fall into place before dirt is turned on the Avon Lake and New Castle repowering projects. "At this point, we're just at the beginning stage of what will be multi-year permitting, engineering, and construction processes," he said, adding he does not have a start date for construction or operation. Both projects have to clear a number of critical hurdles, including:

• Obtaining state environmental approval to add gas-fueling capability to the units
• Obtaining appropriate reductions in future property taxes
• Performing detailed engineering and confirming capital expenditure requirements
• Permitting and constructing natural gas supply pipelines to the stations
• Completing the boiler work to install natural gas burners

NRG's plan to invest an estimated $500 million to repower a third coal-fired generator, the Dunkirk Power Station in western New York, has received a more mixed local response. While drawing praise from the area's elected, civic, business and organized labor officials, the plan to repower the 420-MW plant also has been criticized by environmental activists and some business officials, who have cited its cost and hydraulic fracturing.

A crowd reported at nearly 2,000 turned out in mid-July to support the Dunkirk repowering plan at a public hearing organized by the New York Public Service Commission (Albany, New York), which must decide if the repowering will move forward. The Buffalo News reported the mid-July hearing drew school-age children, parents and elderly residents who came aboard buses or with the aid of a walker or wheelchair. "Their message was overwhelming and clear," the paper reported: the city of Dunkirk and Chautauqua County supported repowering.

The Buffalo News quoted Doug Champ, a Jamestown resident with a background in utility management, as telling the hearing, "This asset, if it's dismantled, will crumble Dunkirk." U.S. Rep. Tom Reed (R), another proponent of repowering Dunkirk, told the paper, "When you have a clean source like natural gas that's available to us--and it's much cleaner to burn than coal--I don't know why we don't come together, the environmentalists and us, and say this is good."

Those opposing the repowering say it could open the door to extracting natural gas by hydraulic fracturing, a practice currently prohibited in New York. "If we continue to replace all the dinosaur plants with new and improved fossil fuel plants--natural gas--we are opening up New York State to fracking," said Lisa Dix, senior New York representative for the Sierra Club. "It's replacing one dirty fuel with another."

Unusually, some segments of the business community sided with the Sierra Club, but for a different reason: Dunkirk's estimated $500 million price tag. The Business Council of New York State prefers a plan from National Grid Plc (NYSE:NGG) (Waltham, Massachusetts), a unit of National Grid (London, England), to build about $63 million of transmission projects instead of repowering Dunkirk. "We don't oppose NRG repowering Dunkirk, but we don't believe the PSC should mandate that the ratepayers become part of the financing," Gary Hughes, the Albany-based council's vice president of communications, told the Buffalo News. "We believe one of the drags on the upstate economy is the cost of power."

Gaier says that's a non-issue. "NRG would pay the entire cost of repowering Dunkirk. We'd expect to sign a long-term power-purchase contract for its output," he told Industrial Info. "A repowered Dunkirk would be the cleanest, lowest-cost and most efficient generator in New York. It would lower wholesale electric costs and back up renewables. Why import power from Canada or PJM if you can generate it in New York?"

As for National Grid's opposition to the Dunkirk repowering, that's not surprising to New York Assemblyman Andrew Goodell, a repowering supporter. He told the Buffalo News, "They make more money shipping expensive power a longer distance." Asking National Grid for its views on the Dunkirk repowering, "is like asking your trucking company what TV you should buy: the one across the road or the one across the country."

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