A study of the costs and impacts of shutting its Meramec coal plant are all that it needs to do right now to prepare for the worst case of issued and impending U.S. Environmental Protection Agency regulations, said Matt Michels, the Managing Supervisor, Resource Planning at Ameren Services Co.
Michels testimony was filed Nov. 30 at the Missouri Public Service Commission as part of the commission’s review of the integrated resource plan that Ameren Missouri, a unit of Ameren (NYSE:AEE), filed in February. Ameren Missouri is also known as Union Electric. The case got a Dec. 15-16 hearing and was still open as of Dec. 21. The Michels testimony was a response to criticism leveled against the plan by various parties, including environmental groups.
“Many of the environmental regulations proposed in recent years were still under review and revision at the time the Company conducted its IRP analysis, and many of those are not yet finalized,” Michels noted. “The Company sought to begin its evaluation of the impact of these regulations by focusing on the Meramec plant for several reasons. It is the oldest coal plant in Ameren Missouri’s fleet, it is less efficient than the Company’s other coal plants, and it carries a higher marginal operating cost than the other unscrubbed coal plants in the Company’s fleet.”
Since the other unscrubbed plants exhibit cost and performance characteristics that are better than those of Meramec, it is logical to rely on a thorough analysis of Meramec as a test case for the other plants, Michels added. “The Company’s analysis showed that under the aggressive environmental scenario the cost results for Meramec represented a virtual toss-up when evaluating pollution control retrofits, conversion to gas-fired boiler operation, and retirement.”
The basis for indicating retirement of Meramec under aggressive environmental regulation was based on factors other than cost, which did not provide a clear distinction between the options evaluated. “These factors included portfolio diversity and environmental attributes that favored retirement of the plant,” Michels said. “Further applying these same factors to other plants, even if the cost analysis results yielded similar conclusions, would not likely result in a decision to retire since such decisions would be made from a different starting point – specifically from the starting point of a fleet that did not include the Meramec plant.”
Ameren Missouri has conducted a thorough evaluation of major options for Meramec and has used a thorough condition assessment analysis performed by Burns and McDonnell to specifically evaluate the long-term viability of the plant in a way that incorporates all the considerations included in the IRP, which cannot be, and was not, performed in conjunction with a Black and Veatch life expectancy study.
Ameren Missouri has four coal plants with these summer net dependable power ratings: Labadie (2,407 MW), Rush Island (1,204 MW), Sioux (986 MW) and Meramec (839 MW). Meramec is located in South St. Louis County on the Mississippi River and began operation in 1953.
In its IRP modeling, Ameren Missouri included 2022 and 2042 retirement cases for Meramec as well as a 2015 retirement case in the integration analysis. In the risk analysis, due to uncertainties around environmental regulations, a new retirement date of 2016 was introduced.
Ameren eyes combined cycle conversions
A witness from an environmental group has contended that the company should fully evaluate the technical and economic feasibility of converting gas-fired CTG units at Audrain, Goose Creek, Pinckneyville and Kinmundy to combined cycle operation. “The Company has evaluated several options for combined cycle resources, including conversion of its Venice CTG units,” Michels responded. “The IRP analysis has shown that combined cycle generators are very competitive resource options regardless of whether they are new or based on conversion of existing CTG’s. As there is no reasonable constraint on the number of new combined cycle units the Company could pursue, considering conversions that, based on the analysis of Venice conversion, would result in essentially the same impact on total costs adds nothing to the IRP analysis or conclusions.”
Michels also explained why Ameren Missouri included CTG resources with wind for evaluation as a supply side resource. “This was done to ensure reliability while adding reasonable amounts of wind capacity,” he said. “Part of constructing alternative resource plans is ensuring that the plans meet reliability requirements. This is done by adding resources to ensure that peak load and reserve requirements are met without undue reliance on the market to make up shortages in the Company’s capacity position in the form of capacity purchases or absorb long positions in the form of capacity sales.”
In establishing its criteria for resource additions, Ameren Missouri decided that it would add supply resources when the capacity shortfall would exceed half the capacity of the supply resource being evaluated or 500 MW, whichever is less. The other supply side resources evaluated ranged in size from 346 MW (Simple Cycle CTGs) to 834 MW (Meramec Combined Cycle Conversion). The options included in the final candidate resource plans ranged from 346 MW to 600 MW (Greenfield Combined Cycle CTGs).
“At the time the Company performed its analysis, MISO credited wind generation at 8% of its nameplate rating,” Michels added. “This means that to provide 400 MW of regulatory capacity for resource adequacy in MISO, the Company would need 5,000 MW of nameplate wind capacity. To avoid assuming such an enormous amount of wind capacity, Ameren Missouri decided to model only 800 MW of wind. As this would provide only 64 MW of regulatory capacity, other supply side resources would be needed to satisfy the peak load and reserve requirements. Of the other supply side resources considered, simple cycle CTGs provide capacity at the lowest capital cost. Therefore, the remaining shortfall was covered with 346 MW of simple cycle CTGs.”