Duke Energy Indiana looks to new coal to save old Wabash River coal unit

Duke Energy Indiana is working to save Wabash River Unit 6 through use of low-sulfur coal, perhaps from the Powder River Basin, while the coal-fired Units 2-5 at the plant are pretty definitely headed for retirement at some point in the fairly near future, said utility President Doug Esamann.

Esamann talked about coal retirement possibilities March 20 on the sidelines of Energy Central’s EnergyBiz Leadership Forum. He said a combination of age and new U.S. Environmental Protection Agency emissions rules are forcing a number of coal retirements. Like the last three conventional coal units at the Edwardsport plant, totaling about 160 MW of capacity, that were shut last year and are currently being dismantled. The company retired the coal-fired Gallagher Units 1 and 3, representing 280 MW, on Feb. 1.

Five units at Wabash River are in danger, but because Unit 6 is newer, Duke Energy Indiana may be able to save it, at least for the time being, with a combination of low-sulfur coal and low-capital-investment dry sorbent injection techynology. Wabash River, traditionally fired by Indiana coal from fairly nearby mines, does have rail capability, so low-sulfur coals from more distant locations can be brought in through existing facilities, Esamann noted.

Wabash River is a six-unit station that was completed between 1953 and 1968. It is also the site of the 260-MW Wabash River Coal Gasification Repowering Project, owned by Wabash Valley Power Association and operated by Duke. The coal retirement considerations for the Wabash River plant don’t extend to the gasification unit, Esamann noted, since that is a relatively new facility from the 1990s and owned by the association.

Esamann added that chlorine, which usually isn’t considered a problem with Indiana coals, has become increasingly a concern, even among Indiana coals. That is due to potential corrosion and chemical reaction problems related to back-end air emissions controls. So chlorine content will be a key discussion point with coal suppliers going forward.

In the meantime, the new, 618-MW Edwardsport integrated gasification combined cycle plant is getting ready for full operation in September. One gas turbine at the plant started up the week of March 12 and another was due to fire up during the week of March 19, Esamann said. He noted that Peabody Energy’s (NYSE:BTU) Bear Run strip mine in Indiana is a prime supplier to the new IGCC. Among other things, Duke Energy Indiana liked the low chlorine content of the Bear Run coal, Esamann said.

A short-run problem is that a combination of a warm winter and cheap natural gas prices will likely drive down Duke Energy Indiana’s coal burn in 2012. In an ongoing fuel adjustment clause case at the Indiana Utility Regulatory Commission, the company said that for the months of December and January, its Indiana coal-fired stations consumed about 45% and 40% less coal than consumed during the same two-month period in 2009 and 2010, respectively. The company is forecasting that the annual coal burns for Indiana in 2012 will be as much as 40% lower than the coal burns for calendar year 2011.

In 2011, Duke Energy Indiana consumed more than 12.9 million tons of coal. As late as early November 2011, the company projected coal burns for 2012 to be in excess of 13 million tons, and the company had placed a large majority of this coal under contract for delivery in 2012, as is typical.

Duke Energy Indiana told the URC it is also implementing a decrement to coal pricing inputs used to formulate supply offers to Midwest ISO. Esamann said the decrement method is currently being used and has been successful in helping with the dispatch of coal-fired units that might not run otherwise. A decrement is complicated, but essentially it allows the utility to debit its costs to not run a unit, like coal contract buyout costs, when it bids capacity to MISO, thus allowing the plant to dispatch when the normal, undebited offer prices would be too high when it comes to dispatch.

Esamann said that parties to the FAC cases at the commission have agreed to wait until the next FAC proceeding to address the decrement usage issue. He noted that the commission has approved the decrement concept in the past.

Duke Energy Indiana is a unit of Duke Energy (NYSE:DUK), which said about system-wide coal retirements in its Feb. 28 annual Form 10-K report: “Duke Energy Carolinas, Duke Energy Indiana, Duke Energy Ohio and Duke Energy Kentucky each periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (15-20 years), and options being considered to meet those needs. The IRP’s filed by Duke Energy Carolinas, Duke Energy Indiana, Duke Energy Ohio and Duke Energy Kentucky in 2011 and 2010 included planning assumptions to potentially retire, by 2015, certain coal-fired generating facilities in North Carolina, South Carolina, Indiana, Ohio and Kentucky that do not have the requisite emission control equipment, primarily to meet EPA regulations that are not yet effective. These facilities total approximately 3,300 MW at eight sites (Dan River, Riverbend, Lee, Buck units 5 and 6, Wabash River, Gallagher, Beckjord and Miami Fort unit 6). Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives, and plans to seek regulatory recovery for amounts that would not be otherwise recovered when any assets are retired.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.