Coal-fired units at Montrose, Sibley targeted for possible shutdown

Great Plains Energy (NYSE: GXP) companies are signing renewable energy deals and studying retirement of certain coal units in the near future, according to plans filed with the state of Missouri.

Kansas City Power & Light (KCP&L) may retire the coal-fired Montrose Unit 1 in 2016 depending on factors like future U.S. Environmental Protection Agency emissions rules.

KCP&L said in an integrated resource plan filed April 9 at the Missouri Public Service Commission that it owns and operates a diverse generating portfolio and Power Purchase Agreements (PPA) to meet customer energy requirements. In 2011, KCP&L signed two wind energy PPAs with on-line dates in 2012. One PPA is with Duke Renewable Generation Services for the output of a 131.1 MW wind unit called Cimarron II, located in Gray County, Kan. The second PPA is with enXco for the output of a 100.8 MW wind farm named Spearville 3. This facility is adjacent to the KCP&L-owned Spearville 1 & 2 wind facilities. This will be used to fulfill a portion of KCP&L’s Missouri and Kansas Renewable Energy requirements.

Based upon current Missouri renewable energy rule requirements, the preferred IRP includes 20 MW of solar additions and 400 MW of wind additions over the 20-year planning period. It should be noted that solar and wind additions could be obtained from PPAs, purchase of renewable energy credits (RECs), or utility ownership, the plan noted.

“The retirement of 170 MW in 2016 represents Montrose Unit 1,” said the plan about the preferred option. “The environmental drivers that contributed to the Montrose Unit 1 retirement included Mercury and Air Toxics Standards Rule, Ozone National Ambient Air Quality Standards (NAAQS), PM NAAQS, Clean Water Act Section 316(a) and (b), Effluent Guidelines, and Coal Combustion Residuals Rule. These rules are currently not in effect and will be monitored by KCP&L prior to the projected retirement year 2016 to determine if the current decision to retire Montrose Unit 1 continues to be prudent.”

The IRP presents a range of options and different coal retirement planning, with some scenarios, for example, including 510 MW of coal retirements in 2016. Other scenarios call for 334 MW of coal retirements in 2016.

The preferred resource plan was not the lowest cost plan from a Net Present Value of Revenue Requirement (NPVRR) perspective. Alternative Resource Plan DBEK1 had the lowest expected NPVRR of all modeled plans. This plan included the “D” level of demand side management (DSM) which was developed to satisfy regulatory requirements. This level of demand management is not considered to be realistically achievable. The plan producing the next lowest expected value of NPVRR was chosen as the preferred plan.

The KCP&L plan, by the way, is based upon resource planning in tandem with KCP&L-Greater Missouri Operations Co. (GMO) and provides benefit to Missouri retail customers by planning on a combined company basis. Both KCP&L and GMO are units of Great Plains Energy.

KCP&L’s 2012 generating capacity breaks down as: 2,744 MW coal, 57% of capacity; 547 MW nuclear, 11% of capacity; 410 MW oil, 8% of capacity; 770 MW gas, 16% of capacity; and 380 MW wind, 8% of capacity.

GMO targets possible shutdown of two coal units

GMO also filed its latest IRP with the commission on April 9. In 2011, GMO signed a contract for a PPA with NextEra Energy for the output of a 98.9 MW wind unit named Ensign, located in Gray County, Kan. This new wind farm will be on-line by the end of 2012. This new PPA is in addition to the Gray County Wind Farm PPA with NextEra Energy which was signed in 2001 and is currently scheduled to expire in November 2016.

In addition to the new wind PPA, GMO completed its first landfill gas project in St. Joseph, Mo., in 2011. This project collects the methane from the St. Joseph city landfill and burns it in a 1.6 MW internal combustion engine. This facility along with the wind PPAs will be used to fulfill GMO’s Missouri Renewable Energy requirements for the next several years.

GMO’s 2012 generating capacity is: 1,015 MW coal, 43% of its total capacity; 75 MW nuclear, 3%; 61 MW oil, 2%; 1,062 MW gas, 45%; 159 MW wind, 7%; and 2 MW landfill gas, 0.1%.

Based upon current Missouri renewable rule requirements, the preferred plan includes 19 MW of solar additions and 350 MW of wind additions over the 20-year planning period. Solar and wind additions could be obtained from PPAs, purchasing of RECs or utility ownership.

“The retirement of 99 MW in 2017 represents Sibley Units 1 and 2,” said GMO about the preferred plan impacts on coal. “The environmental drivers that contributed to the Sibley Unit 1 and 2 retirements included Mercury and Air Toxics Standards Rule, Ozone National Ambient Air Quality Standards (NAAQS), PM NAAQS, Clean Water Act Section 316(a) and (b), Effluent Guidelines, and Coal Combustion Residuals Rule. These rules are currently not in effect and will be monitored by GMO prior to the projected retirement year 2017 to determine if the current decision to retire Sibley Units 1 and 2 continues to be prudent.”

Like in the KCP&L case, the preferred plan was not the lowest cost plan from a NPVRR perspective. There are alternative resource plans that showed a lower NPVRR. These plans include DSM levels which were developed to satisfy statutory requirements. These levels of DSM are not considered to be realistically achievable. The plan producing the next lowest expected value of NPVRR was chosen as the preferred plan.

Great Plains Energy outlines coal supply for its plants

Great Plains Energy said about coal supply in its Feb. 28 annual Form 10-K report: “During 2012, electric utility’s generating units, including jointly owned units, are projected to burn approximately 16 million tons of coal. KCP&L and GMO have entered into coal-purchase contracts with various suppliers in Wyoming’s Powder River Basin (PRB), the nation’s principal supply region of low-sulfur coal, and with local suppliers. The coal to be provided under these contracts is expected to satisfy almost all of the projected coal requirements for 2012 and approximately 95% for 2013, 70% for 2014 and 20% for 2015. The remainder of the coal requirements is expected to be fulfilled through additional contracts or spot market purchases. KCP&L and GMO have entered into coal contracts over time at higher average prices affecting coal costs for 2012 and beyond.”

The Form 10-K noted that Missouri law requires at least 2% of the electricity provided by certain utilities, including KCP&L and GMO, to come from renewable resources, increasing to 15% by 2021. Kansas law requires certain utilities, including KCP&L, to have renewable energy generation capacity equal to at least 10% of their three-year average Kansas peak retail demand, increasing to 15% by 2016 and 20% by 2020.

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.