The mayor of Newton, Ill., told the Illinois Pollution Control Board in May 14 comments that an Ameren Energy Resources (AER) application to delay two air emissions deadlines needs to be granted to save local jobs.
“I understand that Ameren has applied for a variance from the deadline you have asked them to meet regarding their air emissions,” wrote Mayor Mark Bolander. “I also understand that if this variance is not granted, the hardship this deadline will create for Ameren will be devastating for them and countless others. Ameren Corporate and three generators in Illinois will be forced to deal with the ripple effect. The three generators are Newton, Joppa and Edwards. Two of the three may have to close. While Newton is the largest and newest of the three, I am still very concerned.”
Bolander said he can only speak in support of the Newton plant, because he knows very little about the other two plants. He said approximately 50% of the town’s property taxes come from the Newton plant, with 41% of that going to the local school district.
“If the Newton Power Station shuts down, so will our schools, the City of Newton and Jasper County,” he added. “The tsunami created will be insurmountable. Please look at the big picture. … It won’ matter if we’re environmentally friendly if there’s no one left downstate to enjoy it.”
Ameren says delay needed to save coal plants, jobs
AER, a unit of Ameren Corp. (NYSE: AEE), on May 3 requested that the board grant a variance from both the 2015 and 2017 SO2 emission rate provisions of the Illinois Multi-Pollutant Standard (MPS) for five years beginning Jan. 1, 2015, and ending Dec. 31, 2019, and relief from another section for four years, beginning Jan. 1, 2017, and ending Dec. 31, 2020.
“AER requests additional time to comply with the 2015 and 2017 SO2 emission rates because, among other things, declining power market prices have resulted in an insufficient cash flow necessary to finance and maintain the construction completion schedule of flue gas desulfurization (‘FGD’) equipment at the Newton Energy Center (‘Newton FGD Project’) in time to meet those rates,” AER wrote.
“By seeking relief now, which is critical from a timing standpoint, AER will conserve cash flow and stave off draconian operational measures with the hope that stability will eventually return to the marketplace thereby allowing the completion of the Newton FGD Project,” the company added. “Absent such stability and the improvement of power prices, AER will be left with no choice but to cease operations at additional energy centers as its only other viable compliance alternative.”
A series of events over the past several months has contributed to the swift erosion of already declining power prices, AER noted. The statewide emission reduction requirements, including mostly the MPS, were adopted in anticipation of federal requirements that were subsequently vacated or remanded. Most recently, on Dec. 30, 2011, the Cross-State Air Pollution Rule (CSAPR), the replacement regulatory scheme for a judicially-reversed air rule developed by the U.S. Environmental Protection Agency, was appealed and stayed less than 48 hours before its effective date.
“Indeed, CSAPR, like the regulatory schemes before it, would have brought the surrounding region back on more equal ground with Illinois,” AER noted. “It is this action, coupled with other challenging market conditions that contributed to the collapse of power prices in 2012 to the lowest they have been in decades. Poor economic conditions resulting in low demand for power, increased natural gas supplies combined with one of the mildest winters of record resulted in a ‘perfect storm’ of events, where cash flows have dropped precipitously and financing is simply not currently available to complete the Project in time to meet the 2015 and 2017 system-wide rates.”
AER has instituted measures to conserve cash and has already ceased operation at two of its least economic facilities. In recent years it has spent nearly $1bn installing state-of-the-art FGD systems and ancillary pollution control equipment at its energy centers resulting in a drop in SO2 emissions of 79% since 1990 and 23% over the past four years. Under AER’s current MPS compliance plan, the completion of the Newton FGD Project is the next step in complying with the 2015 and 2017 MPS SO2 annual emission rates.
AER said it expects to continue various limited construction activities at Newton to the extent it can financially do so. By continuing limited construction activities, AER will be in a position to respond quickly once power market prices improve.
Two coal plants are shut, others may follow absent a regulatory break
As of 2012, AER generates electricity in Illinois at five coal-fired plants. AER owns seven coal-fired plants: Coffeen in Montgomery County, Duck Creek in Fulton County, E.D. Edwards in Peoria County, Joppa in Massac County, Hutsonville in Crawford County, Meredosia in Morgan County and Newton in Jasper County. As of January 2012, AER generates electricity at five of these facilities, having ceased operation of Meredosia and Hutsonville.
AER generally controls SO2 emissions with pollution control equipment at several facilities as well as through the use of low-sulfur coal or blending low-sulfur coal with Illinois coal containing higher levels of sulfur. Three SO2 scrubbers are in service at Duck Creek and Coffeen.
AER generally controls NOx emissions by burning various combinations of low-sulfur coal, low NOx burners, over-fired air and selective catalytic reduction systems (SCR). Particulate matter (PM) is generally controlled through the use of flue gas conditioning and electrostatic precipitators (ESPs). AER controls mercury emissions through the use of scrubbers and sorbent injection. In 2011, the Ameren MPS Group achieved an overall NOx annual emission rate of 0.11 lb/mmBtu and an overall SO2 emission rate of 0.46 lb/mmBtu.
Since the timing of the construction and installation of the two Newton FGDs was coordinated so as to allow the Ameren MPS Group to meet both the 2015 and 2017 SO2 annual emission rates, AER will not under current market conditions be able to meet either compliance date. If relief is not granted then AER will need to mothball multiple units across its coal fleet, which may include E.D. Edwards, Joppa and/or Newton units. The proposed voluntary rate that AER wants to comply with during the variance period will effectively commit AER to the cessation of operations at Hutsonville and Meredosia while maximizing FGD performance at Duck Creek and Coffeen.
“Nonetheless, AER agrees to voluntarily meet this Compliance Plan rate in spite of the associated constraints and operating requirements, to mitigate any potential negative environmental impacts resulting from the variance,” AER added. AER said it will continue to burn low-sulfur coal from the Powder River Basin and manage operations as necessary to maintain compliance. Further, consistent with cash flows, AER expects to maintain a continuous program of construction at Newton so as to be in a position to have the Newton FGD Project completed and operational to meet compliance obligations.
All major equipment components required to complete the Newton FGD Project has been procured and will be stored on site during the variance period. Assuming power prices rebound, field construction activities could take approximately 24 months to complete once the project ramps back up. Proceeding in this manner will position AER for compliance with the 2015 SO2 annual emission rate by Jan. 1, 2020, with the installation of the Newton FGDs.
Ameren says as an unregulated producer, cash can be a problem
The outlook for the next several years is no better than the recent poor market for this coal-fired power, AER said. “Financial analysts predict low natural gas prices will continue to keep margins and cash flow under pressure for most unregulated power producers. Further, as discussed previously, unlike their regulated peers, unregulated power companies do not enjoy the benefits of rate recovery assurance for capital investments. Instead, unregulated power companies can only turn to the markets to generate positive cash flow to help pay for capital investments.”
AER added: “At this time and under existing conditions, retiring at least two plants across AER’s fleet such as, for example, Joppa, E.D. Edwards, and/or Newton, would be necessary in order to maintain compliance in absence of completing the Newton FGD Project. One of the main drivers for AER’s petition for relief now is that if mothballing of facilities must occur, AER must have the necessary time to make and effectuate these critical decisions in the best possible way.”
AER is offering to meet an annual emission rate of 0.38 lb/mmBtu SO2 on a yearly system average from 2012 through 2019 (with a 0.55 lb/mmBtu or less SO2 coal used in the non-scrubbed units) that is more stringent than the existing 2012 and 2013 SO2 emission rate of 0.50 lb/mmBtu and the 2014 SO2 emission rate of 0.43 lb/mmBtu. By offering to meet this mitigation rate, the total projected SO2 emissions from the Ameren MPS Group will be lower than anticipated under the current MPS from 2012 through 2021. Therefore, AER’s Compliance Plan results in a net benefit to the environment that exceeds the little, if any, harm that would result from the grant of this variance.
AER anticipates the Newton FGD Project can be completed by Jan. 1, 2020, and the Ameren MPS Group SO2 annual emission rate will reduce to 0.25 lb/mmBtu, and then to 0.23 lb/mmBtu by the end of 2020.
AER said it worked diligently to comply with all other components of the MPS. The Illinois MPS mercury emission limit (0.008 pounds per gigawatt hour (lb/GWH)), applicable Jan. 1, 2015, is stricter than the recently adopted federal limit. The current mercury standard under the federal Mercury and Air Toxics Standards (MATS) requires existing coal-fired sources to comply with a mercury emission limit of 0.013 lb/GWH by 2015, by 2016 if granted by state permitting authorities, or by 2017 if necessary to mitigate risks to electric reliability.
AER has installed activated carbon injection (ACI) systems on 12 units at four plants to control mercury emissions at a capital cost in excess of $20m. The operating costs associated with these systems exceed $17m annually in procurement of expensive activated carbon and fuel additives commodities.
Four SCRs and three wet FGD systems have been installed on AER units to control mercury as well as NOx and SO2. Ameren spent $813m installing the three wet FGD systems and spends about $3.5m annually in operating and maintenance costs. Capital costs for installing the SCRs totaled $177m and operating and maintenance costs for the SCRs amount to about $3.9m per year.