Under the revised “Power Block First” proposal for the Taylorville Energy Center (TEC), project developer Tenaska said May 16 that Illinois electricity customers could save an estimated $437.7m over a 20-year period, including more than $250.6m in the plant’s first five years of operation.
That is according to a rate impact analysis conducted by Pace Global LLC, a Siemens business. As TEC’s power capacity is bid into the PJM auction (Commonwealth Edison is the grid operator) in future years, hundreds of millions of dollars in additional savings for ComEd customers could also be realized because of lower resulting auction prices.
TEC is a coal gasification power project planned for Christian County, Ill. Opponents of the project, including ComEd parent Exelon (NYSE: EXC), have claimed that power from the plant would be too expensive over time.
Using U.S. Energy Information Administration (EIA) forecasts of natural gas and power prices, and electricity demand growth, Pace Global found that adding TEC’s power into the Illinois energy markets would reduce average bills of electricity customers by $21.9m annually over the first 20 years of the project. During the plant’s first five years of operation, customers can expect $50.1m in average annual savings, Tenaska said.
As the transmission grid operator serving the ComEd service territory, PJM holds an annual auction for generating capacity contracts that begin three years into the future. Largely because of closures of existing coal plants in the region, auction prices rose 354% last year and are expected to rise further when auction results for this year are announced shortly, Tenaska said. Bidding supply from TEC into that auction is expected to result in lower auction prices and potentially hundreds of millions of dollars in annual savings for ComEd customers.
Change would feature first build of natural gas-fired capacity
The revised proposal would authorize construction of the initial stage of TEC, an efficient 611-MW, natural gas-fueled combined-cycle plant that would be equipped to accept substitute natural gas (SNG) from a potential future coal gasification unit. This first phase of the project provides additional generating capacity at a time when the market is most in need because of coal plant closures, said Tenaska. Should market conditions improve and the Illinois General Assembly approve, the second phase of the project incorporating coal gasification with carbon capture and storage could proceed.
“The ‘Power Block First’ plan allows Illinois to take advantage of today’s low natural gas prices to build a necessary new source of electric power resulting in lower overall rates,” said Tenaska Vice President Bart Ford. “In the future, when economics favor the use of Illinois coal, equipment can be added to convert coal to clean SNG, capture carbon dioxide and provide for geologic storage.”
Tenaska said an amendment to SB 678, which provides legislative authorization for the construction of TEC as well as initiatives for expanded energy efficiency and distributed generation, continue to earn the strong support of a broad coalition of labor, business, environmental and community interests, including the state’s leading consumer advocates, the Citizens Utility Board and Attorney General Lisa Madigan. SB 678 was approved by the Illinois Senate in 2011 and is pending in the House.
Tenaska said this new approach of natural gas first and coal gasification later, allows Illinois to receive the immediate benefits of additional electric generation capacity, jobs and economic benefits. It also allows Tenaska to preserve the air permit and interconnection position for the initial natural gas-fueled power plant. The ability to proceed with the SNG portion of the plant is preserved for Illinois consumers as a hedge against the possibility of rising gas prices.
Nationally, closings of 319 coal-fueled generating units totaling 42,895 MW – enough to power 30 million homes – have been announced, according to the Sierra Club and the Institute for Energy Research. The Illinois Power Agency has estimated that 40% of the coal capacity in Illinois may shut down because of new emissions rules, Tenaska noted. This decrease in the supply of electricity will force electricity prices and capacity prices to go up if adequate efficient replacement capacity is not built.
Tenaska is one of the largest independent power producers in the U.S. Tenaska has developed approximately 9,000 MW of electric generating capacity across the United States. Tenaska affiliates currently operate and manage eight power plants totaling more than 6,700 MW that it owns in partnership with other companies.