ICF: Flint Creek coal retrofits cheaper than gas-fired alternatives

The retrofit of the Flint Creek coal plant with flue gas desulfurization (FGD) and other emissions controls is the most economic option for Southwestern Electric Power (SWEPCO), in the base case projection saving between $321m and $562m on a present value basis in real 2010 dollars.

“The Flint Creek FGD retrofit option is preferred in all scenarios, has lower annual volatility, and is consistent with the plant’s size and age characteristics,” wrote Judah Rose, Managing Director of consultant ICF International. Testimony from Rose was filed June 7 with the Arkansas Public Service Commission on behalf of SWEPCO, a unit of American Electric Power (NYSE: AEP). SWEPCO in February filed the original application for approval of these projects.

Because most new plants are natural gas‐fueled and incremental supply from the SPP wholesale market is natural gas‐based in most hours, the retrofitting of Flint Creek is likely one of the few options for preventing even faster growth in SWEPCO’s reliance on higher priced and more volatile natural gas, Rose added. “Thus, the option provides diversification resulting in decreased reliance on natural gas for incremental supply.”

SWEPCO jointly owns Flint Creek together with the Arkansas Electric Cooperative Corp. (AECC), with each company owning a 50% share. The plant’s current total capacity is 528 MW, though the environmental controls would reduce that to about 517 MW. The plant has been operating since 1978 and burns coal produced in Wyoming’s Powder River Basin and delivered via railroad. The environmental controls are scheduled to come on‐line by 2016.

ICF analyzed five options for the Flint Creek plant and the SWEPCO system, Rose noted. The first two involve continued coal use, and the other three involve replacement natural gas generation. In the options in which Flint Creek continues to operate, the plant is assumed to install environmental controls including a scrubber (FGD), a fabric filter (FF), activated carbon injection (ACI), and low NOx burners with over‐fired air (LNB/OFA). The proposed retrofits also include upgrades to the coal combustion residue handling and disposal systems. The plant is also assumed to add a NOx selective catalytic reduction (SCR) system coming on line either in 2020 (Option #1), or in 2016 (Option #2).

The total cost of the environmental investment in 2010 real dollars for the entire plant is about $601m or $1,162/kW assuming SCR on line in 2020. Also, potential future CO2 regulations are assumed to occur. Thus, the analysis ensures a comprehensive treatment of any future environmental costs by including extra (non‐FGD) environmental costs associated with potential future requirements.

Three natural gas generation options were considered: a new 528 MW combined cycle, located on the same site, i.e., the brownfield option (Option #3); a new 528 MW combined cycle plant built remote from the plant site (within SPP) and augmented with electricity transmission upgrades to deliver the power to the northern section of SWEPCO’s territory in which Flint Creek is located, i.e., the greenfield option (Option #4); and conversion of the existing plant to use natural gas (Option #5).

In (Options #3 and #5), these plants are assumed to be subject to Reliability Must Run (RMR) requirements for a portion of the year in response to concerns about local power supply shortages. In other words, the plant is assumed to have a minimum operational level due to transmission limitations in the area that require the operation of the plant at least at partial load levels in certain periods of the year, even if the economics would otherwise indicate the plant should not operate, Rose explained. “Thus, the benefit of the greenfield option is that the transmission upgrades obviate the need for the natural gas plant to operate when it is otherwise not economic. However, there are additional transmission costs associated with this option and increased costs associated with using a new site.”

Among the three gas options, the preferred one is the brownfield natural gas combined cycle due to its lower capital cost. The next most preferred natural gas option is the new greenfield combined cycle which lacks the capital cost discount of the brownfield combined cycle associated with use of existing transmission and other on‐site equipment. The operational flexibility of the greenfield plant, which decreases the hours of forced operation (i.e., no RMR), does not offset the higher capital costs, Rose wrote.

Despite having the lowest capital cost at $329/kW (2010$), the natural gas conversion option is the least attractive. The conversion option has very high variable costs because the thermal efficiency for the gas conversion option is much lower at 33% as compared with 48% for a new combined cycle at full load.

While the past is not necessarily an indicator of the future, in 2010, the SPP combined cycle average dispatch was only 38%, Rose said. In ICF’s modeling, the strong competitiveness of coal power plants in eastern SPP and the premium in natural gas pricing in Arkansas relative to other SPP regions (due in large part to an approximately 2.75% fuel tax for combined cycle plants), results in a projected capacity factor over the 2016 to 2045 period of 82% for the Flint Creek plant using coal, and 24% for the new greenfield combined cycle. “Thus, not only is the capital cost of the combined cycle higher, but the capital costs of the natural gas options are amortized over less output, decreasing their economic attractiveness,” he added.

ICF also compared Flint Creek with other U.S. coal plants, with Flint Creek found to be younger and larger than the U.S. fleet average. This favors a longer than average remaining useful life for Flint Creek and a higher degree of suitability for retrofit, Rose noted. ICF also reviewed the history of retrofits of similar equipment and found many similarly aged and situated units adding the same controls. ICF also reviewed announced retirements of coal power plants and found that retiring coal plants are generally smaller and older than Flint Creek.

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.