The conversion of the coal-fired Flint Creek power plant into a very inefficient gas-fired plant is not a practical option for plant co-owners Southwestern Electric Power (SWEPCO) and Arkansas Electric Cooperative (AECC), said official Andrew Lachowsky.
Testimony from Lachowsky was one of several filings Sept. 21 by SWEPCO and AECC at the Arkansas Public Service Commission in support of an application for new emissions controls on Flint Creek. Lachowsky was commenting on specific issues raised in the surrebuttal testimony of consultant Richard Hahn, who testified on behalf of the commission General Staff, and in the surrebuttal testimony of Kevin Woodruff on behalf of the state Attorney General (AG).
SWEPCO, a unit of American Electric Power (NYSE: AEP), and AECC asked the commission in February for a declaratory order approving installation of $408.7m worth of new controls on Flint Creek. They include: dry flue gas desulfurization (DFGD) equipment for SO2 control; activated carbon injection (ACI) for mercury; and low NOx burners and over-fired air for NOx control. The DFGD system will also include a pulse jet fabric filter, commonly called a baghouse. Flint Creek is a single-unit, pulverized coal plant with a net capacity of 528 MW and was placed in service in 1978. SWEPCO’s ownership portion of this unit is 264 MW net, and it is responsible for operating and maintaining the plant.
For one thing, Lachowsky in the Sept. 11 filing responded to a Hahn contention that AECC did not consider the acquisition of an existing natural gas combined cycle (NGCC) plant or additional wind resources as specific alternatives to retrofitting Flint Creek. “This comment is misleading at best, and, at worst, illustrates what appears to be a bias against adding scrubbers at Flint Creek,” wrote Lachowsky. “In all additional analyses shown by AECC, the purchase of the Hot Spring generating facility (‘Hot Spring plant’), an existing natural gas combined cycle (‘NGCC’) plant, has been included, which constitutes the acquisition suggested by Mr. Hahn. That transaction closed on September 10, 2012, and the plant is now a part of AECC’s generation mix. In scenarios where Flint Creek is retired, capacity from the Hot Spring plant serves as an alternative to Flint Creek with AECC not adding any additional capacity until 2020.”
The Hot Spring facility that AECC bought, by the way, is a nominal 746-MW, natural gas-fired, 2×1 combined cycle station. It is located about three miles north of Malvern, in Hot Spring County, Ark.
The comment that AECC did not consider additional wind resources as an alternative to Flint Creek is inaccurate, Lachowsky added. “My rebuttal testimony included three options with additional wind power purchase agreements (‘PPAs’), with option 1, the conversion of Flint Creek to burn natural gas, showing 230 MW of wind, and with options 2 and 3 showing 95 MW of additional wind. Mr. Hahn appears to advocate adding wind only in cases where Flint Creek is not retrofitted. Given the pricing and characteristics specified by Mr. Hahn to specifically model, which I incorporated into my analyses, the use of wind resources was feasible regardless of whether Flint Creek was retrofitted. Mr. Hahn’s approach to wind clearly biases the results against the Flint Creek retrofit because he includes a wind PPA that is feasible but in reality may not even be available, and only includes it if Flint Creek is not retrofitted.”
Another Hahn suggestion was the conversion of Flint Creek to burn gas, which is the most costly, in the long term, of the options modeled by AECC, Lachowsky noted. “Mr. Hahn points out that gas conversion ‘has the lowest capital requirement and the greatest flexibility and optionality,’ Mr. Hahn’s great emphasis on flexibility and optionality is misplaced, particularly given these factors are short term in nature. Emphasis on these factors in resource planning would lead AECC to procure all future resources through short term PPAs, as short term PPAs have no capital requirement and, given their short-term nature, provide great flexibility and optionality.”
Lachowsky added: “Said another way, if the primary decisional driver is to consider only the short term, upfront costs, there would be no need for or benefit to long-term utility planning, in which utility management has a statutory obligation to actively engage as a means to provide safe reliable power at the lowest reasonable cost. Conversion of Flint Creek to burn natural gas, as Mr. Hahn recommends, might seem attractive in the short term, but would actually be much less beneficial to AECC and its member cooperatives (‘Members’) in the long term, particularly given the inefficiency of a converted Flint Creek, as outlined in AECC Witness Curtis Warner’s sur-surrebuttal testimony. To clearly highlight this point, had Flint Creek burned gas instead of coal from 2000 through 2011, assuming its energy production was unchanged, the additional fuel cost to AECC and its Members would have been approximately one billion dollars more during the last 12 years alone.”
SWEPCO representative Judah Rose said in Sept. 21 testimony that Hahn has suggested SWEPCO should consider three natural gas/wind hybrid options in addition to the retrofit of Flint Creek: conversion of Flint Creek to a steam gas plant, construction of a new NGCC on site, and purchase of an existing natural gas-fired combined cycle in Oklahoma. The three natural gas/wind options each have purchases of either 95 MW or 230 MW of wind generation capacity. The natural gas/wind hybrid options are structured so that the total annual energy production of each natural gas/wind option approximately equals that of the Flint Creek coal plant.
Rose said he doesn’t agree with these ideas. “My conclusion is the exact opposite regarding the natural gas conversion option, namely it is the worst option,” he added. “This is because it is such an expensive option and carries huge risks. As shown in my direct testimony (see Exhibit I), the natural gas conversion option is by far the most costly option. In my Base Case analysis, the natural gas conversion option costs $562 million more on a present value basis in 2010 dollars (or $590 million more in current dollars) than the Flint Creek retrofit. In the High Natural Gas Price Case, the natural gas conversion option costs $934 million (2010$) more than the retrofit option (or $981 million more in current dollars). There is no scenario among those I examined in which the natural gas conversion is not the option with the highest costs. This covers 13 cases, seven of which are in Exhibit 1 and six others are described elsewhere in my Direct Testimony. In light of the extent of the difference in results, it appears that more than just alternative natural gas and CO2 allowance price assumptions account for the difference.”