Two Ohio-based power generators have announced plans to build, site and operate a new 873-MW natural gas peaking plant in Eastlake, Ohio.
FirstEnergy (NYSE: FE) and American Municipal Power (AMP) said Nov. 8 that they have entered into a non-binding memorandum of understanding (MOU) to build the gas-fueled facility on the grounds of FirstEnergy’s existing Eastlake plant.
Under the MOU, FirstEnergy would supervise construction of the four combustion turbine units. AMP will provide the construction financing and own 75% of the generation output upon completion, while FirstEnergy will fund and own the remaining 25% of the output in 2016. Plans call for the facility to be operational in early 2016.
Plant construction is expected to begin in the latter half of 2014 and will take 15-to-20 months to complete. It is expected that up to 150 temporary construction jobs will be created for this project.
Adding new generation is expected to reduce or extend the timeframe for some of the previously announced transmission projects planned by FirstEnergy by alternatively addressing reliability concerns resulting from coal plants being retired due to new U.S. Environmental Protection Agency rules.
“This project is expected to reduce our estimated transmission spending for projects related to plant deactivations by about $200 million through 2016,” said FirstEnergy Executive Vice President and CFO Mark Clark. “Our estimated transmission spend could then be in the $500 to $700 million range, with approximately $150 million of that total to be incurred in 2013.”
AMP participation breathes new life into Eastlake gas plan
FirstEnergy has previously been interested in developing a gas power generation facility at Eastlake by itself. But FirstEnergy said in August regulatory filings that it suffered a setback when the Eastlake gas proposal failed to clear the May PJM capacity auction.
But with American Municipal Power taking a 75% ownership position the project became more doable, a FirstEnergy official said. FirstEnergy had not gone as far as applying for regulatory permits, the spokesperson told GenerationHub.
The project would support AMP’s updated 2014-2038 long-term power supply modeling, which shows need for significant peaking generation.
“The Eastlake peaking project has the added benefit of helping to alleviate concerns AMP has about future capacity cost increases resulting from PJM’s proposed formation of a new Locational Deliverability Area (LDA) covering the greater Cleveland area beginning with the 2016-17 Reliability Pricing Model (RPM) auction,” AMP President/CEO Marc Gerken said in a statement.
“LDAs are established by PJM in areas where there is limited transmission capability to import capacity to satisfy reliability requirements. FE’s efforts to upgrade transmission around Cleveland combined with the Eastlake project should help to mitigate future constraints and higher capacity market prices in the area,” Gerken went on to say.
In 2011, AMP purchased the Fremont Energy Center, a 707-MW natural gas, combined cycle facility in Fremont, Ohio, from FE. “FE has been a good partner for AMP,” Gerken said. “FE has proven construction oversight experience and a successful operational track record,” said the AMP CEO.
Earlier this year, FirstEnergy announced that nine older, coal plants, including Eastlake, would be deactivated as a result of EPA’s new Mercury and Air Toxics Standards (MATS) and other environmental regulations.
A FirstEnergy spokesperson said two Eastlake coal units were deactivated in September and three other units remain in service only for reliability must run (RMR) purposes.
FirstEnergy’s Eastlake station property includes about 167 acres along the shore of Lake Erie, said the company spokesperson.
Akron-based FirstEnergy is a publicly-traded energy company serving customers in Maryland, Ohio, Pennsylvania, New Jersey, New York and West Virginia. Its generation subsidiaries control more than 20,000 MW of capacity.
Columbus-based American Municipal Power is a nonprofit organization that supplies wholesale power supply for municipal electric systems. AMP serves 129 members – 128 member municipal electric communities in the states of Ohio, Pennsylvania, Michigan, Virginia, Kentucky and West Virginia, as well as the Delaware Municipal Electric Corporation, a joint action agency headquartered in Smyrna, Del.