The coal-fired Dunkirk plant in New York has gotten a little extra life after authorities offered a deal to keep the plant running while changes were made to the regional power grid to compensate for this loss of this capacity.
On March 14, Dunkirk Power LLC filed a notice with the New York Department of Public Service, or DPS, of its intent to mothball Dunkirk no later than Sept. 10, 2012, Dunkirk Power parent NRG Energy (NYSE: NRG) noted in a Nov. 2 Form 10-Q filing at the SEC. “The effects of the mothball on electric system reliability were reviewed by Niagara Mohawk Power Corporation, d/b/a National Grid, or NG,” the filing added. “As a result of those studies, NG determined that the mothball of the Dunkirk Station would have a negative impact on the reliability of the New York transmission system and that portions of the Dunkirk Station may be retained for reliability purposes via a non-market compensation arrangement.”
On July 12, Dunkirk Power filed a Reliability Must Run, or RMR, agreement, with the FERC. On July 20, NG and Dunkirk Power agreed on the material terms for a bilateral reliability support services, or RSS, agreement and submitted those terms to the New York Public Service Commission for rate recovery in NG’s rates. On August 16, the NYPSC approved terms and on Aug. 27, Dunkirk Power and NG entered into the RSS agreement that began on Sept. 1. “Dunkirk Power has requested that the FERC defer consideration of its RMR agreement until the NYPSC appeal period with respect to the order approving the agreement terms has run,” the filing added.
The Dunkirk units are located in Dunkirk, N.Y., and are interconnected to the National Grid system in the New York ISO‘s Zone A. The unit nameplate capacities are: Units 1-2, 100 MW apiece; and Units 3-4, 217.6 MW apiece.
NRG reduces estimate of coal-fired emissions spend
NRG has several coal-fired plants that may have emissions control needs. “Based on current rules, technology and plans as well as preliminary plans based on proposed rules, NRG has estimated that environmental capital expenditures from 2012 through 2016 to meet NRG’s regulatory environmental commitments will be approximately $440 million,” the Form 10-Q said. “These costs are primarily associated with mercury controls to satisfy the Mercury and Air Toxics Standards, or MATS, on the Company’s Big Cajun II, W.A. Parish and Limestone facilities and a number of intake modification projects across the fleet under state or proposed federal 316(b) rules. The change from our previous estimate of $553 million reflects a decrease in costs related to changes in technology related to MATS compliance, completing projects below budget, and shifts in compliance schedules based on regulatory changes.”
NRG said it continues to explore cost effective compliance alternatives to reduce costs. “While this estimate reflects anticipated schedules and controls related to the proposed 316(b) Rule (the EPA pushed back the final 316(b) rule from July 2012 to July 2013), the full impact on the scope and timing of environmental retrofits from any new or revised regulations cannot be determined until these rules are final and any legal challenges are reviewed,” it added. “However, NRG believes it is positioned to meet more stringent environmental regulations through its planned capital expenditures, existing controls, and increasing generation from renewable resources.”
NRG’s current contracts with its rural electric cooperative customers in the South Central region allow for recovery of a portion of the region’s environmental capital costs incurred as the result of complying with environmental laws. Cost recoveries begin once the environmental equipment becomes operational and include a capital return, NRG noted. The actual recoveries will depend, among other things, on the timing of the completion of the projects and the remaining duration of the contracts.
NRG readies new gas-fired unit to support Parish CO2 project
In another clean-air area, on May 3, NRG entered into a financing arrangement in the form of a $54m tax-exempt bond financing. The proceeds of the bonds will be used in the construction of a peaking unit at the W.A. Parish coal plant in Texas, with one or more components of a commercial scale carbon capture, utilization and storage system, or CCUS, which is sponsored in part by the U.S. Department of Energy.
In preparation for construction, NRG, through its wholly owned subsidiary, Petra Nova Power I LLC, or PNP, acquired a gas turbine in late June. On Aug. 14, PNP entered into an EPC agreement for the construction of the 75-MW peaking unit (prior to its use as a cogeneration facility to provide steam and power to the CCUS) on a turnkey basis and anticipates a commercial operations date during the second quarter of 2013.
Construction of the CCUS is intended to allow NRG, through wholly-owned subsidiary Petra Nova LLC, to utilize the captured CO2 for enhanced oil recovery in oil fields on the Texas Gulf Coast. During the third quarter of 2012, the draft Environmental Impact Statement was filed with the U.S. EPA, which issued a Notice of Availability on Sept. 21, marking the beginning of the 45-day public comment period required under the National Environmental Policy Act.
NRG would design and construct a system that would capture at least 90% of the CO2 in an up to 250-MW equivalent (MWe) flue gas slipstream of the combustion exhaust gases from the existing 650-MW coal-fired Unit 8 at W.A. Parish, located in Fort Bend County, Texas. The captured CO2 (up to 5,475 tons per day) would be transported about 80 miles in a new pipeline to be constructed by NRG. The CO2 would be used for EOR and ultimately sequestered at the existing West Ranch oil field in Jackson County, Texas.