Wisconsin Electric completes new air controls at Oak Creek

New flue gas desulfurization (FGD) and selective catalytic reduction (SCR) installations on the coal-fired Oak Creek Units 7-8 were placed into commercial operation on Sept. 4, said Wisconsin Electric Power parent Wisconsin Energy (NYSE: WEC) in a Nov. 2 Form 10-Q quarterly report.

In July 2008, the utility received approval from the Wisconsin Public Service Commission granting Wisconsin Electric authority to construct wet FGD and SCR facilities at Oak Creek Units 5-8. Construction of these emission controls began in late July 2008. In March, the wet FGD and SCR equipment for Units 5-6 was placed into commercial operation. On Sept. 4, the equipment for Units 7-8 went commercial operation. The final cost of completing this project is about $740m ($900m including allowance for funds used during construction).

Said company Chairman, CEO and President Gale Klappa about the Oak Creek projects during an Oct. 31 earnings call: “The wet scrubbers and the selective catalytic reduction equipment are operational now and delivering the emission reductions that we had expected. We’re completing punch list items and final tuning and testing, as well as demolition of the old chimneys at the site. Demolition of the chimneys and a few remaining project items are expected to be completed in the third quarter of next year.”

Two new Oak Creek units, called Elm Road and each having 615 MW of capacity, were designed and permitted to use bituminous coal from the eastern U.S. rather than sub-bituminous coal, which is routinely used in the existing Oak Creek units that just got retrofitted. “Market forces have resulted in a significant price differential between bituminous and sub-bituminous coals,” the Form 10-Q noted. “We have applied for a new air permit from the [Wisconsin Department of Natural Resources] to modify the Oak Creek expansion units for potential future use of sub-bituminous coal. Upon receiving an air permit, we intend to begin testing sub-bituminous coal in various combinations with bituminous coal to identify any equipment limitations that should be considered prior to filing with the PSCW for a Certificate of Authority to make the fuel flexibility modifications.”

Allen Leverett, President and Chief Executive of WE Generation, fielded a question during the Oct. 31 earnings call about new coal blending facilities planned for Elm Road and what kinds of coal blends would be used. He said that the long-term goal is to be able to burn any combination from 100% bituminous to 100% Powder River Basin (PRB). “[B]ut I think realistically probably the highest we’re going to get on PRB for a while would be 80% PRB,” he said. “But we will have to do a lot of testing in order to figure out what’s the best approach and what are the hurdles that we will have to overcome to get to that 80% level. So I think for the next few years, I think that’s probably from a practical standpoint the cap on what we could burn in terms of PRB, but longer-term we would like the flexibility to go to 100%.”

Presque Isle and Valley plants taken to the mat by MATS

In December 2011, the EPA issued the final Mercury and Air Toxics Standards (MATS) rule. “While we are continuing to evaluate the impact of the rule on the operation of our existing coal-fired generation facilities, as well as alternatives for complying with the rule, we currently estimate our capital cost to comply with this rule will be approximately $8 million to $12.5 million,” said the Form 10-Q. “Based upon our review of the rules and plans to convert the [Valley power plant] from coal to natural gas fuel, we currently anticipate that only the Presque Isle Power Plant will require modifications. We believe that our clean air strategy, including the environmental upgrades that have been constructed and that are currently under construction at our other coal-fired plants, positions those other plants well to meet the rule’s requirements.”

As for the EPA’s Cross-State Air Pollution Rule (CSAPR), in February the agency issued final technical revisions to the rule and issued a draft final rule which together delay the implementation date for certain penalty provisions that could potentially impact the Presque Isle plant and increase the number of allowances issued to the states of Michigan and Wisconsin. “Even with these proposed revisions, however, the Presque Isle Power Plant may not have been allocated sufficient allowances to meet its obligations to operate and provide stability to the transmission system in the Upper Peninsula of Michigan,” the Form 10-Q added. “This situation could then put the plant at risk for certain penalties under the rule.

CSAPR was scheduled to become effective Jan. 1, 2012. However, Wisconsin Electric and a number of other parties sought judicial review of the rule, and on Aug. 21 the U.S. Court of Appeals for the D.C. Circuit vacated it. The EPA has requested the court to re-hear the case.

During the Oct. 31 earnings call, Klappa said Wisconsin Electric may be nearing success with a joint venture with Wolverine Power Supply Cooperative to save the Presque Isle plant from shutdown as soon as 2017 due to clean-air needs. “We are close now to signing a joint venture agreement with Wolverine Power Cooperative for environmental upgrades at the Presque Isle units and potential joint ownership of the plant,” he said. “Under this proposed agreement, Wolverine would pay for the environmental upgrades and receive an ownership interest in the facility. Preliminary work has continued on this project, we’ve completed the second phase of engineering and a detailed scope of work has been developed. If the joint venture moves forward, we would not expect our rate base to be reduced. The transaction would of course be subject to customary regulatory approvals.”

The Presque Isle plant occupies 65 acres of land on the shore of Lake Superior in Marquette, Mich. It has 431 MW of capacity in five surviving coal units, Units 5-9, that date back to the 1970s. Units 1-2 were retired in 2007 and Units 3-4 were retired in 2009. Units 5-6 burn low-sulfur bituminous coal and Units 7-9 burn a low-sulfur sub-bituminous coal, said a plant brochure on the company website. The plant typically burns 1.6 million tons of coal per year.

On Aug. 17, Wisconsin Electric announced plans to convert the fuel for the Valley plant from coal to natural gas. It currently expects the cost of this conversion to be between $60m and $65m and, subject to receipt of PSCW approval and a construction air permit from the WDNR, anticipates that the conversion will be completed no later than 2016. The utility expects to file for a Certificate of Authority from the PSCW during the second quarter of 2013.

In June, the company received approval from the PSCW to replace and upgrade the Lincoln Arthur natural gas main, which has the capability to accommodate the increased natural gas required for the conversion of Valley to natural gas.

Klappa during the Oct. 31 earnings call said cheap gas is displacing coal at the utility. “You may remember that our plan called for the addition of 2,200 MW of new capacity,” he said. “Capacity that is almost equally balanced between natural gas and coal. And now with our efficient new capacity in place and natural gas prices at low levels, our natural gas burn is expected to nearly double from 28.5 billion cubic feet last year to 50 billion cubic feet this year. In fact our natural gas units at Port Washington operated at a 56% capacity factor in the first three quarters of this year. This compares with a 23% capacity factor during the same period of 2011. Our Port Washington units are essentially now being dispatched as baseload units.”

Klappa added: “And of course as our natural gas burns have gone up, our coal burns have naturally come down. We are projecting to burn approximately 8.1 million tons of coal this year versus 10.7 million tons in 2011. We will achieve this reduction by maximizing the use of coal storage facilities and by working with our coal suppliers to amend existing contracts.”

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.