Virginia commission staff supports Bremo coal-to-gas conversion

The Virginia State Corporation Commission staff generally agrees with a Dominion Virginia Power contention that a coal-to-gas conversion of its lightly-used Bremo (also known as Bremo Bluff) power plant will preserve 227 MW of needed capacity at an estimated cost of about $53.4m, excluding financing costs.

“With a relatively modest capital investment and a fairly robust test of various market scenarios, the proposed Project is expected to provide customer savings when compared to building new generation ($32 million NPV), to market purchases ($123 million NPV), and to continued operations on coal ($155 million NPV),” wrote David Eichenlaub, Assistant Director in the commission’s Division of Energy Regulation. NPV stands for net present value.

“Given the uncertainty of environmental regulations surrounding smaller vintage coal-fired facilities, the economic benefit of better utilizing existing equipment and infrastructure to not lose any generation capacity and increase energy supply, the Company’s choice to consider and propose the conversion of these smaller vintage coal units to natural gas appears reasonable,” he added.

Eichenlaub provided Jan. 11 testimony in support of an August 2012 application on this conversion project by Virginia Electric and Power, d/b/a Dominion Virginia Power, a unit of Dominion Resources (NYSE: D).

The company performed various sensitivity analyses surrounding: fuel and market energy prices, construction costs of the conversion, and the possibility that there would be no further carbon legislation or regulation on coal facilities. “In Staff’s opinion, the various fuel price forecasts used in this application are reasonable and fall within expected ranges,” Eichenlaub wrote.

He added: “Staff concurs with the Company’s assessment and recommends that the Commission approve the application to convert the Bremo Power Station to natural gas.”

The utility wants to modify the existing Units 3 and 4 at the Bremo by converting them from coal to natural gas. The Bremo plant, located in Fluvanna County, has been in operation since 1931 and currently has two active coal units. Commercial operation of Bremo 3, which has a net capacity of 71 MW, began in 1950. Bremo 4 has a net capacity of 156 MW and began commercial operation in 1958.

Bremo units have been used less and less in recent years

The recent operating histories of the Bremo units show that the capacity factor of each unit has generally declined since 2006, Eichenlaub noted. The capacity factor for Bremo 3 has declined from 61% in 2006 to 18.2% in 2011. Capacity utilization of Bremo 4 has declined from 79% in 2006 to 51.6% in 2011.

Dominion says that if the facilities remain as coal-fired, the capacity factors would continue to decline and the units would be retired as expected environmental restrictions would limit the operation of each unit and cause them to be uneconomical to maintain. Additionally, the company states that the air pollution control permit and related requirements for operation of its new, coal-fired Virginia City Hybrid Energy Center, which began commercial operation in July 2012, require either the conversion of Bremo to natural gas, subject to commission approval, or the cessation of operation by March 7, 2014.

Based upon its 2012 Integrated Resource Plan (IRP) Update, Virginia Power’s current projection indicates that following the conversions, the Bremo units will operate as peaking resources. Bremo 3 is expected to operate at a capacity factor between 1.5% and 2.9%, while the capacity factor for Bremo 4 would range between 11.2% and 17.4%.

Virginia Power is seeking approval to convert both Bremo units to natural gas-fired operation in time to meet the company’s summer peak in 2014. The project will include boiler modifications conducive to gas-fired operation, new environmental equipment and controls, new fuel handling facilities for natural gas, and other modifications as needed to other plant systems.

The company said it undertook a competitive bid process to secure engineering, procurement and construction (EPC) services from one of six potential bidders. An EPC contract with AMEC Kamtech Inc. that was signed in June 2012 resulted in a fixed-price contract for the majority of the required work. This contract effectively shifts risks associated with material costs, labor costs, performance guarantees and schedule completion goals away from Virginia Power and its customers, Eichenlaub noted.

Virginia Power said that no additional electric transmission facilities or network upgrades would be required. Virginia Power has an agreement with CGV to extend a natural gas lateral pipeline approximately 1.5 miles from the company’s Bear Garden Generating Station across the James River to Bremo. The company states that CGV would be responsible for all material acquisition, design, construction, installation, land rights, and permitting activities.

CGV’s proposed pipeline lateral will be connected with Transcontinental Gas Pipe Line‘s (Transco) mainline. This connection will provide Bremo access to the Gulf of Mexico and Marcellus Shale supply regions. The natural gas for Bremo would be purchased from market sources at then-current market prices and delivered via Transco and CGV.

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.