PJM fights through wave of coal retirements to keep the grid afloat

Due to factors like massive coal-fired power plant retirements, either already made or in the planning stages, a recent study by PJM Interconnection reveals a need for major new transmission grid investments.

In 2012, PJM, which plans improvements to the regional power grid, authorized more than 750 electric transmission improvement projects with a total cost of more than $5bn, the company noted in a March 7 statement.

PJM’s recently published report on electric transmission planning details how grid upgrades and construction maintain reliable electric supplies while meeting the challenges of power plant retirements, the rapid switch to natural gas as a power generation fuel, the growth of wind power and states’ renewable energy requirements.

In the November 2011-December 2012 period, PJM received 104 retirement requests for 13,868 MW of generation – about enough electricity to supply Indiana’s needs for a year. Most of the retirements were of coal units and were related to more stringent environmental regulations combined with low natural gas prices. The trend continues in 2013 with formal notice in January of the retirement of an additional 1,697 MW.

“We’ve never had to cope with generation retirements or fuel shifts on this scale,” said Steve Herling, PJM vice president of transmission planning. “The fact that we’re able to respond to these changes so efficiently shows the strength of the planning process and the skills of planners both in PJM and the 14 transmission owners within the PJM region.”

PJM analysis identified the need for more than 130 grid updates to avoid reliability problems resulting from the power plant retirements. The $2.4bn in solutions include equipment upgrades, new substations and substation additions, rebuilding existing lines and construction of new transmission lines. For example, about $174m worth of major projects are required in the Mid-Atlantic region to solve reliability problems caused by the retirement of generating units in Pennsylvania and New Jersey.

Western region of PJM gets a lot of the retirement requests

Most generator retirements were in the western region of PJM, including western Pennsylvania, Ohio, West Virginia, western Maryland and Indiana. In particular, retirement of generators along Lake Erie in Ohio will require significant transmission upgrades in and around Cleveland. FirstEnergy (NYSE: FE) and NRG Energy (NYSE: NRG) have a lot of retiring capacity in that area. About $341m in major projects were authorized to resolve generator-retirement problems in the PJM western region. In total, 137 transmission upgrades were approved.

In Virginia, as another example, PJM authorized $293m in major transmission projects to solve reliability problems caused by retiring generators. Dominion Virginia Power has coal units at its Yorktown and Chesapeake plants it plans to retire, plus a coal-to-gas conversion project in the works (Bremo plant) and three coal-to-biomass conversions (Hopewell, Southampton and Altavista plant) that are due for completion later this year.

As some generation is retired, PJM saw a record amount of new generation in one year, most of it natural gas-fired, PJM noted.

Meanwhile, PJM said it continues to study the effects of existing wind power on the grid and to plan transmission changes to handle it. The PJM report identified nine grid stability problems at eight locations in Ohio, Illinois and Virginia resulting from conditions related to wind power on the grid. PJM planned and authorized $97m in transmission projects to ensure that energy from generators, such as wind power, that typically run during overnight “light-use” hours can be delivered without causing stability problems.

Wind power on the grid is expected to grow because many states require a certain amount of electricity come from renewable sources. PJM continues to evaluate the new transmission lines and improvements that will be necessary to add the wind power needed to meet state renewable energy requirements. The study includes off-shore wind and imports of wind-powered electricity from other regions.

PJM’s 1,000-page report on transmission planning documents these and other grid needs and related construction and upgrade projects throughout the PJM region.

Coal plants like Kammer, Kanawa River and Elrama on the hit list

For the nine years ending with 2012 inclusive, PJM received and processed deactivation requests for 11,086 MW. More recently however, PJM studied an unprecedented 104 deactivation requests totaling 13,868.4 MW between November 2011 and December 2012 alone. Generator owners have requested deactivation of these units between May 2012 and the end of 2015.

Examples of coal-fired plants that got deactivation requests in that period are:

  • Conesville, Ohio (165 MW);
  • Sporn, West Virginia (580 MW);
  • Big Sandy, Kentucky 280 MW;
  • Kanawha River, West Virginia (400 MW);
  • Kammer, West Virginia (600 MW);
  • Beckjord, Ohio (896 MW);
  • Tanners Creek, Indiana (488 MW); and
  • Elrama, Pennsylvania (460 MW).

Said the report about the coal units most at risk: “The combination of reduced natural gas/coal price spreads and lower demand are already driving lower capacity factors for coal-fired units less than 400 MW and more than 40-years old. At the same time coal-fired units greater than 400 MW, regardless of age, have maintained relatively constant capacity factors despite reduced hourly demands and fuel price spreads. Declining gas/coal price spreads and average hourly demand have reduced net energy market revenues for all coal-fired generating capacity. However, net revenues remain lowest for coal-fired units less than 400 MW and more than 40-years old.”

PJM sees costly fixes needed if two Maryland coal plants shut

The study noted that one thing PJM looked at in a shutdown analysis was the possible retirement of two coal-fired plants in Maryland that Exelon (NYSE: EXC)sold last year to an independent power company, Raven Power Holdings LLC.

“On December 7, 2011, the Maryland Public Service Commission (MD-PSC) formally requested that PJM conduct an analysis to study the potential retirement of the Crane and Wagner coal-fired generating units, 998 MW and 399 MW, respectively,” the study said. “The request asked PJM to ‘identify any potential transmission system limitations that may impact Maryland electric reliability’ and to ‘provide an analysis of the impact of deactivation of the Crane and Wagner generation on energy prices resulting from any increases or decreases in congestion.’ The commission also requested that PJM conduct the analysis under three retirement scenarios: Wagner alone, Crane alone and both plants simultaneously.” PJM found that it would cost up to $328.6m in grid upgrades to account for this.

PJM Interconnection ensures the reliability of the high-voltage electric power system serving 60 million people in all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. PJM coordinates and directs the operation of the region’s transmission grid, which includes 59,750 miles of transmission lines; administers a competitive wholesale electricity market; and plans regional transmission expansion improvements to maintain grid reliability and relieve congestion.

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.