Citing low market prices and the compliance costs for ever-toughening environmental standards, FirstEnergy (NYSE:FE) said July 9 that it plans to deactivate two coal plants in Pennsylvania by Oct. 9.
The plants scheduled to be deactivated are Hatfield’s Ferry Power Station in Masontown, Pa., and Mitchell Power Station in Courtney, Pa. The total capacity of these plants is 2,080 MW, representing approximately 10% of the company’s total generating capacity, but about 30% of the estimated $925m cost to comply with the Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS).
Given that Pennsylvania is a deregulated market, FirstEnergy cannot pass along retrofit costs to a rate base.
The Pennsylvania Department of Environmental Protection (DEP) recently updated the air permits for these coal units.
In all likelihood, this move means the permanent closure of the two facilities, a FirstEnergy spokesperson told GenerationHub, following the company’s July 9 announcement.
“We are not looking to reconfigure them as any other type of power plant,” the FirstEnergy spokesperson said. He added that there remains an ample supply of generation to serve the region.
In total, about 380 plant employees and generation related positions are expected to be affected. Eligible employees will receive severance benefits through the FirstEnergy plan or as provided by their collective bargaining agreement.
The company’s fleet after the deactivations will be comprised of 56% coal, 22% nuclear, 13% renewables and 9% gas/oil, and will have a generating capacity of more than 18,000 MW.
With the deactivation of these two plants, in addition to the nine plants the company announced for deactivation last year, nearly 100% of the power generated by FirstEnergy will come from resources that are either non- or low-emitting, including nuclear, hydro, pumped-storage hydro, natural gas and scrubbed coal units.
The company expects to invest approximately $650m in MATS-related control technology to enhance or modify existing air quality equipment or install new equipment on its remaining facilities. Following these upgrades, FirstEnergy expects to reduce emissions of nitrogen oxides by 84%, sulfur dioxide by 95% and mercury by 91% below 1990 levels. In addition, the company expects to reduce carbon dioxide emissions 20% to 30% below 1990 levels by 2020.
The plant deactivations are subject to review for reliability impacts, if any, by PJM Interconnection, the regional transmission operator that controls the area where they are located.
Analyst cites troubling development for supercritical plant
It is troubling for the coal sector to see a supercritical, 1,700-MW coal plant being retired, said UBS Investment Research Analyst Julien Dumoulin-Smith.
“While FE has announced a number of retirements in recent years, Hatfield’s Ferry is the first supercritical, low-heat rate plant, demonstrating just how tough the current environment is for even lower-cost NAPP [Northern Appalachian] coal generators,” Dumoulin-Smith said in a UBS analysis.
It’s possible that the retirement could give FirstEnergy more leverage to negotiate with its coal suppliers for the remaining fleet, the UBS analyst went on to say. UBS also expects the recent announcement could foreshadow further retirements down the road at other coal-fired utilities.
Sierra Club officials hailed the coal retirement news.
“We hope today’s announcement signals a shift for FirstEnergy away from the dirty coal of the past and toward a clean, renewable energy future focused on new jobs in the wind, solar and energy efficiency industries in Pennsylvania,” said Tom Schuster, Pennsylvania Campaign Representative for the Sierra Club.
“These plants are both over 40 years old and have been making people sick for far too long,” said Randy Francisco, Sierra Club Organizing Representative in Western Pennsylvania.
Rep. Tim Murphy, R-Penn., who represents the district where these plants are located, lamented FirstEnergy’s announcement, stating, “The front line in the administration’s war on coal is right here in Southwestern Pennsylvania, and the casualties are the factories and homeowners who will pay higher electric bills, as well as the hundreds of utility workers, boilermakers, and miners who will be out of work.”
Murphy said the coal units involved had “just four short years ago underwent $1 billion in upgrades.”