Sierra Club says McIntosh Unit 1 should be shut, not coal switched

The Georgia Public Service Commission should order the decertification of Georgia Power’s McIntosh Unit 1, instead of the utility’s preferred clean-air option of switching the unit to Powder River Basin coal, said the Sierra Club in June 28 testimony.

That filing was the latest by the club and various parties to an integrated resource plan that Georgia Power submitted to the commission in January. In the IRP, Georgia Power proposed to decertify several coal-fired units due largely to clean-air constraints, but said it can save McIntosh Unit 1 for the time being by switching it to low-sulfur PRB coal. The GenerationHub database shows Unit 1 with capacities of 178 MW (nameplate) and 157 MW (net summer).

Intervenors the Sierra Club and Coosa River Basin Initiative (collectively the “Sierra Club”) on June 28 requested that the commission deny Georgia Power’s request to incur significant expense on behalf of ratepayers to continue burning coal at Plant McIntosh. Georgia Power’s analysis in the Unit Retirement Study as it relates to McIntosh Unit 1 unreasonably understates the future costs at this unit if it continues to burn coal, said the club, because:

  • The company’s environmental compliance strategy, and thus the unit retirement study, underestimate future costs at Plant McIntosh;
  • The company has not shown that Plant McIntosh Unit 1 will operate sufficiently to justify even the environmental costs Georgia Power expects to incur; and
  • The company’s cost projections for PRB coal at Plant McIntosh Unit 1 are unreasonably low.

The analysis of Plant McIntosh must be viewed in the current context where there is significant excess reserve capacity on the company’s system – double that of Georgia Power’s target reserve capacity, the club argued.

Sierra Club criticizes utility plans for SNCR installation at McIntosh

Georgia Power’s underestimated costs for air compliance, the club said, are based upon:

  • its decisions to install selective non-catalytic reduction (SNCR) rather than selective catalytic reduction (SCR);
  • to make modifications to its existing water intake structure rather than building a cooling tower; and
  • to rely solely on its projected change in coal type rather than to install another control device to address SO2 and hazardous air pollutants.

Although Georgia Power has been faced with similar situations – controlling NOx for ozone standards and other environmental regulations – across its Georgia fleet, it has never chosen to install SNCR at any other unit, always choosing the significantly more expensive SCR, the club noted.

Georgia Power has not provided any data showing that the PRB conversion will actually provide the emissions reductions required to comply with the 2010 Sulfur Dioxide Standard, said the club. Further, although the company admits that modeling could show that more expensive control technology should be implemented at McIntosh Unit 1, it has not performed any modeling on McIntosh Unit 1 to assure that its measures are adequate, it added. Such modeling results could show that Plant McIntosh’s emissions will violate the 2010 Sulfur Dioxide Standard, even with the conversion to PRB coal, the club said.

The historical performance over the last two years of Plant McIntosh’s Unit 1 shows that the unit has operated very little. Plant McIntosh operated only a total of 1,038 hours in 2011 and 2012, which equates to less than 6% of the hours of those two years, the club said.

“Georgia Power claims that conversion to a lower cost coal – PRB – will increase the likelihood that McIntosh Unit 1 will operate much more in the future,” the club added. “However, the Company has not taken into account a number of generating resources that will be added to the system that will affect how much Plant McIntosh operates. These include solar, wind and nuclear resources, which have initial costs, but once running will make other units less favorable in the dispatch order because they have a low or almost zero incremental cost. Incremental cost is the difference between how much it costs to operate a unit versus how much it costs to not operate a unit at a particular time. Units with low or almost zero incremental costs are operated whenever they can, absent some extenuating circumstance. These units are sometimes referred to as ‘must dispatch’ units.”

For example, the company has signed one power purchase agreement (PPA) for 250 MW of firmed wind powered generation that will put downward pressure on rates. With another 1,000 MW of proposals for additional wind powered generation pending, it seems likely that Georgia Power will sign additional PPAs over the next 30 years, especially if those proposals provide an opportunity for additional downward pressure on rates, the club said. “However, the Company has not analyzed how the addition of wind power onto the Georgia Power system will affect the amount of operating time of existing units. The Company acknowledges that enough additional wind power can ultimately impact how much units like McIntosh actually operate.”

Sierra Club says utility is underestimating long-term PRB prices

Georgia Power proposes to convert Plant McIntosh from burning Central Appalachia coal to PRB” coal imported from Wyoming or Montana, almost two thousand miles away. Georgia Power claims that PRB coal is cheaper than Central Appalachia coal, the club said. “Thus, the Company’s argument follows, once Plant McIntosh is converted to burning PRB coal, the economics of Plant McIntosh will change from a plant that was idle for all of 2012 to a plant that will suddenly provide significant amounts of electricity for ratepayers in a cost-effective manner. However, Georgia Power’s analysis assumes an unreasonably low cost for PRB coal in the future.

In the 2013 IRP’s Unit Retirement Study, Georgia Power assumed the costs of Powder River Basin coal at the mine mouth remaining at $15 per ton in constant dollars between 2015 through 2052. This assumption is based on a projection provided by the company’s consultants, Charles River Associates.

The club added: “Sierra Club’s expert, Dr. Thomas Power, reviewed the forecast given by the Company and found that, as Georgia Power’s projected prices on PRB coal extend into the future, they are unreasonably low. Dr. Power did agree with the Company’s projections of PRB coal for the short term (2015-2017). However, he disagreed with the Company’s significant understatement of long-term projections because the Company’s projected prices ignore facts that everyone – including the Company’s consultant, Charles River Associates – agree are true. He found that Georgia Power’s projections underestimate the price of PRB coal by approximately 21.2% in 2032, 34.7% in 2042, and 48.2% in 2052.”

Power, in arguing for higher projected prices, said that PRB demand is likely to increase, which will increase prices on PRB coal. He also explained that the cost of PRB coal is likely to increase regardless of demand for several reasons. They include increased costs due to decreasing mine productivity, resulting from mining companies having developed the lowest cost resources first, and now pursuing more expensive deposits. In addition, as mines expand or relocate, this will require road (and possibly rail) relocations and increased haul distances. Further, additional cost pressures will cause costs to rise, including high oil prices and high bonus payments associated with new leasing of federal coal reserves.

“Dr. Power’s projections are consistent with – or lower than – other leading groups’ projections of PRB pricing going forward,” the club argued. “His projections are in line with John T. Boyd Company and Wood McKenzie projections on PRB pricing. Although he did disagree with the Energy Information Administration, he did so on the basis that he found their projections to be too high.”

Power’s projections are consistent with Georgia Power’s own consultants that advised the company on the pricing of PRB going forward, the club said. Power based his analysis on Wood McKenzie’s reports of PRB pricing, a company which advised the company on its pricing forecasts.

Georgia Power recently did successful test burn at McIntosh

A recent coal burn test at McIntosh shows that low-sulfur PRB is a viable option for that facility in place of the plant’s current Central Appalachia coal supply. That was among the points that Georgia Power witnesses covered in June 7 rebuttal testimony filed with the Georgia commission in this IRP case.

The Georgia Power witnesses filing joint rebuttal testimony were: Kyle Leach, Director of Resource Policy and Planning for Georgia Power; Garey Rozier, Manager of Resource Planning for Southern Co. Services; and Larry Legg, Manager of Market Planning for Georgia Power. The utility is a subsidiary of Southern Co. (NYSE: SO).

In summary, the utility in part seeks commission approval within the IRP of the:

  • Decertification of Branch Units 3-4, Yates Units 1-5 and McManus Units 1-2 effective by the Mercury and Air Toxics Standards (MATS) compliance date of April 16, 2015, decertification of Kraft Units 1-4 one year past the MATS compliance date (by April 16, 2016), decertification of Boulevard Units 2-3 effective as of the date of the final order in this proceeding, and approval of expedited decertification of Bowen Unit 6 by April 16, 2013;
  • A switch to natural gas as the primary fuel for Yates Units 6-7 and Gaston Units 1-4; and
  • An amendment of the decertification date specified in the commission’s final order in a prior docket for Branch Unit 1 from Dec. 31, 2013, to coincide with the decertification of Branch Units 3-4.

Aside from Bowen Units 1-4, Wansley Units 1-2 and Hammond Units 1-4, and the coal-fired units for which the company seeks decertification, additional environmental controls will be required for the remaining coal units to operate on coal after the MATS compliance date of April 16, 2015. Specifically, Georgia Power said it plans to utilize a bromine additive at Scherer and switch McIntosh Unit 1 to operate on lower-priced PRB coal (pending a successful test burn and further study).

Among other issues, the June 7 testimony also responds to the concerns raised by staff regarding the company’s plans to supply natural gas to Gaston and Yates. They describe the company’s natural gas transportation procurement strategy for Gaston and Yates and the reasons why the company is confident that it will be able to obtain sufficient natural gas transportation to ensure that these units will be able to reliably serve customers. They also provide further evidence supporting a forecast of PRB coal prices and report on the successful test burn of PRB coal at Plant McIntosh.

As for the McIntosh coal test, they wrote: “Subsequent to the filing of the IRP, the Company completed a test burn on PRB coal with the use of MATS additives at Plant McIntosh. In March, Plant McIntosh Unit 1 tested the use of Activated Carbon Injection (‘ACI’) and Dry Sorbent Injection (‘DSI’) systems while burning PRB coal to evaluate MATS compliance. The results of the test burn confirmed the unit is fully capable of accommodating PRB coal and that it can comply with the stringent MATS requirements with ACI and DSI systems.”

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.