The Indiana Utility Regulatory Commission on Aug. 14 approved $511m worth of new air controls for the “Big Five” coal units of Indianapolis Power & Light to meet air rules like the Mercury and Air Toxics Standards (MATS).
In August 2012, Indianapolis Power & Light (IPL) first requested this approval. IPL owns and operates 3,353 MW of nameplate capacity. Its Big Five consists of Petersburg Units 1-4 and Harding Street Station Unit 7 (HSS 7). The Big Five comprise 65% of IPL’s total generating capacity and more than 82% of its coal-fired capacity.
The Big Five are fully scrubbed and have fewer years of service compared to the other primarily coal-fired units in IPL’s fleet, which are due for retirement. IPL requested approval to construct, install and operate a Pulse Air Fabric Filter System on Units 2 and 3 at Petersburg, and, on all Petersburg units, other environmental controls and monitoring equipment, including activated carbon injection (ACI), sorbent injection, flue gas desulfurization (FGD) upgrade (Units 1 and 2) and electrostatic precipitator (ESP) enhancements (Units 1, 3 and 4) and continuous emission monitoring at Petersburg. IPL also requested approval for environmental controls on HSS 7 including ACI, FGD upgrade, ESP and Sodium Based Solution System (SBS) upgrades and continuous emission monitoring.
EPC contractor picked, original cost estimate was reduced
Kevin Crawford, IPL’s Senior Vice President, Power Supply, explained during this case that IPL will enter into an engineering, procurement and construction (EPC) contract with a third party contractor. The owner’s engineer for the project is Black & Veatch. IEP (a joint venture between Sargent & Lundy and Kiewit Corp.) was selected as the EPC contractor during the course of the case.
Crawford, in mid-review testimony, explained that the updated cost estimate totals $510.98m, which is about $95m lower than IPL’s initial cost estimate of $606m.
Crawford explained that IPL provided a Limited Notice to Proceed (LNTP) to IEP in January 2013 to begin detailed engineering. He pointed out that the EPC contract terms indicate IPL will provide a full notice to proceed on approximately June 1, 2013, but no later than Aug. 31, 2013.
IPL witness James Ayers, Director of Corporate Planning and Analysis, explained why the decision to retrofit these units is economically and strategically justified from a resource planning perspective and also consistent with IPL’s long term resource plan as identified in its most recently filed integrated resource plan (IRP).
Ayers testified that the Big Five comprise 2,179 MW of baseload generation. He testified that all of the Big Five units have been fully scrubbed for SO2 with FGD systems, three have selective catalytic reduction (SCR) technology to control NOx and have been identified as the long-term baseload core of IPL’s generating fleet. He added that these controls also assist in the removal of MATS-regulated emissions – including acid gases (HCI), mercury (Hg) and particulate matter (PM). Ayers explained that because the Big Five baseload units are expected to have 20 or more years of remaining life, the cost analysis can be performed by comparing their life cycle costs directly to equivalent replacement baseload generation.
The Small Six subject to their own reviews
Ayers testified that IPL’s petition did not request approval of a control plan for IPL’s Small Six coal-fired units. He stated that these units are being evaluated separately and more broadly looking at all options on a remaining life cycle basis. He noted that the disposition of the Small Six units does not impact or alter the compliance plan for the Big Five. He added that while no final decision has been made on these units, current analysis indicates that it is likely that the Eagle Valley coal plant will be fully retired ahead of MATS rule implementation. He testified that the coal-fired Harding Street Units 5 and 6 may be retired or repowered as gas-fired peakers.
Harold Leitze, IPL’s Manager of Coal and Transportation, discussed during this case coal quality and characteristics, supply testing and the mercury content of Illinois Basin coal and other coal producing regions. He testified regarding what coal supply information was used in a MATS Study conducted by Sargent & Lundy. Leitze stated that research on the other coal basins around the U.S. shows that Indiana coal is among the lowest in the country in mercury content and that most other coal has more than twice the mercury as Indiana coal. He concluded that switching to coal from another region is not a viable option.
IPL investigated whether capital costs for MATS compliance could be eliminated or reduced if IPL were to procure coals with lower mercury content for use as a compliance tool. Leitze stated that the supply of low mercury coal is constrained and the data regarding the mercury content is not extensive. He testified that limiting IPL’s fuel sources to a small number of mines would not only drive up the price but could place IPL’s fuel supply in jeopardy if other Indiana plants did the same. Leitze stated that because coal has never been priced based upon its mercury content, any possible market price adder based upon mercury is unknown. He also testified that the ability to forecast a market premium is also hindered by the fact that coal suppliers are unwilling to guarantee the mercury content of their coal.