National Grid, NRG work out terms of Dunkirk coal-to-gas conversion

Niagara Mohawk Power d/b/a National Grid on Feb. 13 filed with the New York State Public Service Commission a term sheet that covers the coal-to-gas conversion of three units at the Dunkirk power plant.

The term sheet formalizes the specifics of a general agreement on this plan announced in December 2013 by the parties and the state of New York, including Gov. Andrew Cuomo. Under the term sheet, Dunkirk Power LLC would add natural gas-firing capability to Units 2, 3 and 4 (nominal 435 MW in total). The gas addition is expected to be completed in time to enable commercial operation of the first refueled unit by around Sept. 1, 2015.

National Grid would make payments totaling $20.41m per year to Dunkirk Power for ten years (a total of $150m net present value). National Grid would not acquire any interest in the Dunkirk plant. Nor would National Grid purchase or take title to energy, capacity or any other New York ISO market product produced at the plant.

The term sheet is the culmination of an evaluation undertaken under a January 2013 order by the New York PSC to look at retirement alternatives for the venerable plant.

“The agreement reflected in the Term Sheet allows National Grid to continue to provide reliable electric service to customers in western New York, and would enable the creation and retention of significant economic benefits in the area,” said the Feb. 13 filing. “Having generation operating at Dunkirk also is projected by the NYISO to mitigate future congestion in western New York and provide beneficial market price effects. Further, adding natural gas capability to Units 2, 3 & 4 could produce environmental benefits, including reducing constraints on production of renewable hydroelectric generation in western New York.”

NRG originally wanted to mothball this plant in 2012

In March 2012, Dunkirk Power’s parent company, NRG Energy (NYSE: NRG), filed notice with the commission of its intent to mothball the Dunkirk facility no later than September 2012. Studies performed by National Grid determined that closure of Dunkirk would result in unacceptable reliability conditions until transmission reinforcements to address those impacts could be placed in service. Based on its analyses, National Grid determined that Dunkirk Units 1 and 2 were needed until certain near-term transmission reinforcement projects could be completed; and following the near-term reinforcements, one of the 115 kV-connected units was needed until permanent solutions could be implemented.

National Grid and Dunkirk Power then entered into an interim reliability support services (RSS) agreement to keep Dunkirk Units 1 and 2 on-line for the period September 2012–May 2013. Following a competitive evaluation process, the parties then entered into a second RSS agreement to keep Unit 2 on-line for the period June 2013–May 2015.

Gov. Cuomo’s Energy Highway Task Force in the meantime decided to promote a strategy of supporting clean energy. The Energy Highway Task Force recommended that the state Department of Public Service direct affected utilities to analyze potential power plant retirements and focus “on the opportunity to repower the subject plants as an alternative to closure or system upgrade, where a plant is needed for reliability reasons.” The report specifically identified the Dunkirk plant as one for which repowering should be considered.

In March 2013, in response to a request for proposal (RFP) from National Grid, NRG submitted a proposal consisting of three options for continuing generation at Dunkirk:

  • Option 1—A new 422 MW combined cycle gas turbine and the addition of natural gas-firing capability to Dunkirk Unit 2.
  • Option 2—Addition of natural gas-firing capability to Dunkirk Units 2, 3 and 4.
  • Option 3—Installation of 285 MW of new gas-fired peaking units.

The parties then negotiated the December 2013 agreement, which has now been fleshed out under the Feb. 13 term sheet and calls for only the coal-to-gas conversions, not a full plant repowering.

Because the current reliability support services agreement between National Grid and NRG expires May 31, 2015, and some longer-term transmission upgrades to address reliability issues from a Dunkirk shutdown were not planned to be in place until 2017, refueling the Dunkirk units mitigates potential reliability risk that may arise between 2015 and 2017 such as reliability impacts that may result from other generator shutdowns in the region.

Having Dunkirk Units 2, 3 and 4 on-line will also provide greater operational flexibility at the Niagara Power Project and allow for more power imports from the Ontario control area (IESO), which would provide the NYISO increased opportunity to call on these resources for economic or emergency energy during high load conditions.

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.