A new draft integrated resource plan from Oklahoma Gas & Electric shows that two coal units at the Muskogee plant are due to be converted to natural gas by 2019, with a shorter term plan to repower the gas-fired Mustang plant.
The utility is submitting this IRP in compliance with the IRP requirements that have been established pursuant to Oklahoma Corporation Commission (OCC) and Arkansas Public Service Commission (APSC) rules. This IRP, released June 9, is in response to material changes in planning assumptions that have occurred since the company’s regular triennial IRP, submitted in 2012.
The material change in planning assumptions that has occurred since the 2012 submittal involves specific environmental rules with which OG&E must now comply. Those rules include the U.S. Environmental Protection Agency’s Mercury and Air Toxics Standards (MATS), the Oklahoma Regional Haze State Implementation Plan (SIP) and EPA’s Regional Haze Federal Implementation Plan (FIP).
OG&E and the State of Oklahoma appealed the EPA’s FIP in federal court. On May 27, the U.S. Supreme Court denied a petition to review a July 2013 adverse decision by the 10th Circuit Court of Appeals. That 10th Circuit decision upheld the EPA’s rejection of the SO2 emission provisions of the Oklahoma Regional Haze SIP and the implementation of the EPA FIP related to SO2 emissions instead. With the Supreme Court order, the State of Oklahoma and OG&E have now exhausted all legal avenues in their effort to gain approval from the EPA for a less costly compliance plan that was used as one of the planning assumptions in the 2012 submittal.
OG&E must now comply with the haze requirements by January 2019, a short deadline given the long development lead times required for compliance, the utility noted.
The compromise “Scrub/Convert” is the chosen planning option
OG&E evaluated five alternative environmental compliance plans for haze compliance that capture the range of possibilities including unit replacement, installation of scrubber technology, and conversion of existing generation from coal to natural gas.
The analysis indicated that the “Scrub/Convert” alternative is the best approach. “Scrub/Convert” involves the installation of dry scrubbers at Sooner Unit 1 (by 2018) and Sooner Unit 2 (by 2019) and the conversion of Muskogee Units 4 and 5 from coal to natural gas by 2019. It is the lowest cost alternative in the base case and provides a compromise between the full-on “Scrub” alternative with its high CO2 risk and the “Convert” alternative that exposes customers to high natural gas price risk. The “Scrub/Convert” alternative is, in OG&E’s view, the lowest reasonable cost with due consideration to the uncertainty associated with fuel and carbon prices.
In looking at its future power needs, OG&E began to focus on its Mustang plant. OG&E concluded that retirement of the Mustang steam units in late 2017 and replacement with new, efficient combustion turbines (CTs) at the existing Mustang site in 2018 and 2019 is the best course of action. The initial Mustang unit was built in 1950 and each of the Mustang units have already operated well beyond the retirement age of nearly all units in the U.S. of similar type and size. There are four Mustang steam units with a combined capacity of 463 MW.
OG&E chose the existing Mustang site as the location for the new CTs for several reasons. Since it is close to OG&E’s largest load center, the site provides valuable reliability support and voltage control functions. The site is also beneficial because of existing infrastructure. The addition of new CTs at Mustang will also enhance the development of additional wind in Oklahoma.
In addition to the actions taken to support its longstanding 2020 Goal, OG&E also retired several units in recent years without replacement: four circa-1965 combustion turbines with a total capacity of 56 MW at Enid, a 10-MW CT at Woodward, and a 171-MW gas steam plant at Muskogee. Continued operation of the Enid and Woodward CTs would have required the installation of Selective Catalytic Reduction to bring NOx emissions within required limits.
Utility working within both MATS and regional haze needs
As for Mercury and Air Toxics Standards (MATS) compliance, OG&E requested and has received a one-year extension for compliance to April 16, 2016, from the Oklahoma Department of Environmental Quality on the initial MATS deadline in April 2015. The compliance plan is to install activated carbon injection (ACI) on five coal units at a projected cost of $24m, even though two of the Muskogee units would be switched to gas later in the decade. The utility doesn’t think other retrofits are needed to further control particulate matter and acid gas emissions.
Because of the relatively low cost of the ACI systems and the three-year difference in the compliance timeframes for MATS and Regional Haze, OG&E determined that installing ACI at the five coal-fired units was the least-cost choice irrespective of a subsequent decision with respect to its coal units under the regional haze plan. In order to comply with the April 2016 MATS compliance extended deadline, OG&E has begun the engineering and design process to support ACI installation and is currently scheduled to finish the construction and installation by January 2016.
OG&E has already taken certain actions to address requirements by installing emission control equipment at eight of its units. Specifically, OG&E is installing low-NOx burners at seven units (Muskogee 4 and 5, Sooner 1 and 2, and Seminole 1-3) and the ACI at its five coal-fired units.
When EPA disapproved Oklahoma’s best available retrofit technology (BART) determinations under Regional Haze for four of the coal-fired units, it said it was taking no action on whether the state had satisfied the reasonable progress requirements of the regional haze provisions in the Clean Air Act. Environmental groups sued EPA to force it to take action on this aspect of Oklahoma’s regional haze plan. Subject to court approval, EPA has agreed to issue a proposed rule by Nov. 15, 2014, and a final rule by Sep. 4, 2015. The rule could be used to adopt emission limits that are more stringent than BART or to apply emission limits to sources that were not subject to BART, although the impact on OG&E, if any, cannot be determined until there is a specific proposal, the resource plan noted.
OG&E owns generation and obtains capacity and energy from several power purchase agreements (PPAs). OG&E’s generation resources include coal-fired units, gas-fired steam units, gas-fired combined cycle (CC) units, quick start gas-fired combustion turbine (CT) units, and wind facilities. OG&E owns 51% of the Redbud CC plant and 77% of the McClain CC plant. All other fossil plants are fully owned by OG&E. OG&E is the operator of all of its fossil plants, including McClain and Redbud. OG&E also owns three wind facilities: Centennial, OU Spirit and Crossroads. By 2015 OG&E will complete efficiency improvements at McClain and Redbud realizing an increase of approximately 55 MW of capacity.
The utility’s coal units are:
- Muskogee Unit 4, 492 MW;
- Muskogee Unit 5, 506 MW;
- Muskogee Unit 6, 500 MW;
- Sooner Unit 1, 520 MW; and
- Sooner Unit 2, 522 MW.
Buying a gas plant in place of a Muskogee conversion probably not viable
The acquisition of an existing 500-MW combined-cycle plant could be an alternative to the conversion of a Muskogee coal unit to gas, the utility noted. OG&E said it has acquired two existing combined-cycle plants over the past decade (McClain and Redbud) and continues to monitor CC plants across the Southwest Power Pool (SPP) region. Its analysis indicates that the acquisition cost of this alternative would have to be very aggressive in order to compete with the “Convert” alternative, less than $250/kW for a new highly efficient plant. Older CC plants with higher heat rates would make sense only at lower acquisition costs. Thus, it appears that it isn’t a viable alternative as OG&E believes no combined-cycle plants are available at the acquisition cost necessary make this alternative economical.
Based on its resource planning analysis, OG&E has determined that the following strategy will provide the greatest benefits to customers:
- Continue to aggressively pursue demand-side resources;
- Scrub Sooner Units 1 and 2;
- Convert Muskogee 4 and 5 to natural gas;
- Defer expanding wind energy for at least two years, or until transmission constraints are relieved and there is greater certainty as to the value of wind in the SPP market; and
- Replace Mustang Units 1-4 (463 MW) with ten 40 MW (net) natural-gas fired combustion turbine units over the course of two years, beginning in 2018.