AES Corp. (NYSE: AES) has two U.S. utility subsidiaries, Indianapolis Power & Light (IPL) and Dayton Power & Light (DP&L), that each have been retiring coal-fired capacity due to clean-air compliance and other needs.
In the second quarter of 2013, IPL retired in place five oil-fired peaking units with an average life of about 61 years (approximately 168 MW net capacity in total), since these units were not equipped with the advanced environmental control technologies needed to comply with existing and expected environmental regulations. Although these units represented around 5% of IPL’s generating capacity, they were seldom dispatched by the Midcontinent Independent System Operator, AES noted in its Feb. 26 annual Form 10-K report.
In addition to these retired units, IPL has several other units that it expects to retire or refuel by 2017. These units are primarily coal-fired and represent 472 MW of net capacity in total. To replace this generation, in April 2013, IPL filed a petition with the Indiana Utility Regulatory Commission (IURC) seeking approval to build a 550 MW to 725 MW combined-cycle gas turbine (CCGT) facility at its Eagle Valley Station site and to refuel Harding Street Station Units 5 and 6 from coal to natural gas (106 MW net capacity each). In May 2014, the IURC authorized the refueling project and granted approval to build a 644 MW to 685 MW CCGT at a total budget of $649 million. The current estimated cost of these projects is $626 million. The CCGT is expected to be placed into service in April 2017, and the refueling project is expected to be completed in early 2016.
In 2013 the IURC approved IPL’s federal Mercury and Air Toxics Standards (MATS) compliance plan, which includes investing up to $511 million in the installation of new pollution control equipment on IPL’s five largest baseload generating units. These coal-fired units are located at IPL’s Petersburg and Harding Street generating stations.
As a result of existing and expected environmental regulations, including MATS, DP&L notified PJM Interconnection that it plans to retire the six coal-fired units (total of 360 MW) at its wholly owned Hutchings Generation Station. Hutchings Unit 4 was retired in June 2013. DP&L accelerated its plans with respect to Hutchings Units 1, 2, 3, 5 and 6 and those units are scheduled to retire by June 2015. DP&L removed equipment from these units so that combustion of coal was not possible after September 2013. Conversion of the coal-fired units to natural gas was investigated, but the cost of investment exceeded the expected return.
In addition, DP&L owned approximately 207 MW of coal-fired generation at Beckjord Unit 6, which was operated by Duke Energy Ohio. Beckjord Unit 6 was retired effective October 2014. At this time, DP&L, which operates in a deregulated state, does not have plans to replace the units that have been or will be retired.
In relation to MATS, 3,066 MW of DPL’s generation capacity is largely compliant with MATS, and DPL does not expect to incur material capital expenditures to ensure compliance with MATS, which takes effect in April of this year.