If PacifiCorp loses a legal appeal of the U.S, Environmental Protection Agency’s Regional Haze plan for Wyoming, which includes a mandate for costly selective catalytic reduction (SCR) on the Wyodak coal plant, then PacifiCorp is more likely to shut the plant or switch it to natural gas instead of making the SCR installation.
PacifiCorp d/b/a Rocky Mountain Power on March 31 filed its latest integrated resource plan (IRP) with the Idaho Public Utilities Commission. In it, PacifiCorp noted that there are several coal units where EPA’s Regional Haze rule would mandate SCR installations, and that avoiding those SCRs could save ratepayers hundreds of millions of dollars.
An example of such a unit is Wyodak plant, which is located 75 miles west of the border between Wyoming and South Dakota near Gillette, Wyoming. The single-unit plant was commissioned in 1978. PacifiCorp operates Wyodak and owns 268 MW of the 335 MW capacity. As a result of its assessment of Best Available Retrofit Technology (BART) under the Regional Haze program, the EPA determined installation of SCR by March 2019. PacifiCorp has appealed EPA’s SCR requirement at Wyodak, as has the state of Wyoming, and other parties have filed appeals asserting contrary positions. PacifiCorp and other parties asked the court to stay EPA’s actions pending resolution of the appeals, and the court has granted the requested stay. Under the terms of the stay, the original deadline for compliance is extended on a day-for-day basis for the duration of the stay.
PacifiCorp has considered compliance alternatives to the Wyodak SCR requirement in EPA’s Federal Implemenation Plan (FIP) for Wyoming, which include: early retirement; cease coal-fueled operations by converting the unit to operate on natural gas; and technology and “inter-temporal” tradeoffs. An acceptable alternate compliance solution would require that the state of Wyoming incorporate the alternative as a recommended amendment to its SIP for EPA review and approval. The SIP amendment and EPA review and approvals would include the appropriate public notice and comment processes.
The options are:
- A schedule to install SCR on Wyodak, with a fall 2018 tie-in outage to achieve an assumed March 4, 2019, compliance date is presented in the IRP. The SCR project entails installing the reactor module(s) on the unit in the boiler flue gas exit path between the economizer outlet and the air preheater inlet. Other work that may be required includes installing an ammonia receiving and delivery system.
- A schedule to install less costly selective non-catalytic reduction (SNCR) on Wyodak by an assumed compliance date of March 4, 2019, is presented in the IRP. If a SNCR is needed, the project would entail installation of several levels of urea solution injection equipment in the boiler at critical temperature zones. Other work that may be required includes installing a urea solution receiving and transport system.
- A schedule to convert Wyodak to 100% natural gas fueling is presented. The implementation schedule assumes the unit would be converted to natural gas fueling in 2019 after coal fueling is discontinued on Dec. 31, 2018. Thereafter, a six-month tie-in outage is planned. The schedule would shift out in time under potential compliance scenarios that allow for continued coal operation beyond Dec. 31, 2018.
- A schedule for an early retirement scenario of Wyodak is presented. The implementation schedule assumes the unit would cease coal-fired operation by March 4, 2019. The schedule would shift out in time under potential compliance scenarios that allow for continued coal operation beyond March 4, 2019.
In the 2019 Early Retirement Case, the loss of Wyodak creates an incremental capacity need beginning in the summer of 2019, which drives the need for replacement resources over the 2019 to 2034 timeframe. Notable resource portfolio changes resulting from an early retirement of Wyodak in 2019 include possible need for new gas-fired combined cycle combustion turbine (CCCT) capacity.
PacifiCorp said it financial analysis shows that inter-temporal and fleet trade-off compliance alternatives may be lower cost than installation of SCR by an assumed compliance date of March 2019. PacifiCorp’s financial analysis shows that customer benefits are maximized when the 2019 SCR is avoided, consistent with the company’s ongoing legal appeal. PacifiCorp expects the court to make a final decision on the appeals in 2016. PacifiCorp will continue to support its appeal of the portion of EPA’s FIP that requires installation of SCR at Wyodak. If, following appeal, EPA’s final FIP as it pertains to Wyodak is upheld, PacifiCorp will update its evaluation of alternative compliance strategies that will meet any new requirements, as applicable, and provide the associated analysis in a future IRP or IRP Update. Consideration of Clean Power Plan 111(d) compliance risks aligns with PacifiCorp’s appeal of EPA’s FIP requiring SCR at Wyodak. Eliminating the SCR requirement, will save customers tens of millions in incremental capital expenditures and retains compliance planning flexibility associated with EPA’s draft 111(d) rule, PacifiCorp noted.
Like with Wyodak, PacifiCorp did similar computer model runs for Dave Johnston Unit 3 and Cholla Unit 4.
Dave Johnston Unit 3
The Dave Johnston plant is located near Glenrock, Wyoming. Unit 3 of the four-unit plant, owned and operated by PacifiCorp, was commissioned in 1964. The capacity of Dave Johnston Unit 3 is 220 MW. As a result of its assessment of BART under the Regional Haze program, EPA determined that installation of SCR on Dave Johnston Unit 3 by March 2019 or, in lieu of installing SCR, a commitment to shut down Dave Johnston Unit 3 by 2027. The state of Wyoming filed an appeal of the portion of EPA’s final action that pertains to Dave Johnston Unit 3. The state of Wyoming sought and was granted a stay of EPA’s action as it pertains to Dave Johnston Unit 3. However, the stay does not include an extension of the compliance deadline if EPA prevails in the appeal.
“The option to commit to shutting down Dave Johnston Unit 3 by the end of 2027 coincides with the currently approved depreciable life of the Dave Johnston plant in all states but Oregon. Considering potential 111(d) compliance uncertainties, PacifiCorp has maintained its planning assumption that coal plants will retire at the end of their depreciable lives as currently approved in all states but Oregon. Consequently, an analysis comparing a scenario in which SCR emission control equipment is installed in 2019 assuming an end-of-life retirement at the end of the 2027 with a scenario in which SCR can be avoided with a firm commitment to retire the unit at the end of 2027 comes down to quantifying the cost of the SCR and the associated cost to operate the SCR equipment over the period 2019 through 2027.
“Consideration of 111(d) compliance risks aligns with PacifiCorp’s plans to forego installation of SCR, either via a successful appeal by the state of Wyoming, or by committing to shut down Dave Johnston Unit 3 by the end of 2027. Foregoing installation of SCR requirement will save customers tens of millions in incremental capital expenditures and retain compliance planning flexibility associated with EPA’s draft 111(d) rule.”
Cholla Unit 4
Cholla is a four-unit plant located in Joseph City, Arizona. PacifiCorp owns Cholla Unit 4, which contributes 387 MW of capacity to the PacifiCorp system. Arizona Public Service (APS), the operator of the plant, owns units 1, 2, and 3. PacifiCorp acquired Cholla Unit 4, which was commissioned in 1981, from APS in 1991. Under the BART determination under the Regional Haze program, installation of SCR is required at Cholla Unit 4 by Dec. 5, 2017.
PacifiCorp considered compliance alternatives to the Cholla Unit 4 SCR requirement in EPA’s FIP for Arizona, which include: early retirement; cease coal-fueled operations by converting the unit to operate on natural gas; and technology and inter-temporal tradeoffs. An acceptable alternate compliance solution would require that the state of Arizona incorporate the alternative as a recommended amendment to its SIP for EPA review and approval.
Part of the planning analysis was based on the fact that PacifiCorp and Peabody Energy (NYSE: BTU) are parties to a long-term coal sales agreement for the El Segundo/Lee Ranch mine complex through December 2024. In both the 2017 early retirement case and a 2018 natural gas conversion case, termination of the agreement under the “Early Termination and Buy-Out” provision of the contract requires a payment amount that was redacted from the public version of the IRP.
Said the IRP: “PacifiCorp’s financial analysis shows that installation of SCR by an assumed compliance date of December 5, 2017, is not a cost effective solution for customers when evaluated against a range of compliance alternatives. Customer benefits are maximized under an assumed alternate compliance scenario in which Cholla Unit 4 continues operating through early 2025 without the installation of SCR, followed by conversion of the unit to natural gas fueling, thereby avoiding coal contract [termination damages], avoiding casualty payments under the Safe Harbor Lease, and avoiding or mitigating pre-paid transmission write-off expenses. This preferred compliance alternative also effectively manages utilization and depreciation of the resource over an appropriate period of time for the benefit of customers. If an alternate compliance solution that maximizes benefits for PacifiCorp customers consistent with these results cannot be reached, converting Cholla Unit 4 to a natural gas-fired unit in 2018 or later is currently assessed as the next best alternative to a 2017 early retirement outcome.”