During GenerationHub’s May 27 Quarterly Market Update webcast, Kent Knutson, director of Hub Services for PennWell, said that 2015 is “a landmark year, with so many decisions [that] are going to be made, particularly” by the U.S. Environmental Protection Agency (EPA).
The EPA’s proposed Clean Power Plan is expected to be released mid-summer, he said, noting that if all goes to plan, the state’s initial compliance plans and federal implementation plans are expected to be in place by June 2016.
Noting that “it’s still a robust market,” Knutson said that the Edison Electric Institute (EEI) estimates that $103.3bn of capital expenditure was spent in 2014, with 42% of that on generation efforts.
According to the presentation delivered during the webcast, PennWell’s GenerationHub is tracking $134bn, or 133 GW, in planned and under construction natural gas projects.
Utility-scale solar and wind continue to expand, with 15.3 GW of solar power in development in the next two years, and 33.2 GW of wind power planned from 2015 to 2018 – about 16.6 GW in 2015 alone, though some will likely be pushed into 2016 and beyond.
The presentation further noted that 15 GW of potential nuclear power additions are planned between now and 2024, and 12.5 GW of hydro power – mostly pumped-storage – are planned, with most of it planned after 2018.
Gas, wind and solar continue to dominate the new generation landscape. Generation investment from 2015 to 2018 totals 180.8 GW, of which 169.5 GW, or 94%, represents gas, wind and solar. Of that, gas represents 118.9 GW, or 66%; wind represents 33.2 GW, 18%; and solar represents 17.4 GW, or 10%.
Knutson discussed coal plant retirements, noting that 6,725 MW have already retired in 2015, and an additional 15,542 MW, representing 83 generating units, were expected to retire in the next nine months. He also said that 8,252 MW, or 44 units, are set to retire in May and June alone, with American Electric Power (NYSE:AEP) expecting to retire 6,169 MW, or 24 units, in June.
Of natural gas, Knutson noted that in GenerationHub’s February webcast, GenerationHub was tracking nearly 18,000 MW of planned natural gas development in 2015. “Almost half of that capacity in the last three months, we’ve learned [by] doing research, is being pushed into later years or being postponed altogether,” he said.
He also said: “Of the capacity that’s being built this year, you have a pretty big chunk that’s under construction. A lot has already come on and is operating.”
The presentation included a list of natural gas projects that are expected to come online in 2015, as well as projects that have already come online. Among the projects that are operating are Mississippi Power’s 877 MW Jack Watson plant in Mississippi; Georgia Power’s 807 MW Yates plant in Georgia – both refuel projects; and El Paso Electric’s 264 MW Montana power station in Texas.
Projects that are expected to come online this year include:
•Panda Temple Power’s 803 MW Panda Temple power station in Texas (June)
•Louisville Gas & Electric’s 691 MW Cane Run plant in Kentucky (June)
•Hess Newark Energy Center’s 735 MW Newark energy center in New Jersey (July)
•Public Service Co. of Colorado’s 626 MW Cherokee plant in Colorado (December)
•Los Angeles Department of Water & Power’s 509 MW Scattergood plant in California (December)
Nuclear, Clean Power Plan, court matters
GenerationHub Chief Analyst Wayne Barber noted during the webcast that while most of the news in the energy sector is dominated by new natural gas and renewable energy projects coming online, it is worth remembering that there are four new nuclear units that are under construction and scheduled to enter operation by 2021.
One set of new units are Vogtle Units 3 and 4 in Georgia, which will be operated by Southern’s (NYSE:SO) Georgia Power. The other set of new units, which will be operated by SCANA (NYSE:SCG) utility South Carolina Electric & Gas, are V.C. Summer Units 2 and 3 in South Carolina.
One “sort of new” nuclear plant – Tennessee Valley Authority’s (TVA) Watts Bar 2 in Tennessee – is supposed to enter commercial operation by the end of this year, while another new nuclear plant was recently licensed, he said.
Of the four nuclear units being built by Southern and SCANA in Georgia and South Carolina, Barber said that all of those units have encountered delays, adding, “18-month delays [have been] announced by their contractor team – and they both have the same contractor team, which includes Chicago Bridge and Iron and Westinghouse Electric.”
The contractors have proposed schedules that are significantly behind the earlier time tables, but so far at least, all four units would still qualify for a nuclear production tax credit for new nuclear plants. To do that, the new units must be operational by Jan. 1, 2020, he added. It appears that Vogtle 4 and VC Summer 3 would meet that deadline for the nuclear tax credits, he said, adding, “But, the cushion is getting smaller than it was.”
TVA, which as a federally owned utility, is not eligible for any tax credits, will bring online the Watts Bar nuclear plant later this summer. Barber also noted that DTE Energy (NYSE:DTE) has become the third nuclear operator to receive a combined construction operating license for the new Fermi 3 reactor in Michigan from the U.S. Nuclear Regulatory Commission (NRC). DTE is not expected to break ground on that plant any time soon, however.
He further noted that Duke Energy (NYSE:DUK) has increased its ownership share in a couple of existing nuclear plants in North Carolina.
Other matters of interest, Barber said, include nuclear waste. For instance, courts in recent years have ordered the NRC to resume the licensing case for the Yucca Mountain spent fuel repository in Nevada, and some companies are submitting proposals to the U.S. Department of Energy (DOE) regarding interim nuclear waste storage sites in Texas and New Mexico.
Among other things, Barber noted that Exelon (NYSE:EXC) is sponsoring legislation in Illinois to get its nuclear units recognized as clean energy sources, which would help Illinois meet its requirements under the proposed Clean Power Plan.
That plan calls upon states to draft plans to decrease carbon dioxide from the power sector 30% by 2030, with a great amount of those reductions to occur by 2020, he said.
“[A]ll sorts of industry groups and state agencies have submitted comments saying that the rule is very unrealistic, especially the 2020 part,” he said.
Also, FERC has called for a safety valve and easing of those 2020 goals, he said, noting that the valve “would basically give companies some leeway to seek some extra time from the target deadlines to get into compliance.”
The Clean Power Plan, he said, “has plenty of opposition and plenty of enemies both in the courts and in Congress,” and there are various legal challenges going on.
While the plan has such fans as Exelon, others, like AEP and fellow “coal-centric utilities have just called it flat-out unworkable.”
Noting that there are other energy matters before the courts, Barber said, for instance, that the U.S. Supreme Court recently granted a petition for a writ of certiorari filed in January by U.S. Department of Justice Solicitor General Donald Verrilli, on behalf of FERC, for review of the judgment of the U.S. Court of Appeals for the District of Columbia in FERC v. Electric Power Supply Association (EPSA).
As TransmissionHub reported, the petition asked the Supreme Court to consider whether FERC reasonably concluded that it has authority under the Federal Power Act to regulate the rules used by operators of wholesale electricity markets to pay for reductions in electricity consumption, known as demand response, and to recoup those payments through adjustments to wholesale rates.
Among other things, Barber also discussed energy storage, saying that like plastics was referenced in the movie, “The Graduate,” as being “the thing of the future, for the moment, at least, energy storage might be something like that for the electric power grid.”
He noted that energy storage are easier to license, build and deploy than generation and transmission, and are quicker to power up than peaking plants.
According to the presentation, there are 185 GW of energy storage globally, and energy storage costs are coming down sharply, from $2,000/kWh in 2009 to $700/kWh in 2013.
GenerationHub Chief Analyst Barry Cassell during the webcast discussed coal plant retirements and other matters, noting, for instance, that AEP in West Virginia, a state in which the company has traditionally had seven or eight coal-fired power plants, the company will have only three once plants are shut down. On top of that, he noted that FirstEnergy (NYSE:FE) a couple of years ago shut down three coal-fired power plants in West Virginia as well.
A lot of such retirements, he said, have to do with the age of the plants, as well as their locations. West of the Mississippi, he noted, coal plants tend to be relatively newer and bigger, so not many retirements are seen in that region.
Cassell also noted that in Ohio, “utilities are scrambling to find a way – at a time of very cheap power prices – to ensure that … coal plants be continued because they argue, ‘Hey, these are very reliable ways of producing electricity during a polar vortex, if there is such a thing again, or any other peak demand period where reliability is key.’”
As GenerationHub reported, the AEP Ohio unit of AEP filed with the Public Utilities Commission of Ohio (PUCO) an expanded purchase power agreement (PPA) designed to provide customers with more stable electricity prices during periods of market volatility while continuing the economic viability of Ohio’s generation.
Cassell also pointed to a GenerationHub article that said that Consumers Energy‘s plans to retire its seven oldest coal-fired generating units by April 2016 – 32% of its fleet – mean that only one other energy provider in the country is retiring a larger percentage of its coal plants.
He also noted that PJM Interconnection is evaluating the expansion of the gas-fired Zion Energy Center in Illinois. Zion Energy LLC is looking to uprate the three combustion turbines at its gas-fired power plant in Illinois.
Among other things, he noted that Duke Energy Florida obtained its final air permit for the Suwannee expansion project. As GenerationHub reported, the Florida Department of Environmental Protection on April 28 issued a final air construction permit to Duke Energy Florida covering the installation of two nominal 178-MW simple cycle combustion turbines at the Suwannee River power plant to provide additional peaking resources at the facility.