Indiana commission okays IPL’s Harding Street 7 coal-to-gas conversion project

The Indiana Utility Regulatory Commission on July 29 approved an October 2014 application from Indianapolis Power & Light for certificates of public convenience and necessity (CPCN) related to a coal-to-gas conversion project at Harding Street Unit 7.

The commission had previously approved coal-to-gas conversions at Harding Street Units 5 and 6. The Unit 7 conversion is needed to comply with federally-mandated requirements, including the National Pollutant Discharge Elimination System (NPDES) and the Mercury and Air Toxics Standards (MATS). IPL’s “Compliance Plan” approved July 29 includes the construction of wastewater treatment technologies, operational changes, and use of modified stormwater management practices at its coal-fired Petersburg and Harding Street plants, and refueling of Harding Street Station (HSS) Unit 7 (HS-7).

IPL is a unit of AES Corp. (NYSE: AES).

Bradley D. Scott, IPL Senior Vice President, Power Supply, during this case provided an overview of IPL’s generating units and other sources of supply. Scott explained that as part of the proposed Compliance Project, IPL seeks to change the MATS compliance plan for HS-7 approved in a prior case, which involved new air emissions controls and keeping the unit on coal. He added however, the NPDES compliance project does not impact the MATS compliance plan for the Petersburg coal units, which is underway, on schedule and within the commission-approved cost estimate.

Angelique Oliger, Director of Environmental Policy for AES US Services LLC, and Dennis H. Fink, Senior Project Manager for CH2M HILL Engineers, discussed the NPDES permits issued under Section 402 of the Clean Water Act and other existing or anticipated environmental mandates. Fink and Oliger explained that in addition to the current NPDES permit limits, anticipated regulatory drivers were considered in the context of choosing a NPDES compliance strategy that would be adaptable to future regulations. These regulations include but are not limited to: changes to the NPDES permit limits, update to the industry’s Effluent Limitation Guidelines (ELGs) under the Clean Water Act, and the Coal Combustion Residuals (CCR) Rule.

Judah Rose, Managing Director for ICF Resources LLC, provided background and support for ICF’s CO2 price forecasts provided to IPL for use in the compliance analysis. Rose also supported the probabilities assigned to the CCR, Section 3 l 6(b) of the Clean Water Act, and ELG regulations for use in IPL’s analysis.

A converted Unit 7 will fill a need during the ‘Gap Year’

IPL officials said a converted Harding Street Unit 7 would help support the IPL system during the “Gap Year.” The Gap Year is the 12-month period between when the coal-fired Eagle Valley Units 3 through 6 are retired in April 2016 and when the new Eagle Valley combined cycle gas turbine (CCGT) project goes in service in April 2017. The Gap Year includes the Summer 2016 and the Winter 2016/2017 peak periods. The capacity position forecast reflected in IPL’s filing shows IPL projected to be about 390 MW short of capacity in the Gap Year. To mitigate the Midcontinent Independent System Operator (MISO) Planning Resource Auction price volatility risk, IPL has bilaterally purchased 100 MWs of Zone 6 Zonal Resource Credits at a fixed and known price for the Planning Year (PY) 2015-2016 resulting in a minimal net capacity requirement. For PY 2016-2017, IPL has purchased 100 MWs of Zone 6 Zonal Resource Credits at a fixed and known price and is nearing completion of an agreement for an additional 200 MW. This results in a net capacity requirement ranging from 50 to 100 MW.

Dennis C. Dininger, IPL Director of Commercial Operations, explained the need for firm natural gas transportation during the 2016-2017 MISO year and IPL’s associated arrangements for gas supply. Dininger and James L Cutshaw, IPL Revenue Requirements Manager, explained that natural gas transportation costs and fuel costs associated with the HS-7 Refueling will be recovered through the fuel adjustment mechanism.

Dininger explained that all competing generators in MISO are also subject to the NPDES requirements. Hence, IPL expects that related costs will be priced into offers from other market participants and, therefore, these costs should increase the overall price level in the market and have little impact on the generation of the Petersburg plant. Dininger testified that the HS-7 Refueling is expected to increase its dispatch cost due to the price level of delivered natural gas over coal. He said IPL anticipates that HS-7 will run more like a peaking unit than its current base load level, thereby increasing the amount of purchased power and decreasing the level of off-system sales.

Dininger testified that IPL anticipates that with the HSS Units 5, 6, and 7 fuel conversions to natural gas that natural gas will fuel 10% and coal will fuel 82% of IPL customer needs in 2016. He said the fuel mix will move to 30% natural gas and 63% coal with the remaining from purchases of MISO, various solar projects, the Hoosier Wind Project, and Lakefield Wind Project in 2017. Dininger explained that the increase in natural gas is primarily due to the addition of the Eagle Valley CCGT to the fleet in April of that year.

Total project cost estimated at nearly $332 million

IPL expects the cost of the Compliance Project to total approximately $257.99 million for the water treatment and control measures, which are referred to as the “Water Control Component”. He said the HS-7 refuel cost estimate is approximately $74.0 million. The compliance costs include the costs incurred to preserve the continued operation of HS-7. The total Compliance Project estimate is $331.96 million.

Said the July 29 commission approval for HS-7: “This project will satisfy reliability, energy and capacity needs and, because the unit will be fueled by natural gas, it will further diversify IPL’s resource mix. Because HSS is electrically directly connected to the IPL load zone, the HS-7 Refueling project provides an important capacity resource close to the center of IPL’s service area. This reduces transmission cost and interruption risk.

“Substantial evidence demonstrates and we find that IPL has evaluated the projects against other reasonable generation alternatives, including sensitivities, and also included reasonable [demand side management/energy efficiency] levels. The analyses conclude that the HS-7 Refueling is the least cost reliable resource alternative to meet IPL’s customers’ resource needs. Based on the evidence of record, the Commission finds the public convenience and necessity requires, or will require, IPL’ s proposed HS-7 Refueling.”

Incidentally, the Office of Air Quality at the Indiana Department of Environmental Management is taking comment until Aug. 21 on a draft air permit covering the HS-7 project. “The proposed change is a modification to Boiler 70 (Unit 7) to enable the unit to use natural gas as its only fuel and discontinue the use of coal and fuel oil,” said a permit notice. “The rated capacity of the unit will increase slightly from 4123 MMBtu/hour to 4346 MMBtu/hour as a result of the proposed change. This modification to Boiler 70 will also allow for the removal of the recently permitted storage silo for activated carbon, which will not be constructed and the source is also proposing to install a new 92 MMBtu/hr natural gas fired auxiliary boiler.”

In May 2014, IPL was approved by the Indiana commission to convert Harding Street Units 5 and 6 from coal to natural gas. IPL plans to stop burning coal completely at the Harding Street plant in 2016. The three coal units at Harding Street total 645 MW of capacity. Harding Street 5 and 6 were among the units targeted to stop using coal because it is not cost effective to add emission controls to these small coal-fired units (106 MW each when coal-fired). The GenerationHub database shows Harding Street Unit 7 at 471 MW (nameplate) and 435 MW (net summer) of capacity.

IPL’s mainstay coal generator will, after these Harding Street conversions and the Eagle Valley coal shutdowns, be the four-unit Petersburg plant.

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.