The recently-shut, coal-fired Kanawha River power plant, while not a good candidate right now for conversion to natural gas, may at some point be a good candidate in place of new gas-fired power plant build, the Appalachian Power Co. (APCo) subsidiary of American Electric Power (NYSE: AEP) told the West Virginia Public Service Commission in an Oct. 8 filing.
The commission opened up a review earlier this year of the planned shutdown by APCo of several coal-fired units, called the “Disposition Units” in this case, with the shutdowns due largely to compliance needs under the federal Mercury and Air Toxics Standards. Those Disposition Units are Units 5 and 6 of the Glen Lyn Plant, Units 1 and 2 of the Kanawha River Plant, and Units 1 and 3 of the Sporn Plant. These are among thousands of MWs of coal-fired capacity that AEP shut around the end of May across its Midwest system, in states that included Indiana, Kentucky, Ohio and West Virginia.
Details on the affected units are:
- Glen Lyn Unit 5 (90 MW) and Unit 6 (235 MW);
- Unit 1 (200 MW) and Unit 2 (200 MW) at Kanawha River;
- Unit 1 (145 MW) and Unit 3 (145 MW) at Sporn; and
- Unit 3 (230 MW) at Clinch River.
The Oct. 8 filing was a request to reopen this proceeding for the purpose of sharing APCo’s conclusions respecting the potential future viability of certain of its inactive generating resources and seeking authorization from the commission to proceed with the decommissioning and disposal of some of those resources.
On March 19, the commission issued an order (called the “IRP Order”) directing APCo to file an integrated resource plan on or before Dec. 31, 2015. On May 8, the staff of the commission filed a petition requesting that the commission initiate a new proceeding and direct APCo to file information sufficient for the commission to evaluate the then-planned shutdown of the “Disposition Units,”’ the options considered, and the impact to customers.
On July 7, the commission issued an order saying that it “is reasonable for APCo to consider maintaining, for at least four years or until further order of the Commission, any infrastructure installed at Kanawha River that would be used if the plant was to be converted to burn natural gas.” The commission further concluded that APCo should “consider whether property or equipment at the [Disposition Units other than Kanawha River Units 1 & 2 may economically contribute to natural gas conversion at those plant sites in the future before it takes irreversible steps to demolish or dispose of that equipment.”
The commission urged APCo to maintain any infrastructure installed at the Kanawha River Plant that would be used for natural gas conversion of the plant for at least four years, or until further order of the commission. APCo sought reconsideration of that order on certain accounting-related issues. Further, APCo indicated that it would be considering whether and, if so, how any of the Disposition Units might figure into meeting its customers’ future needs.
On Aug. 7, the commission issued an order on the reconsideration motion stating that it “will expect APCo to share its conclusions regarding its analysis of the future viability of the Disposition Units as soon as possible.”
Kanawha River might be competitive on gas; Glen Lyn and Sporn aren’t at all
Said the utility’s Oct. 8 filing: “As APCo indicated in its Petition for Reconsideration, APCo has studied the viability of the Disposition Units and is now able to report to the Commission the results that its analyses have produced to date. In its analyses, APCo evaluated the cost of converting and operating Sporn Units 1 & 3, Glen Lyn Unit 6, and Kanawha River Units 1 & 2 to use natural gas, rather than coal, as fuel. APCo excluded Glen Lyn Unit 5 from its analyses. Glen Lyn Unit 5 has reached the end of its useful life and is effectively inoperable because of certain significant equipment liabilities.
“APCo modeled the costs of converting and operating Sporn Units 1 & 3, Glen Lyn Unit 6, and Kanawha River Units 1 & 2 based on an assumed ten-year life of any converted units and considered conversion, pipeline, and refurbishment costs, the latter under low cost and high capital cost scenarios. APCo then compared these conversion and operation costs to the costs of comparable, new gas-fired generating capacity, in the form of both combustion turbine (‘CT’) and combined cycle (‘CC’) units. These analyses show that the cost of converting and operating the Kanawha River Units is significantly less than the cost of converting and operating either the Sporn Units or Glen Lyn Unit 6.
“Further, the cost of converting and operating the Kanawha River Units is, under certain scenarios, relatively comparable to the cost of installing and operating new gas-fired capacity. The cost of converting and operating the Sporn Units or Glen Lyn Unit 6 would be significantly more than the cost of installing and operating new gas-fired capacity.
“In view of the significant differences in cost between the conversion and operation of the Kanawha River Units or the construction and operation of new gas-fired capacity and the conversion and operation of the Sporn Units or Glen Lyn Unit 6, it does not make economic sense to consider further the conversion of the Sporn Units or Glen Lyn Unit 6. Accordingly, APCo requests that it be relieved of any obligation to study further the future viability of the Sporn and Glen Lyn Units and of any obligation to maintain the Sporn and Glen Lyn Units for future use. APCo further requests authorization from the Commission to proceed with the decommissioning and disposal of Sporn Units 1 & 3, Glen Lyn Units 5 & 6, and Clinch River Unit 3.
“In light of the results of its analyses, APCo plans to keep open the possibility of the conversion of the Kanawha River Units and to include those units among the demand and supply alternatives that will be considered in APCo’s preparation of the integrated resource plan to be filed by December 31, 2015.”
APCo noted that the relative economics of the Kanawha River Units 1 and 2 gas conversion alternative under a “Low Refurbishment Cost” view are slightly more advantageous than a CT alternative, but on par with a CC alternative. If the “Higher Refurbishment Cost” view is assumed, the CT alternative is roughly equivalent, while the CC alternative is more economical than the comparable Kanawha River Units 1 and 2 gas conversion option.
APCo is already converting Clinch River Units 1 and 2 in Virginia from coal to gas, with Unit 3 not getting that conversion.
These coal unit shutdowns have left APCo to largely rely on the Amos and Mountaineer power plants for in-state generation from coal-fired capacity. Its Wheeling Power sister utility also fairly recently acquired half of the Mitchell coal plant in northern West Virginia from an unregulated AEP subsidiary. The other half of Mitchell is now owned by AEP’s Kentucky Power subsidiary as a replacement for the recently-shut, 800-MW Big Sandy Unit 2, which was also coal-fired.