Calpine has a strong hand in Texas, executives say

Calpine (NYSE:CPN) President and CEO Thad Hill thinks his company’s gas-focused power fleet increasingly has the upper hand on generators with heavy reliance on coal and nuclear power – especially in Texas.

“There still is more coal to displace,” and nuclear power is next in line, Hill said in response to a financial analyst question during an Oct. 30 quarterly earnings call.

Hill seemed to be speaking to the situation nationally on that point. But one of the topics included in Calpine’s quarterly materials was “Something has to give in Texas.”

Calpine suspects that 25% of Electric Reliability Council of Texas (ERCOT) capacity is not covering its cash costs and could face retirement decisions in the near future. “Ultimately economics is going to work” against additional capital expenditures for environmental equipment at old coal plants, Hill said.

Next year much of the coal fleet begins running scrubbers “en masse” and the incremental estimated cost impact is up to $4/MWh, Calpine officials said. Many Texas coal plants got extensions into 2016 on compliance with the EPA Mercury Air Toxics Standard (MATS) into 2016.

Calpine also expects about 8,000 MW of generation in ERCOT will require investments to meet regional haze compliance within the next three-to-five years. That’s according to ERCOT and EPA data, Calpine said.

While most of the regulatory spending concerns coal plants, nuclear plants are to a lesser extent also facing increased regulatory spending, Calpine officials said.

Calpine has a national portfolio of roughly 27,000 MW. That includes more than 9,700 MW in the East; 9,400 MW in the West and 7,400 in Texas.

Calpine has made roughly 15,000 MW of transactions since 2010. It has sold 7,000 MW and purchased about 8,000 MW.

Calpine notes plant deal, bouncing back from California fire

The purchase of Granite Ridge in New Hampshire expands Calpine’s presence in the attractive New England market. The 745-MW combined-cycle plant started commercial operation in 2003 and has had a capacity factor of roughly 50% since 2011, Calpine executives said during the call.

Calpine now owns 2,000 MW in New England.

In addition, Calpine started commercial operation of the 309-MW Garrison natural gas plant in Delaware during June, officials said. Calpine noted that it is in the early stages of development of a second phase of the Garrison Energy Center.

Both Hill and Calpine Executive Vice President and COO Trey Griggs heaped praise on geothermal generation employees affected by the massive September wildfires in California.

Luckily no Calpine employees died as a result of the fires although about two dozen lost their homes, company officials said. The fire that started on Sept. 12 quickly burned more than 12,000 acres.

Significant damage was done to the company’s Geysers power operations. Cooling towers were burned at five plants. Insurance will cover part of the losses. Calpine expects to see a full return to normal geothermal production in 2016.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.