The Southwestern Electric Power Co. (SWEPCO) unit of American Electric Power (NYSE: AEP) plans to rely less on coal and more on other energy resources (mostly renewables) over the next 20 years, with the possible addition of a new gas-fired power plant next decade.
SWEPCO, which serves part of Texas, Louisiana and Arkansas, on Dec. 1 filed its latest integrated resource plan (IRP) with the Arkansas Public Service Commission. The plan covers the next 20 years. The key components of this plan are for SWEPCO to:
- Invest in environmental control equipment to make the Welsh Units 1 and 3 (units are 528 MW each) and Flint Creek (50% SWEPCO share is 264 MW) coal units compliant under known or anticipated environmental regulation;
- Continue operation of recently installed environmental control equipment at coal-fired Pirkey (86% share is 580 MW) and Dolet Hills (40% share is 257 MW);
- Add 435 MW of Natural Gas Combined Cycle (NGCC) generation in 2026;
- Begin the process of retiring approximately 700 MW of older gas-steam units;
- Retire the coal-fired, 528-MW Welsh Unit 2 in 2016;
- Acquire an optimal mix of supply-side resources in the form of additional wind resources, utility-scale solar, and natural gas-fired generation resources;
- Implement demand-side resources in the form of additional energy efficiency programs; and
- Recognize that residential and commercial customers will add distributed resources, primarily in the form of residential and commercial rooftop solar.
This 2015 IRP considers the impacts of final and proposed U.S. Environmental Protection Agency (EPA) regulations to SWEPCO generating facilities. In addition, the IRP development process assumes potential regulation of greenhouse gas (GHG)/carbon dioxide (CO2). For that purpose, a reasonable proxy was utilized in the IRP that assumed that the resulting economic impact would be equivalent to a CO2 “tax” applicable to each ton of carbon emitted from fossil-fired generation sources which would take effect beginning in 2022. Under the company’s ‘Base’ pricing scenario, the cost of such CO2 emissions is expected to stay within the $15-$20/metric ton (tonne) range over the long-term analysis period.
SWEPCO said it is still analyzing the impacts of the U.S. Environmental Protection Agency’s Clean Power Plan (CPP), which was published in final form on Oct. 23 and is now under court appeal by various parties. The CPP calls for 32% greenhouse gas reductions from existing power plants by 2030, with an interim compliance deadline in 2022.
SWEPCO’s total internal energy requirements are forecasted to decrease at a Compound Average Growth Rate (CAGR) of 0.3% over the IRP planning period (through 2034). Likewise, SWEPCO is expected to experience a decrease in peak demand of 0.3% per year over the planning period. The primary reductions in internal energy and peak demand are tied to the expiration of certain wholesale contracts. The net impact of load growth, plant retirements and plant deratings leaves SWEPCO with a “going-in” (i.e. before resource additions) capacity deficit. In 2022, SWEPCO is anticipated to experience a capacity shortfall.
SWEPCO’s Preferred Plan Portfolio is:
- Maintains SWEPCO’s coal units at Welsh Units 1 and 3, Flint Creek and Pirkey, in addition to its share of energy and capacity from the non-SWEPCO operated Dolet Hills unit;
- Utilizes 390 MW (nameplate) of wind energy from existing power purchase agreements (PPAs) acquired in 2012 and 2013;
- Continues operation of SWEPCO’s newest plant additions – the environmentally-compliant, coal-fueled Turk unit (73% share of plant is 477 MW), as well as the Stall natural gas combined-cycle (511 MW) and Mattison natural gas combustion turbine (301 MW) facilities;
- Retires Welsh Unit 2 in 2016;
- Retires the 700 MW of older gas-steam units through the end of the planning period, beginning in 2020;
- Adds the 435 MW of Natural Gas Combined Cycle generation in 2026;
- Adds 1,200 MW (nameplate) of wind energy by the end of the planning period, beginning in 2017;
- Implements customer and grid energy efficiency, including Volt VAR Optimization (VVO) programs so as to reduce energy requirements by 1,334 GWh and capacity requirements by 221 MW in 2034;
- Adds 850 MW (nameplate) of utility-scale solar energy by the end of the planning period, beginning in 2017;
- Recognizes additional distributed solar capacity will be added by SWEPCO’s customers, starting in 2016, and ramping up to 53 MW (nameplate) by 2034.
Only one gas-steam unit in the firm plan to be retired
“With the exception of Lieberman 2, which will be retired in 2015, no firm commitment has been made to retire the balance of the gas-steam assets,” said the IRP. “However, given the age and the potential of such expensive component failures, this IRP assumes that certain of these relative older, less efficient gas-steam units will be retired over the planning period.’
The gas-steam units are:
- Arsenal Hill 5, Shreveport, LA, in-service in 1960, currently planned to be retired in 2025, 110 MW;
- Knox Lee 2, Longview, TX, in-service in 1950, retired in 2020, 30 MW;
- Knox Lee 3, in-service in 1952, retired in 2020, 26 MW;
- Knox Lee 4, in-service in 1956, retired in 2019, 71 MW;
- Knox Lee 5, in-service in 1974, retired in 2039, 348 MW;
- Lieberman 1, Mooringsport, LA, in-service in 1947, retired in 2014, 86 MW,
- Lieberman 2, in-service in 1949, retire in 2019 (note that this planning purposes retirement date is later than the 2015 firm retirement date mentioned above), 25 MW;
- Lieberman 3, in-service in 1957, retire in 2022, 109 MW,
- Lieberman 4, in-service in 1959, retire in 2024, 108 MW;
- Lonestar 1, Lonestar, TX, in-service in 1954, retire in 2019, 50 MW;
- Wilkes 1, Avinger, TX, in-service in 1964, retire in 2029, 171 MW;
- Wilkes 2, in-service in 1970, retire in 2035, 378 MW; and
- Wilkes 3, in-service in 1971, retire in 2036, 362 MW.
Over the 20-year planning horizon, the company’s capacity mix attributable to solid fuel-fired assets would decline from 46% to 35%, and natural gas assets decline from 37% to 32%. Renewables (wind, utility and distributed solar, based on nameplate ratings) increase from 7% to 29%, and, similarly, demand-side and energy-efficiency measures increase from 1% to 4% over the planning period. The addition of carbon-free energy resources serve to hedge SWEPCO’s exposure to natural gas price and Southwest Power Pool (SPP) energy market volatility, while producing a lower cost solution than one that includes greater reliance on new gas assets.
At times renewable energy was added to the Preferred Plan portfolio when there was no need for capacity. In these instances the added resources had a positive economic effect on the overall plan due to the ability to sell low-cost energy to the SPP market. While over the planning period SWEPCO is adding a significant amount of cost effective renewable generation, approximately 2,100 MWs (nameplate) or 600 MWs of firm capacity for planning purposes, these investments in intermittent renewable generating resources will be made incrementally and continually monitored and evaluated to determine if incremental additions will impact overall reliability within the SPP Regional Transmission Organization (RTO).
The proposed amount of intermittent renewable resources within SWEPCO’s Preferred Plan are in alignment with current SPP planning criteria. Reliability concerns due to the intermittent nature of renewable resources are mitigated by way of the company’s overall reserve margin. The reserve margin is designed to account for the unavailability of resources at times of peak demand. Should a substantial portion of renewable energy become unavailable SWEPCO said it would have adequate resources to meet customer needs.
Five year plan includes up to 200 MW of wind and 50 MW of solar
SWEPCO’s Five Year Action Plan includes:
- Conduct a Request for Proposal(s) (RFP) to explore potential near-term, tax-advantaged opportunities to add up to 200 MW wind and 50 MW of solar energy (via Renewable Energy Purchase Agreements (REPAs)). The modeling indicated adding these resources in this timeframe should optimize production energy costs under the assumed parameters;
- Complete solid fuel plant Mercury and Air Toxic Standards (MATS) and Regional Haze-required retrofit projects already underway: Pirkey Station: Install Calcium Bromide injection system (Project Complete); Welsh Units 1 and 3: Complete Activated Carbon Injection (ACI), Fabric Filter Baghouse, and Chimney installations (2016); Flint Creek: Complete Dry Flue Gas Desulfurization and ACI installations (2016).
SWEPCO’s historical all-time highest recorded peak demand was 5,554 MW, which occurred in August 2011; and the highest recorded winter peak was 4,919 MW, which occurred in January 2014. The most recent (2015) actual SWEPCO summer and winter peak demands were significant at 5,149 MW and 4,708 MW, occurring on August 10th and January 8th, respectively.
SWEPCO assumed that all of its coal and lignite units, with the exception of Welsh Unit 2, would continue to operate during the IRP planning period. However, with the exception of Knox Lee Unit 5 and Wilkes Unit 3, all of SWEPCO’s less efficient gas-fired steam units would retire over the course of the IRP planning period. These units, while providing capacity value, contribute very little energy value. Therefore, as equipment ages and needs to be replaced, there will come a time where the cost of replacing equipment will exceed the future value of energy and capacity those units provide.
Here is a list of retrofit technologies that are being added, or have been added, to the SWEPCO fleet, including technologies to meet the requirements of MATS:
- Dolet Hills Unit 1 installed an ACI system, DSI technology, and a baghouse to mitigate mercury and PM emissions;
- Pirkey Unit 1 will be installing an ACI system;
- Welsh (Units 1 and 3) will be installing an ACI system with a baghouse. These units have a one-year MATS extension from the Texas Commission on Environmental Quality (TCEQ);
- Welsh Unit 2 will be retired per an unrelated settlement agreement and received an extension of the MATS requirements until the unit retires or until April 16, 2016, whichever comes first.
- Flint Creek will also have installed a dry FGD (NID technology), ACI system and a baghouse to meet MATS and regional haze requirements. This plant has also received a one-year MATS deadline extension to April 2016.
All other SWEPCO generating units are expected to meet the MATS requirements without modification.