The strategic plan for the Interstate Power and Light and Wisconsin Power and Light units of Alliant Energy (NYSE: LNT) includes adding environmental controls at newer, larger and more efficient coal-fired units.
Alliant Energy outlined current plans for retrofits and retirements in its Feb. 24 annual Form 10-K report.
The following shows environmental controls projects included in the current environmental compliance plans:
Interstate Power and Light
- Ottumwa Unit 1, in-service 2018/2019, selective catalytic reduction (SCR), regulatory approvals in process;
Wisconsin Power and Light
- Edgewater Unit 5, in-service in 2016, scrubber and baghouse; and
- Columbia Unit 2, in-service in 2018, SCR.
IPL plans to include the proposed Ottumwa Unit 1 SCR project in a filing with the Iowa Utilities Board early this year.
The current strategic plan also includes the retirement, or fuel switch from coal to natural gas, of several older, smaller and less efficient units.
Interstate Power and Light
- M.L. Kapp Unit 2, 2018 MW nameplate, fuel switch completed in June 2015;
- Prairie Creek Unit 4, 149 MW nameplate, fuel switch by end of 2017;
- Sutherland Units 1 and 3, 199 MW nameplate, retire by end of 2017;
- Dubuque Units 3 and 4, 66 MW nameplate, retire by end of 2017;
- Fox Lake Units 1 and 3, 93 MW nameplate, retire by end of 2017;
- Other unnamed units, about 195 MW nameplate, retire by end of 2017;
- Burlington Generating Station, 212 MW nameplate, fuel switch by end of 2021; and
- Prairie Creek Units 1 and 3, 64 MW nameplate, fuel switch or retire by end of 2025.
Wisconsin Power and Light
- Nelson Dewey Units 1 and 2, 227 MW nameplate, retired December 2015;
- Edgewater Unit 3, 69 MW nameplate, retired December 2015;
- Edgewater Unit 4, 239 MW nameplate (WPL’s 68% of the unit), retire by end of 2018;
- Rock River Combustion Turbine Units 3-6, 169 MW nameplate, retire by end of 2019; and
- Sheepskin Combustion Turbine Unit 1, 42 MW nameplate, retire by end of 2019.
In some cases, final Midcontinent ISO studies could indicate that the retirement of an individual unit may result in reliability issues and that transmission network upgrades for system reliability are necessary to enable such retirement. Under the current MISO tariff, the specific timing for the retirement of these units could depend on the timing of the required transmission network upgrades as well as various operational, market and other factors.
The retirements of Fox Lake Unit 3, Sutherland Units 1 and 3, and other units are contingent on the construction of the new Marshalltown gas-fired project as well as various operational, market and other factors.
The retirements of Edgewater Unit 4 and the Rock River and Sheepskin Combustion Turbine Units are contingent on the construction of the gas-fired Riverside expansion as well as various operational, market and other factors.
Alliant Energy, IPL and WPL are working with MISO, state regulatory commissions and other regulatory agencies, as required, to determine the final timing of these actions. The expected dates for the retirement and fuel switching of these EGUs are subject to change depending on operational, regulatory, market and other factors. The potential retirement of other units within the generation fleet continues to be evaluated.
Cheap gas has helped push up coal inventories
Coal is a primary fuel source for internally generated electric supply. Alliant Energy, through Corporate Services as agent for IPL and WPL, has entered into contracts with different suppliers to help ensure that a specified supply of coal is available at known prices for IPL’s and WPL’s coal-fired units for 2016 through 2018, the Form 10-K noted. As of Dec. 31, 2015, existing contracts provide for a portfolio of coal supplies that cover approximately 79%, 55% and 33% of IPL’s and WPL’s estimated aggregate annual coal supply needs for 2016 through 2018, respectively. Remaining coal requirements are expected to be met from either future term contracts or purchases in the spot market.
Alliant Energy, through its subsidiaries Corporate Services, IPL and WPL, also enters into various coal transportation agreements to meet IPL’s and WPL’s coal supply requirements. As of Dec. 31, 2015, existing coal transportation agreements cover IPL’s and WPL’s estimated coal transportation needs for 2016 and 2017. In 2015 and 2016, two of Alliant Energy’s coal suppliers filed for restructuring under Chapter 11 of the U.S. Bankruptcy Code. There has been no significant impact to Alliant Energy, IPL and WPL as a result of these bankruptcy filings, the Form 10-K said.
Nearly all of the coal utilized by IPL and WPL is from the Wyoming end of the Powder River Basin. Which probably makes Arch Coal and Alpha Natural Resources, both of which have PRB mines, the unnamed coal producers that sought bankruptcy.
A majority of this coal is transported by rail-car directly from Wyoming to IPL’s and WPL’s units, with the remainder transported from Wyoming to the Mississippi River by rail-car and then via barges to the final destination. As protection against interruptions in coal deliveries, IPL and WPL strive to maintain average coal inventory supply targets of 25 to 55 days for units with year-round deliveries and 30 to 125 days (depending upon the time of year) for units with seasonal deliveries. As of Dec. 31, 2015, actual inventory days ranged from 29 to 92 days for units with year-round deliveries and were 161 days for a unit with seasonal deliveries. “Coal inventory levels have been impacted by lower natural gas prices, which makes natural gas-fired generation more economical compared to other fuel sources, such as coal,” said the company. “Coal inventory levels have also been impacted by lower electric demand due to milder temperatures in the fourth quarter of 2015.”
Alliant added: “Average delivered coal costs moderately declined during the last half of 2015 due to downward rail rate adjustments, lower rail fuel surcharges to historic low levels and lower spot market coal prices. However, average delivered coal costs are expected to slightly increase in the future due to price structures and adjustment provisions in existing coal contracts, in conjunction with expected rising market prices; rate structures and adjustment provisions in existing transportation contracts; and expected future coal and transportation market trends. Existing coal commodity contracts with terms of greater than one year have fixed future year prices that generally reflect recent market trends. Rate adjustment provisions in current rail transportation contracts are based on changes in the All Inclusive Index Less Fuel as published by the Association of American Railroads. These transportation contracts also contain fuel surcharges that are subject to change monthly based on changes in diesel fuel prices, which are currently at low levels.
“Other factors that may impact coal prices for future commitments are increasing costs for supplier mineral rights, increasing costs to mine the coal, and changes in various associated laws and regulations. For example, emission restrictions related to SO2, NOx and mercury, along with other environmental limitations on [electricity generating units], continue to increase and will likely limit the ability to obtain, and further increase the cost of, adequate coal supplies. Factors that may impact future transportation rates include, but are not limited to: the possible need for railroads to enhance and expand infrastructure, corresponding investments in locomotives and crews, and the desire to improve margins on coal movements commensurate with margins on non-coal movements.”