Sierra Club applauds Vectren’s plan to sharply reduce coal-fired capacity

The Sierra Club on Nov. 29 celebrated Vectren‘s (NYSE: VVC) release that same day of a 20-year integrated resource plan that retires all but one coal-burning generation unit by 2024, and calls for the building of Vectren’s first utility-owned 50-MW solar farm by 2019.

The club said Vectren released its plan to customers and clean energy advocates. Vectren is expected to file its plan with the Indiana Utility Regulatory Commission on Dec. 16.

The plan would retire the A.B. Brown coal plant in Posey County and half of the F.B. Culley coal plant in Warrick County in 2024, and also end Vectren’s ownership stake in the Warrick coal plant in 2020. The plant is mostly owned by aluminum maker Alcoa Corp. Vectren also proposes to build 54 MW of solar by 2019, close several small gas plants and build an 889-MW gas plant in 2024.

The Sierra Club’s Beyond Coal Campaign has been organizing in Evansville, Indiana, for the past two years to advocate for retirement of the Brown and Culley power plants and investment in renewable energy.

“Vectren’s 20-year plan acknowledges the need for a lower carbon future, with the retirement of most of its major polluters by  2024,’ said Wendy Bredhold, Campaign Representative for Sierra Club’s Beyond Coal Campaign in the Ohio River Valley. “We applaud Vectren for moving to phase out coal; which CEO Carl Chapman said will result in a 60 percent reduction in carbon from 2005 levels, but this plan should include less reliance on gas and more on energy efficiency and renewable energy. We will keep pushing Vectren for more efficiency, wind, and solar.”

Vectren Energy Delivery of Indiana-South held the Nov. 29 discussion as its third and final public stakeholder meeting, which was conducted as part of the integrated resource (IRP) planning process that is overseen by the Indiana commission. This is the first plan, with input gathered at three public stakeholder meetings throughout 2016, which points to a future that is likely less reliant on coal, the company noted in a Nov. 29 statement.

“When looking at the energy mix Vectren will use to meet future electric demand, we considered a broad range of potential conditions and variables throughout this IRP process,” said Carl Chapman, Vectren’s chairman, president and CEO. “Over the next several months, we will finalize our generation plan with steadfast consideration for customer bill impacts. To speculate on exactly what that will look like and the timing is premature, but it will likely include natural gas and renewable energy options, as well as our continued offering of energy efficiency programs to ensure customers are focused on using energy wisely. We would anticipate still having some reliance on coal-fired generation, albeit substantially less, which will in turn lower the carbon footprint of our generation portfolio.”

Vectren must comply with a slate of federal mandates over the next several years, the compliance costs of which have driven the IRP process to consider alternative fuel sources. Some of these regulations are:

  • U.S. EPA’s Coal Combustion Residual (CCR) – Provides guidelines on coal ash handling and disposal regulations around the use of ash ponds; and
  • U.S. EPA’s Effluent Limitations Guideline (ELG) – Includes more stringent limitations on wastewater discharges from coal-fired plants; this rule resulted from previous mandates related to air.

Through the IRP stakeholder input process, Vectren communicated it would be required to spend roughly $250 million to comply with the CCR, ELG and other related rules, which spurred the consideration of other options due to the age of some of its coal-fired generation units.

“Over the next year, we will work to develop a transition plan that takes into strong consideration the economic impacts of each step, while evaluating possible modifications to current regulations that may be implemented under future administrations including those beyond the newly elected president,” said Chapman. “Our plan will be focused on ensuring we have a reasonably priced, reliable generation portfolio as well as a diverse energy mix to alleviate the risks associated with choosing only one fuel source. Likewise, we will expect to incorporate more renewable energy resources, such as solar, as costs are expected to continue to decline in the coming years.”

A Vectren presentation for the Nov. 29 meeting shows these plans under the preferred IRP option:

  • 2018 – retire Bags 1 gas-fired peaker (50 MW);
  • 2019 – retire Northeast 1-2 gas-fired peakers (20 MW);
  • 2020 – exit Warrick Unit 4 coal facility (150 MW Vectren share of unit);
  • 2024 – retire coal-fired Brown 1-2 and Culley 2 (580 MW); and
  • 2025 – retire Bags 2 gas-fired peaker (65 MW).

The preferred plan also includes an 889-MW, gas-fired combined-cycle addition in 2024 at an unspecified location. It also includes completion in 2023 of ELG-related upgrades for Culley Unit 3. Culley Unit 3 (270 MW) is Vectren’s most efficient coal unit and would be the only coal unit left after 2024.

Vectren noted that, related to the combined-cycle addition, that it does not currently have a significant amount of gas generation. Coal units respond too slowly to effectively back up large amounts of intermittent renewable energy, while new gas generation positions Vectren for more renewables in the future.

Said the presentation: “Gas Fired Combined Cycle units provide a rapid response suitable for backing up significant amounts of renewable generation with the obvious benefits of being more efficient with very low emissions.The Duct-Firing option of a combined cycle unit provides quick response peaking capacity with a higher level of efficiency compared to simple cycle gas turbine peaking units. Gas generation with Duct-Firing was selected in each of the modeled scenarios, including the high technology case with steep drops in renewables/storage cost, and possible future states with high gas prices. Vectren modeled a new CCGT plant, built at a brown field site, which reuses some equipment. Should this site ultimately be chosen, Vectren will pipe gas to the location.”

The presentation indicated that this plan may not change much under the new Trump Administration, which has promised a broad attack on environmental regulations and an effort to save coal-mining jobs. It noted that under Trump:

  • EPA’s greenhouse-gas-reducing Clean Power Plan (CCP) is at risk;
  • Clean-Energy Tax incentives are at risk; and
  • The Paris climate change agreement could be canceled.

However, Vectren said it is confident in the need for new gas generation by 2024. It pointed out that:

  • a duct-fired gas combined cycle unit was selected in all scenarios, including the “low regulatory scenario,” which is basically a Trump scenario;
  • natural gas prices are low and stable;
  • the Brown coal plant’s SO2 scrubber technology is aging;
  • other new administrations will most likely push for a lower carbon future;
  • the long lead time to file for, gain approval of, and build new gas combined cycle;
  • uncertainty regarding availability and cost of future capacity and energy; and
  • if necessary, the CCGT can serve as back up for further cost-effective renewables.

The presentation said: “President-elect Trump has indicated that he intends to review environmental regulations. At this point, it is unclear which regulations President-elect Trump’s new EPA administrator intends to review, other than the Clean Power Plan and the Waters of the US rule. Final regulations, like the ELG and CCR rules, require notice and comment rulemaking to rescind and/or modify. An 18 to 24 month process. Rules such as the ELG rule which are technology mandates arising under legislation, in this case the Clean Water Act, are more difficult to set aside and must be supported by a technological or human health rationale.

“The CPP is a final regulation, so it must be rescinded/modified through a supplemental notice and comment rulemaking. Currently in litigation, and even if the Trump Department of Justice determines that it will no longer defend the rule, the rule is still being defended by other states and environmental groups. Previous Endangerment Finding would also need to be rescinded and/or modified. While it remains to be seen what measures, if any, the Trump administration will be successful in delaying or rescinding, Vectren’s generation planning decisions are long term in nature, and the low regulatory scenario that we modeled assumed that there was no CPP in place during the planning period.”

Vectren delivers electricity to approximately 144,000 customers in all or portions of Gibson, Dubois, Pike, Posey, Spencer, Vanderburgh and Warrick counties in Indiana.

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.