Tuesday, February 6, 2018

Pleasants Power Station sale canceled

FirstEnergy Corp. had planned for one of its subsidiaries to sell the Pleasants Power Station near Willow Island, W.Va., to another. That would move Pleasants, which burns coal, from a competitive market to a regulated one.

That transfer apparently is dead now. According to the Marietta Times, FirstEnergy has called off the move.

The Federal Energy Regulatary Commission nixed the sale, while the West Virginia Public Service Commission had approved it with certain conditions. FE says it does not accept the PSC's terms and it will not appeal the FERC decision.

Now we wait and see what the future of the plant is.

AEP updates its plan to move away from coal and toward renewables

What had been a company known for its large coal-fired power plants, many of them along the Ohio River and its tributaries, is transforming into a company that will rely more on natural gas and renewables.

American Electric Power released its Strategic Vision for a Clean Energy Future today, Feb. 6. A lot of what’s in it has been said before, including here. But this is the latest version of the company’s plan to move away from coal and toward other sources of electricity that it sees as environmentally responsible.

The AEP towboat M/V Chuck Zebula northbound at Ravenswood, W.Va., on Jan. 31, 2017.

What it means for residential and business customers is the possibility of higher electricity rates in the future for customers of American Electric Power and its operating companies.

From the news release:

COLUMBUS, Ohio, Feb. 6, 2018 - American Electric Power (NYSE: AEP) today released a report outlining the company’s strategy for a clean energy future. The strategy includes new carbon dioxide emission reduction goals and investments in renewable resources and advanced technologies to enhance the efficiency of the power grid.

In the report, AEP outlines a business strategy that will lead to reductions in carbon dioxide emissions from its power plants of 60 percent from 2000 levels by 2030 and 80 percent from 2000 levels by 2050.

AEP expects to achieve its carbon dioxide emission reductions through a variety of actions including investments in renewable generation and advanced technologies; investment in transmission and distribution systems to enhance efficiency; increased use of natural gas generation; and expanded demand response and energy efficiency programs.

"AEP is focused on modernizing the power grid, expanding renewable energy resources and delivering cost-effective, reliable energy to our customers,” said Nicholas K. Akins, AEP chairman, president and chief executive officer. “Our customers want us to partner with them to provide cleaner energy and new technologies, while continuing to provide reliable, affordable energy. Our investors want us to protect their investment in our company, deliver attractive returns and manage climate-related risk. This long-term strategy allows us to do both."

AEP’s resource plans include adding 3,065 megawatts (MW) of solar generation and 5,295 MW of wind generation to the portfolio serving its regulated utility customers by 2030. …

AEP’s generation capacity has gone from 70 percent coal-fueled in 2005 to 47 percent today. Its natural gas capacity increased from 19 percent in 2005 to 27 percent today, and its renewable generation capacity has increased from 4 percent in 2005 to 13 percent today.

The full document detailing AEP’s plan is 24 pages.

One excerpt:

“After 2030, emissions reductions will continue to occur as most of our coal-fueled generating units reach the expected end of their useful lives, which is typically around 60 years of age. As these units are retired, they will be replaced with cleaner forms of generation, including renewables and highly efficient natural gas. While natural gas does produce CO2 emissions, its carbon footprint is significantly lower than that of coal. AEP does not anticipate building new coal units. However, if technological (e.g., carbon capture) and economic barriers are overcome, that could possibly change.

“AEP is increasingly focused on managing its existing coal-fueled generating units, to allow for a lower capital investment over time. This allows us to optimize unit operation, investment and depreciation rates to manage both customer and investor value.

“AEP is working hard to use energy more efficiently, on both sides of the meter, through a variety of initiatives. These programs include using Volt VAR Optimization (VVO), deploying high-efficiency transmission, managing distributed energy resources connected to the distribution system as a virtual power plant, and encouraging customers to invest in energy-efficient solutions, such as load management programs and technologies. By reducing the amount of energy consumed and managing the grid more efficiently, AEP can optimize existing generation, avoiding associated environmental impacts and delaying the need for new generation.” (Pages 6-7)

This requires a change from AEP’s decades-old strategy of building generating capacity.

“(O)ur capital investments once focused primarily on large, central generating stations — building new capacity and upgrading existing coal-fueled units to comply with environmental regulations. Today, we are investing in what customers want and value most. We are increasing our use of renewable resources, energy efficiency and demand response, supporting distributed energy resources and investing in technology and strategic partnerships. At the same time, we are reducing our environmental footprint and reducing risk in our business, to the benefit of customers, shareholders and the environment.

“AEP’s exposure to carbon regulation is already greatly reduced compared with five years ago. From 2011 to mid-2016, AEP retired more than 7,200 MW of coal-fueled generating capacity, driven by a number of factors. From 2000 to 2016, AEP’s CO2 emissions declined 44 percent. This is due to a combination of plant retirements, low natural gas prices that resulted in coal-fueled generating units operating less frequently, the addition of renewable generation and reduced wholesale generation sales. In early 2017, AEP completed the sale of four fossil-fueled plants totaling approximately 5,300 MW. The sale further decreased AEP’s carbon exposure going forward.

“In 2017, coal represented 47 percent of AEP’s generating capacity, compared with 70 percent in 2005. The percentage of AEP’s generating resources fueled by coal will continue to decline.” (Page 8)

One of the plants sold last year was the General James M. Gavin power plant at Cheshire, Ohio, in the Robert C. Byrd pool. It was one of the largest on the AEP system. Among its remaining coal-fired plants are Mountaineer and Rockport on the Ohio and John Amos on the Kanawha.

AEP also owns part interest in the Kyger Creek power plant near Cheshire. It also shares ownership of the Killen and Stuart power stations just above Maysville, Ky. Those two coal-fired plants are scheduled to shut down permanently this year.

AEP recognizes that there are some economic risks to its plan.

“Climate-related risks and the transition to a lower-carbon economy affect most economic sectors and industries. As we work to address these risks, we are seeking solutions that achieve the environmental objectives without undermining economic growth and enabling our vision to power a new and brighter future for customers and communities. With lower demand growth, energy prices generally increase for our customers. Higher rates directly impact customer households’ purchasing power, especially in economically disadvantaged areas of AEP’s service territory. Educating customers about the efficient use of energy lowers customers’ bills, and more efficient use can contribute to fewer emissions.

“Higher energy costs also have a negative impact on the competitiveness of industry. When this happens, companies are less likely to expand or move to our service territory. That means fewer new jobs and state and local taxes to support local communities; for AEP, it means fewer revenue growth opportunities. A net positive is that as we generate less electricity, our environmental impacts are reduced. One way that AEP internalizes and balances these risks is to include a carbon price when evaluating all resource decisions to ensure carbon is appropriately valued and that our regulatory and public policy strategy supports it.” (Pages 17-18)

So in terms of the Ohio River, that means one of the largest customers for coal along the river is transitioning away from coal, so the number of coal tows should decrease in the next couple of decades. AEP probably won’t be the only utility with coal-burning plants along the river to go with such a strategy.

It could also mean fewer coal trains on tracks along the river as utilities and merchant operators that depend on rail for delivery will seek other generation sources. That’s already happening, at least as far as utilities that relied in Appalachian coal are concerned.