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Stranded Peaker Units and Coal Capacity in the Southeast

image credit: Moss Landing power plant in California, now a home for battery storage
Diane Cherry's picture
Principal Diane Cherry Consulting, LLC

Diane Cherry is a woman owned small business providing clean energy consulting services for local government, clean energy companies, non-profits and educational institutions. Her projects and...

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  • Dec 11, 2020
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This article is spot on with crux of problem here: U.S. utilities cannot strand the assets of more than 1,000 peaker units and 236 GW of coal capacity without a different regulatory and financial structure. Financing uneconomic plants is huge problem in Southeast that needs solving. Taken from the article: "

We’ve reached a massive milestone in the global energy transition — the ability, right now, of renewable energy sources and energy storage to match or beat the price of power from natural gas-fired peaker plants and coal-fired generators. The problem is that energy markets are not exactly free markets — and replacement of existing generation is not entirely tied to price. There are artificial regulatory constructs and financial structures built into energy markets which can favor certain parties (utilities) and fuels (legacy coal, gas and nuclear)." 

#renewableenergy #utilities #powergeneration

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Matt Chester's picture
Matt Chester on Dec 11, 2020

The problem is that energy markets are not exactly free markets — and replacement of existing generation is not entirely tied to price. There are artificial regulatory constructs and financial structures built into energy markets which can favor certain parties (utilities) and fuels (legacy coal, gas and nuclear)." 

These are also quite in the weeds issues to talk about, so they don't/won't get much mainstream press or consideration-- this is indeed where we need the utility industry leaders (at utilities, at regulators, etc.) to step up and be forward-looking, pragmatic, and find a way to keep the energy transition moving along in a responsible manner. 

Why do you think this is happening particularly in the Southeast-- are there lessons to learn from other regions of the country? 

Diane Cherry's picture
Diane Cherry on Dec 11, 2020

The Southeast has long had a huge number of coal plants and monopoly utility structure, without an RTO, which makes all of this quite different from the rest of the country. Most of the IRPs are also coming in with lots of new natural gas plants as utilities transition to renewables (offshore wind is one that is picking up steam) but there is still not a way to pay for stranded costs unless it is taken up with another vehicle such as securitization (legislation needed to do this though). The SC legislature passed an energy market reform bill and NC is expected to do the same and we may get a way to think about financing stranded costs when that happens.

 

Joe Deely's picture
Joe Deely on Dec 11, 2020

Would like to hear more about this...

I guess to start off - what states do you include in SouthEast?

  • Florida, Georgia and South Carolina would seem to be a given.
  • Do you include Alabama and North Carolina?
  • How about Mississippi and Tennessee?

All of these were included in SE grid study... would you expand even further?

Are you saying that this region is shutting coal down at a slower pace vs rest of country and/or is coal generation declining at a slower pace?

Any particular use cases you can share?

 

Diane Cherry's picture
Diane Cherry on Dec 11, 2020

Yes the SE is closing plants slower than the rest of the country and I include the states you name. Take a look at this DOE report. which talks about all of this.

Despite the declining use, Southeastern utilities have few plans to close. Duke’s Roxboro plant will shut down two of its four units in 2028 and another two in 2033 under the company’s current plans. Southern has no plans to close any of its larger units, though it has begun discussing the future of two units at Bowen. And TVA is not considering a retirement date at present for Cumberland.

Most utilities perate as regulated monopolies, enabling them to recover the cost of building and upgrading their facilities from their customers. That typically takes decades. But closing plants early means utilities either run the risk of failing to recoup their investment or charging their customers more to close coal plants sooner.  Colorado and New Mexico enacted legislation aimed at helping power companies pay down coal plant debts; we don't have that in the SE.

Joe Deely's picture
Joe Deely on Dec 12, 2020

Thanks for the info and the link. I agree that many utilities are slow to find capacity replacements for old coal plants - that are obviously not economical. I call these "zombie plants" and there are many of them all across the country. That may change over the next few years as storage becomes more prevalent.

What's needed before a coal plant retires...

 - most coal plants drop below 50% CF in the years before closure announcement

 - there needs to be replacement generation available or planned

 - in most cases there needs to be new replacement capacity

Let's take a look at the three states you mentioned.  Note: I've included a chart at bottom that shows Top 30 coal states and their generation so far this year.

Georgia 

"Southern has no plans to close any of its larger units, though it has begun discussing the future of two units at Bowen"

There are 3 major plants left in GA. Scherer(3,440MW), Bowen(3,232) and Wansley(1,744MW) - for a total of 8.4GW.

In 2019, Georgia retired about 1GW of coal plants. Another 3GW of coal plants were retired/converted in mid 2010s.

You can see on the chart that Georgia has had the steepest drop of any state when it comes to coal generation in 2020. One of the reasons for this is a drop to basically zero generation for the Wansley plant - it is now a zombie plant. So my guess is that the retirement of Wansley will be announced within the next year - assuming that Vogtle does not fall substantially behind schedule and Wansley will close in 2022.

Scherer and Bowen have also seen substantial drops in 2020.  

Unit 4 of Scherer(892MW) which is co-owned by Jacksonville and FPL will close in 2022. So in 2022 - 2,604 MW of coal will retire in Georgia - leaving 5.8GW remaining.

Once the second unit at Vogtle goes live Southern will announce the retirement of one of the two remaining plants. I think Bowen is more likely because it is older. That will leave only the remaining 2,580MW at Scherer. Solar/storage will eventually replace this and all coal will be gone from Georgia.

North Carolina

"Duke’s Roxboro plant will shut down two of its four units in 2028 and another two in 2033 under the company’s current plans. "

North Carolina is definitely a mess - still has 10GW of coal capacity left although coal generation is declining pretty quickly as can be seen in chart below. The current "zombie" plant in NC is the GG Allen (1.1GW) plant. This is scheduled to be retired in 2024/2028. There is no reason this can't be retired earlier - assuming Duke starts to implement some storage capacity.

In order to shutdown remaining coal NC will need to triple solar generation, add a bunch of storage and perhaps add some offshore wind and/or small nuclear.

Tennessee

"And TVA is not considering a retirement date at present for Cumberland."

TN has 5,700 MW of coal and Cumberland is about 2,450MW of this total. The obvious zombies on the TN coal list would be the 1.4GW Kingston coal plants and the 870MW Bull run plant - both of which will have a CF below 15% this year. Both of those should close first.

Next in-line would be the 976MW Gallatin plant and finally Cumberland. 

Kingston and Bull Run could easily be closed with additional solar/storage.

In order to close Gallatin and Cumberland a lot more capacity will need to be developed - more storage, more NG, or small nuclear.

 

Bob Meinetz's picture
Bob Meinetz on Dec 13, 2020

 "An additional finding: solar-plus-storage has 99.8% of the capacity value of a theoretical “perfect generator” in California’s CAISO grid region, according to a study commissioned by California’s three major utilities — easily matching gas."

Dianne, "solar-plus-storage" is an imaginary construct of gas interests that, as of December 2020, doesn't exist anywhere in the world. So to declare is has 99.8% of the capacity value (whatever that means) of a theoretical "perfect generator" (whatever that means) is 99.8% hype - as one might expect of a study commissioned by California's three major utilities.

That "solar-plus-storage" has become such a prominent marketing tool for gas isn't surprising - California utilities, which make $billions on sales of gas to generate electricity, needed to put a green face on their fuel. Powering a grid with batteries makes almost as much sense as powering a grid with solar panels, after all, and renewables supporters will fall in line behind just about anything with a green face on it.

Jim Stack's picture
Jim Stack on Dec 14, 2020

It sure sounds like a big problem. When they have to be profitable and try to be green and clean. I never knew they has old coal plants that had not been paid off so they could retire them. I would think the cost of water they boil and transporting the coal along with disposing of the sludge would make it pay to retire a coal plant  

   At least solar can be added fast at low cost and Battery Storage saves money with all types of power generation. If they also add favorable  policy for home solar pv and storage the customers will help them a lot. But they won't do that since it could reduce their profits. 

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