POWER September 2016 - 60

COAL FLEET
Coal Power Plant Post-Retirement
Options
Deciding to retire a coal-fired unit is often a tough call, but even tougher decisions
follow. The next steps taken by a generation owner have multiple
economic, environmental, and stakeholder consequences.
Ed Malley
S
ince 2000, U.S. generating companies
(Gencos) have announced the closure
of more than 200 coal-fired power
plants, totaling 102 GW of generating capacity.
Closures have exceeded previous estimates
made by the Energy Information Administration
(EIA). As recently as 2014, the
EIA had estimated 60 GW of plant closures,
comprising 150 sites and about 500 boilerturbine
units. Although most of the press
coverage of plant retirements focuses on closure
announcements, that's not the end of the
story. Several significant decisions then need
to be made about the short- and long-term
disposition of those units.
About 35 of the 200 announced sites (representing
600 units) have been demolished and another
15 have been sold for redevelopment. For
remaining sites, Gencos are looking for solutions
that meet safety, environmental, financial, schedule,
and stakeholder goals for their shareholders
and communities. Gencos, engineers, contractors,
developers, and investors have learned
important lessons from the recent closures and
have developed best practices. Those lessons and
practices are the focus of this article.
Timing of Plant Retirements
Retirements are nothing new. Thomas Edison
built the first power plant, Pearl Street Station
in lower Manhattan, in 1882 (the same year
POWER magazine launched) and demolished it
in 1895. In the 21st century, Gencos close power
plants because they lose money every month,
or because of the effective date of a regulation,
or because they become too unreliable.
The primary recent drivers of retirement
announcements have been low natural gas
prices and new environmental regulations-
especially the Mercury and Air Toxics Standards
(MATS), Clean Water Act Section
316(b), and the Coal Combustion Residuals
rule. Other contributing factors have included
more competitive markets and a variety
of regional and state-level policies involving
renewables and carbon pricing.
Most of the power plants being closed today
were built in the 1940s to 1960s, before
the Clean Air Act was passed in 1970. Many
60
have minimal air pollution controls, use oncethrough
cooling water, and sluice wet coal
ash to ponds. Scrubbers, closed-loop cooling,
and dry ash handling are current requirements
or will be phased in over the next few years.
Because much of the older capacity tends to
be smaller units under 300 MW, which are
not economical to retrofit, they are therefore
retired. Many closures coincided with the
MATS deadlines in 2015 and 2016, at a time
when natural gas prices were at historic lows.
Now that MATS deadlines have passed,
additional closures are being announced by
companies including Dynegy (5,000 MW) and
DTE Energy (2,100 MW). Economics, renewable
energy mandates, and reduced demand for
electricity are driving these additional closures.
Power plant closure activity began on the
East and West Coasts in oil-fired plants, because
of the high cost of fuel. Closures are
now occurring in the coal belts, the Upper
Midwest, and the Southeast. There are even
some coal-fired plant closures in western
states (Table 1). The most recent was the announced
partial closure of Colstrip in Montana
(see " Colstrip Units 1 and 2 Will Shut
Down by 2022 " at powermag.com).
Investor-owned utilities, independent power
producers, cooperatives, and municipal power
companies are all closing plants. If their sites
aren't repurposed in some way, these previously
productive assets sit totally unused, adding
no value to Gencos or to their communities.
Closing Coal Plants: The Financial
Story
Power plant decommissioning and redevelopment
projects are all about risk, money,
and who pays.
When a power plant shuts down, revenue
ceases but costs do not. Some owners quantify
their costs, which may be allocated over many
cost centers. Best-in-class companies also determine
real estate valuations and exit strategy
costs so they can make informed decisions
about whether to redevelop, hold, or sell.
" Who pays " has emerged as a very interesting
question. In states that are still regulated,
decommissioning costs could be passed
through to ratepayers, subject to public service
commission approval. In deregulated
states, shareholders would pay for decommissioning,
subject to management approval.
Because there is no legal requirement to
demolish an old power plant, and no return
on this investment, management typically
chooses not to spend significant money to decommission
a site. Developers may purchase
a site as-is and bear the decommissioning
costs in exchange for a lower purchase price.
Table 1. 10 largest companies by coal capacity (MW) with announced
retirements 2016 to 2020. Source: SNL
Company
Tennessee Valley Authority
Duke Energy Corp.
Dynegy Inc.
American Electric Power
Consumers Energy
TransAlta Corp.
Berkshire Hathaway Inc.
PNM Resources Inc.
NRG Energy Inc.
Southern Co.
Total
www.powermag.com
2016
1,209
350
988
956
376
380
357
4,616
2017
1,868
1,083
231
419
3,601
2018
750
875
1625
2019
2020
670
Total
3,827
1,225
1,083
988
956
670
607
419
380
357
670 10,512
POWER | September 2016
http://www.powermag.com http://www.powermag.com
POWER September 2016

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