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AEP to Retire 6,000 MW of Coal-Fired Generation

In an effort to comply with a series of regulations proposed by the U.S. Environmental Protection Agency (EPA), American Electric Power (AEP) on Thursday announced a $6-8 billion plan to retire nearly 6,000 MW of coal-fueled power generation, upgrade or install advanced emissions reduction equipment on another 10,100 MW, refuel 1,070 MW of coal generation as 932 MW of natural gas capacity and build 1,220 MW of gas-fueled generation by the end of the decade.

AEP plans to permanently retire five coal-burning plants (the 335 MW Glen Lyn Plant in Glen Lyn, VA; 630 MW Kammer Plant in Moundsville, WV; 400 MW Kanawha River Plant in Glasgow, WV; 1,050 MW Phillip Sporn Plant in New Haven, WV; and 100 MW Picway Plant in Lockbourne, OH) by the end of 2014.

The company also plans to retire generating units at six other locations (the Big Sandy Plant in Louisa, KY; Clinch River Plant in Carbo, VA; Conesville Plant in Conesville, OH; Muskingum River Plant in Beverly, OH; Tanners Creek Plant in Lawrenceburg, IN: and Welsh Plant in Pittsburg, TX), but it will continue operating some generation at those sites.

Last year AEP placed 10 of the same coal-fired generating units in "extended startup" status for nine months to cut operating and maintenance expenses (see Power Market Today, May 21, 2010). Those units had experienced a steady decline in the number of dispatched days over the previous two years due to the economic recession, AEP said.

AEP also plans to idle for a year or more beginning in 2016 two coal-fueled generating units at the Northeastern Plant in Oolagah, OK, while emission-reduction equipment is installed. In addition, AEP would install or upgrade emissions reduction equipment at seven other coal-fueled power plants in Arkansas, Indiana, Louisiana, Ohio and Texas.

AEP's plan to drop 6,000 MW of coal-fired power, while adding over 2,000 MW to its natural gas-fired capacity was released just days after the Los Angeles Department of Water and Power said it plans to nearly double its reliance on natural gas for electricity generation while phasing out coal over the next two decades (see Daily GPI, June 7), and New Jersey Gov. Chris Christie unveiled the state's draft 2011 energy master plan, which among other things calls for coal-fired generation to be phased out in favor of natural gas (see Daily GPI, June 8).

Bentek Energy LLC expects about 1.8 Bcf/d worth of fuel switching from coal to gas this year, which would be a step up from last year, which saw 1.1 Bcf/d of switching (see Daily GPI, May 12a). At GasMart 2011 in Chicago last month, Bentek Vice President Jim Simpson said he sees about 8.7 Bcf/d worth of potential structural shifts in the gas market over the next eight years or so, including about 4.1 Bcf/d worth of fuel switching from coal to gas on the power side.

Natural gas could take as much as two-thirds of the market for new power generation over the next 20 years, including load gains from the retirement of more than 50 GW of coal-fired power generation capacity, according to a recent report from consulting firm ICF International (see Daily GPI, May 12b). The increase could amount to an additional 1 Bcf/d annually, according to ICF.

AEP's action in retiring older, smaller coal-fired plants fit into ICF's projection that those plants will likely fade away as the EPA implements rules to carry out the Clean Air Transport Rule, the Air Toxics Rule, coal combustion residuals, and cooling water intake structure standards. Power companies are finding it is not economic to refit the older plants which generally are more polluting.

The resulting increase in natural gas demand would push prices to $5-6/MMBtu in the long term, ICF said.

The economic impact of proposed EPA regulations "will extend far beyond direct employment at power plants" and could include 10-35% electricity price increases for businesses, said AEP CEO Michael Morris. He continued to rail against the stricter EPA pollution regulations, citing support in the Congress to call a halt to EPA actions.

A House subcommittee last month voted to favorably report on a bill that would require an analysis of the cumulative economic impact of actions proposed by EPA (see Daily GPI, May 25).

In March the Subcommittee on Energy and Power voted out legislation (HR 910) that would bar the EPA from regulating carbon dioxide and other greenhouse gas (GHG) emissions under the Clean Air Act (see Daily GPI, March 11). Similar measures seeking to tie the EPA's hands have been introduced in the Senate. A bill unveiled by Sen. James Inhofe (R-OK) would strip away the EPA's authority to limit carbon emissions from power plants, refineries and other stationary sources. Sen. John Barrasso (R-WY) has proposed to block the Obama administration's regulation of GHG emissions from stationary sources without specific authorization from Congress (see Daily GPI, Feb. 1).

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