AEP sees $6-8 billion tab to convert coal plants

June 10, 2011
One of the largest US electric utilities projects a minimum capital investment of $6-8 billion by 2020 to comply with proposed US Environmental Protection Agency regulations that would affect coal-fired power plants.

By OGJ editors
HOUSTON, June 10
-- One of the largest US electric utilities projects a minimum capital investment of $6-8 billion by 2020 to comply with proposed US Environmental Protection Agency regulations that would affect coal-fired power plants.

A spokesman for American Electric Power, Columbus, Ohio, could not immediately estimate the natural gas demand implications of a company compliance study.

AEP said “unrealistic compliance timelines” in the EPA proposals will force it to prematurely close nearly 25% of its coal-fired generating capacity. Installing emissions reduction equipment would create some jobs, but the utility expects a net loss of 600 power plant jobs with $40 million/year in wages.

AEP said, “The sudden increase in electricity rates and impacts on state economies will be significant at a time when people and states are still struggling.”

Based on the regulations as proposed, AEP’s compliance plan would 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 gas capacity, and build 1,220 Mw of gas-fueled generation.

High demand for labor and materials due to a constrained compliance time frame could drive actual costs higher, AEP said. It said the compliance plan could differ markedly depending on the final form of the EPA regulations and regulatory approvals from state commissions. As proposed, the rules would reduce AEP coal use to 57% of total generating capacity by 2020 from 65% in 2011.

AEP noted that it has invested more than $7.2 billion since 1990 to reduce emissions from its coal-fired plants. Nitrogen oxide emissions are 80% lower and sulfur dioxide emissions are 73% lower. The company owns nearly 25,000 Mw of coal-fired capacity.

AEP said, “We support regulations that achieve long-term environmental benefits while protecting customers, the economy, and the reliability of the electric grid…and have worked for months to develop a compliance plan that will mitigate the impact of these rules for our customers and preserve jobs.”

“We are deeply concerned about the impact of the proposed regulations on our customers and local economies. Communities that have depended on these plants to provide good jobs and support local services will face significant reductions in payroll and property taxes in a very short period of time.

“The economic impact will extend far beyond direct employment at power plants as thousands of ancillary jobs are supported by every coal-fueled generating unit. Businesses that have benefited from reasonably priced coal-fueled power will face the impact of electricity price increases ranging from 10% to more than 35% just for compliance with these environmental rules at a time when they are still trying to recover from the economic downturn,” AEP said.

The EPA timelines for compliance are inadequate for construction of significant retrofits or replacement generation, AEP said, so many coal-fueled plants would be prematurely retired or idled in just a few years. AEP’s compliance plan alone would abruptly cut generation capacity in the Midwest by more than 5,400 Mw. Depending on the year, another 1,500 Mw to 5,200 Mw of AEP capacity would be idled or curtailed for extended periods as pollution control equipment is installed.

AEP said, “With more time and flexibility, we will get to the same level of emission reductions, but it will cost our customers less and will prevent premature job losses, extend the construction job benefits, and ensure the ongoing reliability of the electric system.”

By Dec. 31, 2014, AEP would permanently retire plants at Glen Lyn, Va., 335 Mw; Moundsville, W.Va., 630 Mw; Glasgow, W.Va., 400 Mw; and Lockbourne, Ohio, 100 Mw. It would retire 450 Mw this year and 600 Mw by 2015 by closing a plant at New Haven, W.Va.

AEP would retire some units but continue operating others are Louisa, Ky., Cleveland, Va., Conesville and Beverly, Ohio, Lawrenceburg, Ind., and Pittsburg, Tex.

At Oologah, Okla., two units totaling 935 Mw would be idled Jan. 1, 2016, one unit for a year and one for 2 years.

AEP will complete construction of the gas-fired, 580 Mw Dresden, Ohio, plant in 2012.

In addition to the retrofits, AEP would install or upgrade emissions reduction equipment at seven other coal-fueled power plants in Arkansas, Indiana, Louisiana, Ohio, and Texas.