SLIDESHOW: An Alarming Trend Affecting U.S. Baseload Power

States, regulators, and market participants have in recent years called attention to a trend concerning uneconomic baseload generation in organized wholesale markets, specifically in ISO New England, New York Independent System Operator (NYISO), MISO, PJM, the Electric Reliability Council of Texas (ERCOT), and the California Independent System Operator (CAISO).

Cheap natural gas, low power demand growth, increasing operating costs owing to state and federal rules, and market design issues are affecting bottom lines and forcing some power companies to withdraw generating capacity or reconsider participation in these competitive markets.

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<strong>1.       An alarming trend. </strong><br> <br> This baseload exodus could have a worrying impact on reliability, as shown by summer planning reserve margin projections (%) from the North American Reliability Commission's <em>2015 Long-Term Reliability Assessment. Source: POWER </em>  <strong>2.     Goodbye, Ohio. </strong>  <br> <br>On Sept. 14, American Electric Power (AEP) agreed to sell four Midwestern power plants—a total 5.2 GW for about $  2.17 billion—in an effort to become a fully regulated company. The plants include the 1,186-MW natural gas–fired Lawrenceburg Generating Station in Lawrenceburg, Indiana; the 840-MW natural gas–fired Waterford Energy Center in Waterford, Ohio; the 507-MW natural gas–fired Darby Generating Station in Mount Sterling, Ohio; and the 2,665-MW coal-fired Gen. James M. Gavin Plant in Cheshire, Ohio.  <br> <br> Duke Energy in 2014 made a similar move when it announced it would transition its generating fleet away from volatile organized wholesale markets. <br> <br> Pictured:  AEP's 2,665-MW coal-fired Gen. James M. Gavin Plant in Cheshire, Ohio, is one of the largest in the U.S. <em>Courtesy: Analogue Kid/Wikimedia Commons </em> <strong>3.     ISO New England. </strong> <br> <br>Entergy Nuclear closed the 620-MW Vermont Yankee nuclear plant in December 2014, owing to increased costs and market conditions, even though the unit had received a license renewal to operate until 2032. In October, Entergy said it will also retire its 680-MW Pilgrim nuclear plant in Massachusetts by 2019, citing low wholesale power prices and low gas prices.  <br> <br> Pictured: Entergy's Pilgrim nuclear plant. <em>Courtesy: Entergy</em> <strong>4.      NYISO. </strong><br> <br>On August 1, New York’s financially struggling upstate nuclear power plants—Exelon's 610-MW Ginna and 1,761-MW Nine Mile plants, and Entergy's 838-MW FitzPatrick plant (which Exelon agreed to acquire for just $  110 million)—received a much-needed lifeline with passage of the New York State Public Service Commission's Clean Energy Standard. The Clean Energy Standard requires all six New York investor-owned utilities and other energy suppliers to pay for the intrinsic value of carbon-free emissions from nuclear power plants by purchasing “Zero-Emission Credits.” The plants will begin receiving subsidies in 2017.  <br> <br> Pictured: Entergy's James A. FitzPatrick Nuclear Power Plant, a single-unit facility located in Scriba, N.Y., that the company planned to shut down by January 2017 for economic reasons, but which Exelon will buy and likely keep open. <em>Courtesy: Exelon </em>  <strong>5. 	PJM. </strong><br> <br>AEP Ohio and FirstEnergy are continuing discussions with Ohio legislators around restructuring the state's electricity market.  <br> <br> In late June, meanwhile, Exelon notified state and federal regulators that it plans to close the two-unit, 1,880-MW Quad Cities in Cordova, Ill., by June 2018. The company warned that its Three Mile Island plant, which didn't clear in the PJM capacity auction for the 2019 to 2020 planning year, might be at risk of closure. It said it would also close the 1,098-MW Clinton, Ill., single-unit reactor in June 2017, even though it cleared the MISO capacity auction. According to Exelon, Quad Cities and Clinton have lost a combined $  800 million over the past seven years, “despite being two of Exelon’s best-performing plants.”  <br> <br> Pictured: Exelon's 1,871-MW Quad Cities station <em>Courtesy: Exelon </em>  <strong>6. 	MISO. </strong><br> <br>Dynegy in May said it will shut down three coal units at two Illinois power plants—more than 1,800 MW—because they failed to recover basic operating costs at a MISO capacity auction. Just months before, the company said it would retire another 465-MW uneconomical Illinois coal plant.  <br> <br> Meanwhile, Detroit-headquartered DTE Energy in June said it would retire eight small coal-fired units at three sites in Michigan within the next seven years due to "age and projected future costs." <br> <br> Pending closure of Exelon's 1,069-MW Clinton nuclear plant for economic reasons, meanwhile, complicates MISO's planning efforts. The grid operator projects a generation shortfall of 300 MW, 800 MW, and 1.2 GW in parts of Michigan, Missouri, and Illinois, respectively.  <br> <br>Pictured: DTE Energy in June 2016 said that it will retire the last unit at its Trenton Channel Power Plant in Detroit by 2023, along with seven other units in its fleet. <em>Courtesy: DTE Energy </em>  <strong>7.     ERCOT.</strong> <br> <br>A September 2016 report from the Institute for Energy Economics and Financial Analysis (IEEFA) projects that seven aging coal-fired power plants in Texas—a total 8.1 GW that represents about 40% of coal-fired capacity in ERCOT—will likely be retired due to their inability to compete in the Texas electricity market. Among "forces arrayed against coal-fired generation" that suggests the plants' retirement is likely are increases in natural gas generation, increased competition from new wind and solar resources, and generally, "low energy market prices in ERCOT's deregulated wholesale markets,” IEEFA said. Another consideration is a federal regional haze rule that could force generators to install $  2 billion in pollution controls, rendering them uneconomical.  <br> <br> But coal plants aren't the only ones in trouble. NRG Energy mothballed all units at its Bertron Natural Gas Plant and Unit 5 at its Greens Bayou natural gas plant (at total 1,098 MW) this summer. The 45-MW Aspen Lufkin biomass plant was also mothballed this summer for economic reasons.  <strong>8.     CAISO. </strong><br> <br>In California, where generation from hydropower and renewables soared this summer, thermal generation (almost all from natural gas) in CAISO dropped 20% compared to last summer, according to the Energy Information Administration. The biomass sector has suffered the most notably. According to the California Biomass Energy Alliance, more than a dozen of its members’ 34 operating solid-fuel biomass plants have been idled, struggling to compete with low natural gas prices.  <br> <br> Under a recently passed bill (SB 859), however, electricity retailers will be required to enter into five-year contracts for 125 MW of biomass power from facilities built before 2013 that generate energy from wood harvested from high-fire hazard zones, reported <em>Biomass </em> magazine in September.  <br> <br> Pictured: Thermal Energy Development Partnership, a 20.5-MW woody biomass power plant in Tracy, in San Joaquin County, Calif., has been idled. <em>Courtesy: Greenleaf Power</em>

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7. ERCOT.

A September 2016 report from the Institute for Energy Economics and Financial Analysis (IEEFA) projects that seven aging coal-fired power plants in Texas—a total 8.1 GW that represents about 40% of coal-fired capacity in ERCOT—will likely be retired due to their inability to compete in the Texas electricity market. Among “forces arrayed against coal-fired generation” that suggests the plants’ retirement is likely are increases in natural gas generation, increased competition from new wind and solar resources, and generally, “low energy market prices in ERCOT’s deregulated wholesale markets,” IEEFA said. Another consideration is a federal regional haze rule that could force generators to install $ 2 billion in pollution controls, rendering them uneconomical.

But coal plants aren’t the only ones in trouble. NRG Energy mothballed all units at its Bertron Natural Gas Plant and Unit 5 at its Greens Bayou natural gas plant (at total 1,098 MW) this summer. The 45-MW Aspen Lufkin biomass plant was also mothballed this summer for economic reasons.

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