Coal Generation Shut Downs Becoming Real

Midwest System Operator Ask for Delays

Location: New York
Author: Energy Staff Writer
Date: Tuesday, November 29, 2011

MISO expects generation station retirements to eliminate all generation capacity above minimum capacity requirements, the grid operator said in comments filed with FERC. The MISO markets had about 116,000 MW of generation and demand resources participating as of the summer of 2011. About 72,000 MW is coal-fired generation. About 62,000 MW of this coal capacity will require retrofit investments or replacement, MISO noted.

Ranges of retrofit costs vary depending on size and current air quality control equipment installed. It is expected that 28,000 MW will require fabric filters at an average cost of $150,000/MW, about 20,000 MW will require additional scrubber type control equipment with an average cost of nearly $450,000/MW, and 13,000 MW of capacity may be retired since the cost to retrofit those units is the same or higher than the cost to replace them at nearly $667,000/MW.

“Reliability in the Midwest will be severely challenged throughout the implementation period of the proposed rules,” said MISO. “The compliance time allowed by the proposed rule and the time required to accomplish the installation of new control equipment or capacity replacement is exactly the same, meaning owners of all these units must remove them from service simultaneously leaving inadequate generation resources to sustain reliable electricity supply.”

Around 62,000 MW of generation cannot be removed from service simultaneously without interrupting loads in the region, MISO noted.  In order for MISO to meet reliability obligations, generator outage requests will be denied to maintain adequate supplies, it said.

MISO is a regional transmission organization charged with the operation and administration of the wholesale electricity markets in thirteen Midwestern states and one Canadian province.

Request for Flexibility

MISO said it has joined with other regional grid operators to ask the EPA for some flexibility to give the generators more time to comply. The EPA's proposed mercury rule to take effect in a few years, in particular, would hit the MISO system the hardest. The tight timing for implementation of the EPA regulations is problematic, in part, because it takes three to four years to retrofit or to replace a power plant and the rules go into effect quicker than that, MISO noted.

“As a result, 62,000 MW of coal units could potentially be unavailable for reliability purposes -- all at the same time,” said MISO. “Even though most of these units would not necessarily retire, they would still need to be shut down for many months to install environmental control equipment to comply with the EPA regulations.”

New natural gas-fired generation is seen by the gas industry and some regulators as a key to supply needs, but new gas generation resources will need a steady supply of fuel, MISO noted. MISO is studying whether there would be enough capacity on the existing interstate gas pipelines to fuel the new gas-fired plants.

“The gas pipeline system in the Midwest, for example, was built for winter heating use,” MISO noted. “MISO will likely need to work with stakeholders to try to expand the capacity of the gas pipelines if more gas is used to run an increased number of gas plants in the winter.”

MISO said it participated with several other ISOs and RTOs to run under an exemption until the a reliability solution is implemented. For non-RTO regions, the Reliability Safety Value regulations would provide for the initial transmission reliability studies to come from the local planning coordinator, with input from other parties.

In addition, MISO also supports alternative proposals to mitigate any potential for decreased reliability. For example, units would only run when no other resource is available to meet electricity needs. This targeted approach both serves reliability goals under the Federal Power Act as well as near-term pollution reduction goals under the Clean Air Act, MISO noted.

In a recent draft report on its system requirements for the future, MISO said its region has adequate generating capacity to meet its reserve requirements through 2021 based on currently announced generation retirements. However,  this assessment does not include coal-fired capacity retirements that might be required by regulations imposed by the EPA.

The impact of those EPA regulations “could significantly, and rapidly, erode reserve margins,” said the draft report. Depending on economic conditions, including the cost of environmental compliance, nearly 13 GW of existing coal generation within the region is at risk for retirement, the draft report noted.

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