old smokey power – the conundrum continues · natural gas @ $17.5m ($5m/mile), $3/mmbtu. demo or...
TRANSCRIPT
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Old Smokey Power – The Conundrum Continues Pete Belmonte, P.E.
EUEC 2017 San Diego, CA February 9, 2017
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Disclaimer
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•© Copyright TRC, 02.09.2017•The information presented is fictional and reflects no particular company or power plant. This presentation is made strictly for educational purposes. •The information in this presentation, which does not purport to be comprehensive, has been provided by TRC and has not been independently verified. While this information has been prepared in good faith, no representation or warranty, express or implied, is or will be made and no responsibility or liability is or will be accepted by TRC as to or in relation to the accuracy or completeness of this presentation pack or any other written or oral information made available as part of the presentation and any such liability is expressly disclaimed. Further, whilst TRC may subsequently update the information made available in this presentation, we expressly disclaim any obligation to do so. •The presentation contains estimates and indications of likely future developments and other forward-looking statements that are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries, sectors and business segments in which the Group operates. These and other factors could adversely affect the Group’s results, strategy and prospects. Forward-looking statements involve risks, uncertainties and assumptions. They relate to events and/or depend on circumstances in the future which could cause actual results and outcomes to differ materially from those currently anticipated. Due to the hypothetical and future nature of forward-looking statements TRC cannot warrant or guarantee the accuracy of such statements. The statements and presentation should only be used as an indicative flagging of potential future issues. TRC assumes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
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2013 2014 2015 2016
Regulatory Drivers
July 25, 20131-hour SO2 NAAQSarea designations finalized
August 2014316(b) final rule
April 19, 2013 Effluent guidelines rule proposed
December 19, 2014 Final coal combustion residuals rule under Subtitle D
April 16, 2015Initial MATS compliance
2017-2022Effluent guidelines compliance 3-8 years after final rule
2018-2019Coal combustion residual compliance 4-5 years after final rule
Key:Orange: AshGreen: WaterBlue: HAPsPurple: GHGsBlack: NAAQS
April 16, 2016Possible extended MATS compliance
September 20, 2013GHG NSPS for New EGUs re-proposed
Jan. 15, 2013EPA finalizes new PM2.5 NAAQS
June 2, 2014Clean Power Plan; Mod/Recon Proposed Rule
June 1, 2015Final existing EGUs 111(d) GHGrules expected
2021316(b) compliance up to 8 years after final rule
2017 2018-21
January 8, 2014Proposed GHG NSPS for New EGUs published in federal register
February 24, 2014UARG v. EPAOral Argument June 2014 Decision Expected
June 1, 2016Initial Deadline for State Plans implementing CPP
April 29, 2014 Supreme Court
Upholds CSAPROctober 23, 2014DC Cir Lifts Stay
January 1, 2015Phase 1 CSAPR
June 2, 2017Deadline for State Plans implementing CPP for states that have made reasonable progress
June 1, 2018Deadline for State Plans implementing CPP – Multistate Plans
December 2014New ozone NAAQS Proposed.
2017+Final new ozone NAAQS designations
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Environmental Drivers
• Mercury and Toxic Substances – Final Rule 2011, Effective Dates 2015 - 2016
• Cooling Water Intake & Discharge – 316a– Final Rule 2014, Effective Dates on NPDES Cycle
• CCR and ELGs– Final Rule 2014, Effective Dates Starting in 2015
• BART, SO2 NAAQS, SILs• Clean Power Plan
– Final Rule 2015, Effective Dates through 2030, Stayed for en banc Hearing of DC Circuit Court in September 4
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Economic Drivers
• CHEAP Natural Gas• Wind and Solar Power
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Uptha Creek Unit 1• 300 MW PC• Constructed 1962 • Internals rebuilt several times• ESP 1973• 30% CF• 10,900 Btu/kwh• Local, low to medium S bituminous coal, $70/ton• Once through cooling, Baron River• Ash sluiced to an on-site surface impoundment• Natural gas 3.5 miles east• 2,800 lbs CO2/MW
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Alternatives Evaluated
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Invest in controls and upgrades to UC-1■ Aging unit■ High heat rate, low CF
Re-power UC-1 –natural gas combined cycle■ Existing power plant, transmission, infrastructure■ Older design STG, well maintained■ Retain once through cooling? Cooling tower BTA?■ Natural gas @ $17.5M ($5M/mile), $3/MMBtu
Demo or Mothball UC-1 and/or Build New combined cycle (CCGT)■ 1X1 7FA, 7,000 Btu/kwh■ Natural gas @ $8.4M ($2.4M/mile)■ Wells and cooling towers
Co-Fire Natural Gas with CoalContract for 300 MW of offsite/renewables
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Reasonable Worst Case Upgrades, UTC-1
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• Cap-ex air $211 Million, +/- $63 Million• Cap-ex 316(b), ash ponds, etc. ~ $75 Million• Op-ex
• Current generation = 1,681,920,000 kw-hr/yr• Fuel cost = $63M/yr @ $3/MMBtu,12,500 Btu/kW-hr
• Annualized Production Cost• Cost Recovery Factor ~ $33,000,000/yr• $/yr / current kW-hr/yr = $0.057/kWh
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UTC-1 Range of APC Costs
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New Combined Cycle Comparison
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Cap-ex ~ $275 Million (@ $917/kw - EIA) Op-ex
Current generation = 1,681,920,000 kw-hr/yr Fuel cost = $35.3M /yr @ $3/MMBtu, 7,000
Btu/kW-hr Annualized Production Cost
Cost Recovery Factor ~ $26,000,000/yr $/yr / current kw-hr/yr = $0.058/kWh
Brand new, state-of-the-art power plant Upside if gas < $3/MMBtu delivered? If we give up coal, can never go back
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A Dose of Reality
• Uncertainty swirling around future gas price volatility, consistently low over the last few years
• Uncertainty regarding NAAQS, CSAPR, 316(b), CO2• Will our industrial demand return?• 80% debt financing no longer available – this could change• PUC reluctant to approve either alternative as a prudent investment• Reliability, Availability, Certainty
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Alternatives Considered
Base Case - Invest in suite of controls and upgrades to existing coal unit
Replace existing capacity with new combined cycle natural gas
Fuel switch - co-fire UTC-1 with gas/PRB Shut down UTC-1, purchase market power Future consideration – CCS for EOR?
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Refined Cost Estimates
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• Bringing in the Gas– Linear Permitting– Pipelines and
Compressors– Gas Supply Contracts
• Retrofitting the Boilers – Coal to Gas or Dual Fuel– Permit Impacts– Code Requirements– Boiler Configuration– Building Improvements– Burner Management– Heat Rate Impact
Power Plant Retrofits
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GHG NSPS Annualized Cost Estimates
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Annualized Cost $0.061/kWh $0.058/kWh $0.057/kWh
Base Case Co-Firing CCGT
Lbs CO2/MWh –actual
2800 2000 980
NSPS limits -lbsCO2/MWh
1100 1100 1000
Difference 1700 900 NA
Cost @ $5/ton (ranges $2-$10)
$7.15MM/yr $3.78MM/yr NA
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State by State Comparison of Costs
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ALL PAIN, NO GAINModeled Effect of EPA’s 111(d) Rule
“Pain” data can be found in EPA’s Rule Proposal and retirement projections in EPA’s IPM, Base Case Unit Retirements, 2020 and EPA’s IPM, Regional Compliance, Option 1, 2020. “Pain” data also includes U.S. Chamber of Commerce’s analysis of the anticipated impact of EPA’s regulation of greenhouse gases from U.S. sources, released prior to rule proposal publication. “Gain” data is based on previous EPA assessments of climate impacts of CO2 reductions in its light-duty vehicle rule and Intergovernmental Panel on Climate Change (IPCC) projected concentrations of CO2 in
2050, which projected CO2 concentrations from 450 to 600 ppm, as discussed in American Coalition for Clean Coal Electricity, Climate Effects of EPA’s Proposed Carbon Regulations (2014).
Remaining CO2 Concentration598.48 ppm
Modeled CO2 Reduction1.52 ppm
GLOBAL CO2CONCENTRATION
GAIN:• 0.25% reduction in CO2 concentration (see pie
chart).• Global temperature increase reduced by 0.016F.• Sea level rise reduced by 1/100th of an inch; less
than the thickness of 3 sheets of paper.
PAIN:• EPA’s own projected costs up to $8.8 billion.
Projected Texas electric generation retirements of 16,565 MW by 2020.
• Projected nationwide retirements of at least 121,000 MW by 2020. (Assumes regional compliance.)
• U.S. Chamber of Commerce Predictions:• Lower U.S. GDP by $51 billion on average per
year;• Lead to 224,000 fewer U.S. jobs on
average/year;• Force U.S. consumers to pay $289 billion more
for electricity;• Lower household disposable income by $586
billion.• Texas, Oklahoma, Arkansas, and Louisiana
would, per year, suffer $8.2 billion in economic harm, 36,000 fewer jobs, and $1.4 billion in higher electricity bills.
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598.48
1.52
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The Conundrum & Current Market Conditions
• All options carry some risk—there is no alternative that will always be better
• Multiple regulations for existing coal impacts competitiveness
• Proposed GHG NSPS changes the rules for new turbines– Conflicts with some recent GHG BACT determinations
– Will standard be flexible enough to accommodate a changing power market?
The company, PUC, community and rate-payers have reason to support operation as co-fire or CCGT
Low NG prices
Too many obstacles for New Coal
Renewable Subsidies (PTC extension)
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Coal is not Dead
• Coal production in the United States totaled 739 MMst in 2016, an 18% decline from 2015 and the lowest level of coal production since 1978. EIA Forecasts Coal to Comprise > 30% of the U.S. Fuel Supply for Power Generation For Foreseeable Future
• Larger Plants Equipped with SO2, NOx and PM Scrubbers
• Closed Cycle Cooling Systems• Possible Carbon Pricing Through Cap and Trade
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CPP Recent Developments
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• December – Paris Climate Change Agreement
• February 9th – Supreme Court Stay
• February 13th – Death of Justice Scalia
• Postponement of oral argument and full D.C. Circuit to hear argument
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Timeline for Court Decision
• Decision from the DC Circuit – Winter 2017 • After this, timing depends on
– Who wins in the DC Circuit– The presidential election
• Final Supreme Court Decision– As late as June 2018
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Final Thoughts on CPP
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Highly Unlikely to be Implemented Political and Practical Reasons Legal Reasons
If implemented, won’t be on proposed schedule Only enforcement mechanism against a State is
a federal plan This is not the end of GHG regulation – The
Ship Has Sailed
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Questions?Pete BelmonteP: 713.244.1072 | E: [email protected]
Old Smokey Power – The Conundrum Continues �Pete Belmonte, P.E.�EUEC 2017 San Diego, CA �February 9, 2017Disclaimer Regulatory DriversEnvironmental DriversEconomic DriversUptha Creek Unit 1Alternatives EvaluatedReasonable Worst Case Upgrades, UTC-1UTC-1 Range of APC CostsNew Combined Cycle ComparisonA Dose of RealityAlternatives ConsideredRefined Cost EstimatesPower Plant RetrofitsGHG NSPS Annualized Cost EstimatesState by State Comparison of CostsSlide Number 17Slide Number 18Slide Number 19Slide Number 20The Conundrum & Current Market ConditionsCoal is not DeadCPP Recent DevelopmentsTimeline for Court DecisionFinal Thoughts on CPPSlide Number 26