Mich. Coal Plant Shelved on Weak Demand, Gas Recovery Tech. Developments
CMS Energy subsidiary Consumers Energy last week announced that it is deferring the development of an 830-MW coal-fired power plant planned for Hampton Township. State regulators had last year approved an air permit for the $2 billion-plus project on the condition that it use stringent emission controls and that it was ready for carbon capture and sequestration when the technology was feasible.
The Michigan utility said it was deferring—not cancelling—development of the new unit because of reduced customer demand for electricity due to the recession, forecasted lower natural gas prices due to recent developments in shale gas recovery technology, and projected surplus generating capacity in the Midwest market.
“We continue to believe that new clean coal generating capacity will be in the long-term best interests of our 1.8 million electric customers as part of a balanced energy portfolio, but the current timetable for the new unit isn’t consistent with today’s market conditions,” said John Russell, the president and chief executive officer of CMS Energy and Consumers Energy. “Based on the latest market dynamics, we have determined that it is in the best interests of our customers to defer development of the new plant at this time.”
Michigan’s Department of Environmental Quality (DEQ) had approved an air permit for the plant in December 2009—with the condition that Consumers Energy would retire up to 958 MW of coal-fired generating capacity from seven of the company’s oldest existing coal plants in the state.
The permit’s conditions also called for the coal plant planned at the Karn/Weadock complex near Bay City to use scrubber and hydrated lime injection control for sulfur dioxide, acid gases, and other air pollutants. Additionally, it would require baghouse control for particulate and hazardous air pollutants, carbon injection for mercury control, and selective catalytic sequestration technology for nitrogen oxide control.
Finally, as the DEQ had said the plant would be designed to be “ready to employ carbon capture and sequestration technology to reduce greenhouse gas emissions once that technology becomes commercially feasible.” The plant was expected to enter service in 2017.
Consumers Energy had also planned to apply to the Michigan Public Service Commission (PSC) for a certificate of necessity this year, before construction began, as expected, in 2012.
It’s decision to shelve the plant comes barely a week after Michigan regulators denied Wolverine Power Supply Cooperative’s air quality permit for a new 600-MW power plant, fueled primarily by petroleum coke and coal, in Rogers City. In that case, the state’s Department of Natural Resources and Environment (DNRE) decision was based on findings of the PSC, which said the company failed to demonstrate the plant was needed to meet future supply.
The deferred plans also follow a September 2009 report from the Michigan PSC suggesting that the state would not need a new coal plant until at least 2022, owing to energy efficiency initiatives and increased use of renewable energy sources. That report had specifically recommended that Consumers Energy delay the planned coal-fired plant near Bay City until 2022.
Earlier this year in filings with the Security and Exchange Commission, Consumers Energy acknowledged substantial uncertainty over how expected environmental regulations would affect the company. In a conference call with investors, the company acknowledged serious legal and regulatory obstacles to the development of its proposed new 830-MW plant.
Russell said the company will monitor customer demand, fuel and power prices, and other market conditions, but has set no timetable for a future decision about the project. He also said the company also remains committed to its Growing Forward strategy, which calls for investing approximately $7 billion in its electric and natural gas utility operations over the next five years. The proposed coal unit made up about $1 billion of that five-year total. The company expects to make other investments in place of the coal plant.
“We have a number of alternative investment options, including additional environmental controls on some of our existing coal-fired units, that will support our efforts to provide customers with reliable and affordable energy,” Russell said last week, adding those substantial investments are expected to create nearly the same number of jobs as the clean coal plant, boosting the state’s economy.
Source: Consumers Energy, POWERnews