Bleeding financially from underperforming and legally burdened coal generation in downstate Illinois and elsewhere, Vistra, the nation’s largest competitive generator, has renewed its call for passage of the Illinois Coal to Solar and Energy Storage Act, a bill that could help keep 2.2 GW of existing at-risk capacity online through 2025 while the state expands its renewable and storage capacity.
The Irving, Texas–headquartered company said it renewed its support for the bill owing to “mounting financial and legal pressures that now come from operating coal plants.” The announcement came as the company accelerated the closure of the 1.2-GW Joppa Power Plant in September 2022—three years earlier than previously disclosed—to settle a complaint related to pollution exceedances in Illinois.
Vistra’s Heavily Burdened Coal Fleet
The Joppa plant, which opened in 1953, has six coal units with a combined capacity of 1 GW, as well as five natural gas units with a combined capacity of 239 MW. The plant, which is partly interconnected to Midcontinent Independent System Operator (MISO) and partly within the Electric Energy Inc. (EEI) control area, is interconnected to the Tennessee Valley Authority and Louisville Gas and Electric Company, but it primarily sells its capacity and energy to MISO.
The company said Tuesday its plan to accelerate the plant’s closure to next year, compared to its previously slated retirement date at the end of 2025, stems from an agreement to settle a complaint brought by the Sierra Club in December 2018. The plant was then owned by Dynegy, a company Vistra acquired in 2019. Filed before the Illinois Pollution Control Board (IPCB), that complaint alleged the disposal and storage of coal ash at the Joppa generation facilities, as well as at the 915-MW Coffeen and 585-MW Edwards facilities in Illinois, were causing exceedances of the applicable groundwater standards.
Vistra has already shuttered the Coffeen plant, as well as three other coal plants in Illinois, all serving MISO—the 425-MW Duck Creek, the 434-MW Havana, and the 294-MW Hennepin plants—at the end of 2019 to address changes in the state’s Multi-Pollutant Standard (MPS) that went into effect in August 2019. “Under the revised MPS rule, our allowable [sulfur dioxide (SO)] and [nitrogen oxide] emissions from the MISO fleet are 48% and 42% lower, respectively, than prior to the rule changes,” the company said. In November 2019, it announced it would also shutter the Edwards plant by the end of 2022 to settle a lawsuit alleging particulate matter violations.
The Joppa plant, too, would have been mired in MPS requirements. According to the company, the MPS rule would have mandated the continuous operation of existing selective catalytic reduction (SCR) control systems during the ozone season, and SCR-controlled units to meet an ozone season NO emission rate limit, and it also sets an additional, site-specific annual SO limit for the Joppa Power Station.
Joppa’s closure at the end of 2025 announced last year wasn’t wholly unexpected, owing to Vistra’s September 2020 launch of its Vistra Zero brand, a portfolio of zero-carbon generation facilities to propel the company to its net-zero carbon emissions by 2050 ambitions. As it launched the brand, the company said it would transform its integrated business model by growing its share of solar and energy storage and retiring about 7 GW of coal assets between 2021 and year-end 2027. Between September 2020 and December 2020, the company announced it would retire all its remaining coal facilities in Illinois and Ohio, as well as the 650-MW Coleto Creek facility in Texas, between 2025 and 2027.
Plants it slated for closure, citing “economic challenges, including incremental expenditures” that would be required to comply with the federal coal combustion residuals (CCR) rule and effluent limitations guidelines (ELG) rule, represent a combined 6.9 GW. In Illinois, plants that serve MISO include Joppa’s coal and gas facilities; the 1.2-GW Baldwin coal plant, and the 615-MW Newton plant. Facilities that serve PJM include the 1.1-GW Kincaid coal plant in Illinois; the 1-GW Miami Fort coal plant in North Bend, Ohio; and the 1.3-GW Zimmer coal plant in Moscow, Ohio.
But in its February 10-K filing—released just days after the rolling blackout debacles in ERCOT, MISO, and the Southwest Power Pool prompted by Winter Storm Uri—Vistra describes steep impairment losses attributed to its retirement of some of these facilities, including $172 million related to the Kincaid plant, $99 million related to the Zimmer plant, and $52 million related to the Joppa facility.
In a statement on Tuesday, Vistra CEO Curt Morgan also pegged the company’s coal plant financial pressures on market shortcomings. “Joppa’s 2022 closure is an unfortunate reminder that our remaining MISO fleet continues to face challenges and is at risk of rapid closure for a variety of factors, most notably legal and economic challenges—the latter due to the dysfunctional MISO market in Illinois and significant maintenance costs,” he said.
Repurposing Coal Sites—and Keeping Some Open Longer
To alleviate some of these financial and legal pressures, the company has embarked on a $550 million plan to “repurpose” coal plant sites across central and southern Illinois as renewable power and energy storage sites.
These efforts echo Vistra’s development and completion last December of a 300-MW/1,200-MWh energy storage facility that is housed inside a “completely refurbished former turbine building” at its 1,020-MW combined cycle gas turbine Moss Landing power plant site in California.
Morgan on Tuesday urged the Illinois legislature to pass the Illinois Coal to Solar and Energy Storage Act to facilitate coal site repurposing and provide some relief for affected communities.
The legislation as introduced in the House on Feb. 22 (HB 3446) essentially seeks to amend the Illinois Power Agency Act, the State Finance Act, and the Public Utilities Act to authorize the procurement of renewable energy credits (RECs) by large electric utilities for new renewable energy resources sited at facilities that burned coal as of January 2019. If passed, the bill would require the Illinois Power Agency to award 15-year contracts to coal plant owners (who would remain responsible for the initial capital investment) to provide an aggregate amount of 400,000 to 600,000 RECs per year, priced at $35 per REC.
However, like legislation introduced last year in both chambers, the bill also provides for a “transition plan” that could keep 2.2 GW of existing in-state generation serving the MISO Zone 4 market online through May 2025 to “ensure that adequate electric generating resources are available” as the state expands its renewable portfolio.
More significantly, the bill establishes a “Transition Fund” collected through a tariff-filed customer surcharge of 0.072 cents/kWh through December 2024. The surcharge will decrease incrementally until 2038, when the last purchase contract terminates.
In a fact sheet describing last year’s bills, Vistra said the “Transition Fund” is essentially a “mechanism, tied to market prices for capacity, to provide transition assistance of no more than $92.5 million/year in total, and very likely less,” to keep existing generation online.
“After 2025, market conditions and other policy decisions will determine the future of the remaining legacy coal fueled plants, but this assistance period gives union energy workers and their families, local communities, vendors, and suppliers time to prepare and transition, while helping ensure there is sufficient generation capacity to meet the downstate MISO Zone 4 needs while more renewable generation is planned and built,” it said.
Vistra’s fact sheet suggests the measure is urgent because “for a variety of longstanding factors, between 2015 and 2022 approximately 4,700 MW of generation capacity—enough power for 2.3 million homes—has closed or will close in Illinois MISO Zone 4 market.”
On Tuesday, the company said that if the bill passes, it will invest “more than half a billion dollars to develop approximately 300 MW of utility-scale solar and 175 MW of battery energy storage.” That includes a “nine-site construction program [that] would help Illinois more than triple its in-state utility-scale solar generation capacity and more than double its battery energy storage capacity—all by 2025.”
Proposed projects include a standalone 45-MW battery energy storage facility at the Joppa plant, which does not have the site characteristics to support utility-scale solar. “We have a construction-ready plan to invest $550 million, including approximately $59 million at the Joppa location, to transform coal plant sites into renewable energy centers,” said Morgan on Tuesday.
Vistra said plans to repurpose its coal plants would improve the local tax base and provide a reliable source of property tax revenue for decades to come. “When Vistra closed four plants in 2019 to comply with revised state regulation, the company voluntarily offered local communities a $6 million-plus property tax bridge to make the transition easier, given the rapid retirement of the plants,” it said.
“The company estimates the new taxable value at renewed plant sites will be 350-400% more than the land values of closed plant sites, including nearly double the current property taxes for the Joppa Plant,” it said.