Vistra May Close 2 GW of Illinois Coal Power By Year's End

Vistra Energy will shutter four coal-fired power plants—a total 2 GW—as required by Illinois’ recently revised Multi-Pollutant Standard (MPS) rule, but CEO Curtis Morgan noted the move was “inevitable” due to the changing regulatory environment and unfavorable economic conditions in the MISO market. 

The company on Aug. 21 said it will close the 54-year-old 915-MW Coffeen Power Plant; the 43-year-old 425-MW Duck Creek Power Plant; the 41-year-old 434-MW Havana Power Plant; and the 66-year-old 294-MW Hennepin Power Plant. All the plants are in downstate Illinois. Four other coal plants acquired through its merger with Dynegy in April last year that are regulated under the MPS will keep operating.  

The announcement had been largely expected since the Illinois Pollution Control Board (IPCB) moved to impose stricter pollution caps in March. The MPS was originally enacted in 2007 to regulate sulfur dioxides and nitrogen oxides from Illinois’s downstate power plants, but in 2017 and 2018, under then-Governor Bruce Rauner, the board moved to replace two sets of annual emission rate limits with a single set of specific annual tonnage limits. Dynegy strongly backed the measure because, it said at the time, it provided “regulatory clarity, consistency and create a single MPS operating group.” The proposal was modified in October. But in January, under new Governor J.B. Pritzker, the IPCB requested an opportunity to re-evaluate the board’s modified proposal, and in March, the board filed a new proposal with lower pollution caps. 

“The revised rule, which also calls for a reduction in annual mass caps for SO2 and NOx, requires that the company permanently shut down 2,000 MW of capacity from the eight MPS group of plants by the end of the year, pending approval by grid operators, Midcontinent Independent System Operator (MISO) and PJM Interconnection, and approval of the termination of certain tariffs by the Federal Energy Regulatory Commission,” Vistra noted on Aug. 21. 

“In addition, the revised rule requires adjustments of these annual caps as additional power plant units are shut down or transferred. As a result, the retirement of the four plants will further reduce annual allowable SO2 and NOx emissions in the MPS group of plants, driving total allowable emissions down by 57 and 61 percent, respectively, from that allowed under the former MPS rule. While not explicitly required by the MPS, CO2 emissions will also be significantly reduced by approximately 40 percent relative to 2018 levels.” 

Vistra said the decision to retire the four plants resulted from a plant-by-plant analysis that “evaluated several factors in making retirement decisions, including ensuring compliance with the new emissions caps set forth in the revised MPS rule, plant economics, federal energy regulations, and MISO market rules.”  Consideration was also given to “prioritize retirement of higher emitting plants as suggested by the IEPA and IPCB along with the other factors listed above which resulted in a balanced mix of higher and lower emitting plant retirements,” it said. 

The company has filed required notices with MISO, PJM, and FERC. If the entities determine the units are not needed for reliability, Vistra could shutter the plants by the end of the year. 

In a second-quarter earnings call with investors on Aug. 2, Morgan said that preliminary analysis suggests the retirements could be “approximately $50 million to $100 million accretive to Vistra’s long-term EBITDA profile, as some of our existing MISO assets are EBITDA and free cash flow negative in the current market environment.” 

Meanwhile, Vistra has indicated that it is considering reinvesting in and repurposing its existing coal plant sites into solar and battery energy storage facilities. In  March 2019, the company announced its support for the Illinois Coal to Solar and Energy Storage Act of 2019, a  bill that would “transition existing downstate coal plants in Illinois to renewable sources of utility-scale solar and energy storage that will help meet the state’s evolving energy goals.” The company noted in in a recently released sustainability report that under the bill, “for each megawatt of new utility-scale solar and battery storage installed at existing coal plants, five times as many megawatts of existing coal-fueled generation must be retired by 2030.” 

On Aug. 2, Morgan suggested the coal-to-solar and battery program could result in “some incremental payments, almost like a pseudo-capacity payment,” to the existing coal plants until 2025, which would “obviously help them stay alive.” However, Vistra did not include those payments in its current financials because of the “uncertainty with what’s going to happen,” he said. 

Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine)

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