Old Smokey Power The Conundrum Continues Pete Belmonte, P.E. EUEC 2017 San Diego, CA February 9, 2017

Transcription

1 Old Smokey Power The Conundrum Continues Pete Belmonte, P.E. EUEC 2017 San Diego, CA February 9, 2017

2 Disclaimer Copyright TRC, 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. Forwardlooking 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. 2

3 April 29, 2014 Supreme Court Upholds CSAPR October 23, 2014 DC Cir Lifts Stay Regulatory Drivers Jan. 15, 2013 EPA finalizes new PM 2.5 NAAQS April 19, 2013 Effluent guidelines rule proposed July 25, hour SO 2 NAAQS area designations finalized August (b) final rule April 16, 2015 Initial MATS compliance September 20, 2013 GHG NSPS for New EGUs re-proposed January 8, 2014 Proposed GHG NSPS for New EGUs published in federal register February 24, 2014 UARG v. EPA Oral Argument June 2014 Decision Expected June 2, 2014 Clean Power Plan; Mod/Recon Proposed Rule June 1, 2015 Final existing EGUs 111(d) GHG rules expected January 1, 2015 Phase 1 CSAPR June 1, 2016 Initial Deadline for State Plans implementing CPP April 16, 2016 Possible extended MATS compliance June 2, 2017 Deadline for State Plans implementing CPP for states that have made reasonable progress Effluent guidelines compliance 3-8 years after final rule Key: Orange: Ash Green: Water Blue: HAPs Purple: GHGs Black: NAAQS June 1, 2018 Deadline for State Plans implementing CPP Multistate Plans Coal combustion residual compliance 4-5 years after final rule December 2014 New ozone NAAQS Proposed. December 19, 2014 Final coal combustion residuals rule under Subtitle D Final new ozone NAAQS designations (b) compliance up to 8 years after final rule

4 Environmental Drivers Mercury and Toxic Substances Final Rule 2011, Effective Dates 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, SO 2 NAAQS, SILs Clean Power Plan Final Rule 2015, Effective Dates through 2030, Stayed for en banc Hearing of DC Circuit Court in September 4

5 Economic Drivers CHEAP Natural Gas Wind and Solar Power 5

6 Uptha Creek Unit MW PC Constructed 1962 Internals rebuilt several times ESP % 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 CO 2 /MW

7 Alternatives Evaluated 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 $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 $8.4M ($2.4M/mile) Wells and cooling towers Co-Fire Natural Gas with Coal Contract for 300 MW of offsite/renewables 7

8 Reasonable Worst Case Upgrades, UTC-1 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 = $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 8

9 UTC-1 Range of APC Costs 9

10 New Combined Cycle Comparison Cap-ex ~ $275 Million (@ $917/kw - EIA) Op-ex Current generation = 1,681,920,000 kw-hr/yr Fuel cost = $35.3M $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 10

11 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 11

12 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? 12

13 Refined Cost Estimates 13

14 Power Plant Retrofits 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

15 GHG NSPS Annualized Cost Estimates Lbs CO 2 /MWh actual NSPS limits - lbsco 2 /MWh Base Case Co-Firing CCGT Difference NA $5/ton (ranges $2-$10) $7.15MM/yr $3.78MM/yr NA Annualized Cost $0.061/kWh $0.058/kWh $0.057/kWh 15

16 State by State Comparison of Costs 16

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20 ALL PAIN, NO GAIN Modeled Effect of EPA s 111(d) Rule PAIN: EPA s own projected costs up to $8.8 billion. Projected Texas electric generation retirements of 16,565 MW by Projected nationwide retirements of at least 121,000 MW by (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. GAIN: 0.25% reduction in CO 2 concentration (see pie chart). Global temperature increase reduced by F. Sea level rise reduced by 1/100 th of an inch; less than the thickness of 3 sheets of paper. Remaining CO 2 Concentration ppm GLOBAL CO 2 CONCENTRATION Modeled CO 2 Reduction 1.52 ppm 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, 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 CO 2 reductions in its light-duty vehicle rule and Intergovernmental Panel on Climate Change (IPCC) projected concentrations of CO 2 in 2050, which projected CO 2 concentrations from 450 to 600 ppm, as discussed in American Coalition for Clean Coal Electricity, Climate Effects of EPA s Proposed Carbon Regulations (2014). 20

21 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) 21

22 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 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 22

23 CPP Recent Developments December Paris Climate Change Agreement February 9 th Supreme Court Stay February 13 th Death of Justice Scalia Postponement of oral argument and full D.C. Circuit to hear argument 23

24 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

25 Final Thoughts on CPP 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 25

26 Questions? Pete Belmonte P: E: