Private power plant operator Northern Star Generation LLC has notified the PJM Interconnection of its intent to close the 110-MW Colver Power Project waste coal plant in September 2020, once its power supply contract with local utility Pennsylvania Electric Co. ends.
The Colver plant is contracted to sell its output through February 2020 to FirstEnergy Corp. subsidiary Pennsylvania Electric, known as Penelec. The contract began in 1995, when the plant first started operating, according to data from S&P Global Market Intelligence.
David Sims, the general manager for Northern Star Generation, said the company had to notify PJM whether the Colver plant would participate in an upcoming capacity auction that seeks to procure power for the 2021/2022 delivery year. That notification was given Nov. 22.
Given the uncertainty of what those capacity prices might be and the trend of declining capacity prices, "we are concerned that the prices that might come out of the auction would be too low to cover the fixed costs of the plant," Sims said in an interview Dec. 6. Houston-headquartered Northern Star Generation operates the plant and is jointly owned by the Archmore International Infrastructure Fund, an investment fund managed by UBS Global Asset Management and a subsidiary of Harbert Management Corp.
Capacity prices in PJM's Mid-Atlantic Area Council, or MAAC, region, which reflect Penelec's service territory, cleared at $86.04/MW-day in the last auction, held in May, compared to $100/MW-day in the prior year's auction for the 2019/2020 delivery year.
Sims said Northern Star cannot decide whether to close the Colver plant until PJM completes an analysis of whether the plant's output is needed for reliability.
Given that the waste coal used as the plant's fuel source is left over from underground coal mines, it is a "modest component" of the operating costs, Sims said. More expensive are trucking costs and environmental costs of using limestone to remove sulfur dioxide emissions, a federally regulated air pollutant. The waste coal is also "fairly abrasive" and causes erosion to the boiler tubes, which are fairly expensive to maintain, Sims added.
On top of that, the plant is not able to comply with the acid gas piece of the U.S. Environmental Protection Agency's Mercury and Air Toxics Standards, a 2012 rule to limit hazardous air emissions including acid gases and mercury. Sims said the plant can comply with the mercury piece but the acid gas portion would require purchasing more limestone, which would add to operating costs.
Sims said Northern Star is facing the same issue with its 88-MW Cambria Cogeneration plant in Edensburg, Pa., which did not clear PJM's last capacity auction seeking power for the 2020-2021 period. Sims confirmed the Cambria plant still operates even though its last power contract with Penelec expired in 2011. The Cambria facility has two boilers instead of the single boiler at Colver and has some flexibility to operate at reduced loads when PJM prices are lower, Sims said.
Sims still has to discuss the next steps of the Colver site with the plant's ultimate owner, General Electric Co. At both the Colver and Cambria sites, Northern Star Generation is exploring alternatives such as modifying the plants to co-fire natural gas, he said.