Florida utility Lakeland Electric will shut down its coal-fired Unit 3 at the C.D. McIntosh Jr ST steam turbine plant in Polk County, Fla., by the fall of 2024, but the company is still mulling options over how to make up for its capacity.
McIntosh Unit 3, which has a nameplate capacity of 363.8 MW, now costs $20/MWh more to run than the companion natural gas-fired unit, the C.D. McIntosh Jr CC, Lakeland Electric Assistant General Manager of Production Michael Beckham said. The coal unit, which began operating in 1982, has been out of service since February after its scrubber tank needed an emergency replacement or else be "at risk of catastrophic failure," costing the utility $1.4 million in repairs.
"It's increasingly costly in terms of safety, environmental and reliability … we expect that trend to only increase," Beckham said during the city of Lakeland's utility committee hearing on May 6.
Shutting down McIntosh Unit 3 will mean Lakeland Electric will have to come up with another 136 MW of capacity to meet customer demand in 2024. The utility has a few options to consider, such as issuing a request for proposals to contract for electricity from larger utilities such as the Orlando Utilities Commission and Tampa Electric Co., adding up to 30 MW of solar paired with storage, building a single natural gas combustion turbine or internal combustion turbine, or partnering with another utility for a 350-MW to 600-MW natural gas plant.
The city-owned Orlando Utilities Commission owns a 30.54% interest in McIntosh Unit 3, according to S&P Global Market Intelligence data. The Lakeland City of owns the majority share and is the plant's operator. In 2018, the bulk of the plant's coal came from the MC No. 1 mine in Franklin County, Ill., owned by Murray Energy Corp. and Foresight Energy LP.
As the utility weighs its options, Beckham and Lakeland Electric General Manager Joel Ivy said his team are keeping an eye on an advocacy group's ballot initiative to deregulate the state's electricity market and limit investor-owned utilities from owning power plants.
"I don't give it a good chance of it passing, but it's out there," Ivy said, calling it "a game-changer." While municipal utilities are technically exempt from the ballot initiative, Ivy said he is sure the state and investor-owned utilities would want to level the playing field and have municipal utilities comply with the constitutional amendment if it makes it onto the ballot for the state's November 2020 election and passes.
"It would mean investing in another generator would be a bad idea," he added.
When asked about replacing McIntosh Unit 3 with another coal plant, Ivy said the cost of a new coal plant is at least three times the cost of a natural gas unit. Given the federal regulatory environment and the market's increasingly supportive attitude toward natural gas and renewables, building another coal plant is not feasible.
"What we're doing is not unique in the industry, looking at a natural gas fleet," Ivy said. "I don't feel bad about it … it's kind of the only game of town." He added that the utility cannot afford to build a nuclear reactor.
The utility committee has asked Lakeland Electric for a presentation that provides more details, including pricing, for all replacement options for McIntosh Unit 3 at a later meeting.