NEWS

USA: Deal Announced to Close Louisiana Coal Unit

The Arkansas Public Service Commission has approved a plan to retire the Dolet Hills power plant, a coal-fired unit in Mansfield, Louisiana that serves part of the state. The decision, reached in December and announced Jan. 8 by the Sierra Club, came as part of a settlement agreement in a recently concluded Arkansas rate review, according to Peter Main, a spokesman for Southwestern Electric Power Company (SWEPCO), which shares the plant’s electricity production with plant owner Central Louisiana Electric Co. (Cleco).

Said Main in a Jan. 9 email to POWER: “As part of a settlement agreement in the recently concluded Arkansas rate review, SWEPCO has agreed to seek regulatory approval to retire the Dolet Hills Power Plant by the end of 2026. SWEPCO has committed to make the necessary regulatory filings at least 12 months prior to the retirement date. Also as part of the settlement, the Sierra Club agrees to withdraw its pending challenges related to the Dolet Hills Power Plant in Texas and Louisiana. With this agreement, we continue to focus on the economic operations of the plant and lignite mine to best serve our customers. This action follows our change to seasonal operations last year as we adjust to electric power market conditions and the challenges of mining the Oxbox [coal mine] lignite reserves.”

The Sierra Club was among the environmental groups that had called for the plant’s closure due to concerns about pollution. The 650-MW Dolet Hills plant, with one coal-fired unit, entered service in 1986. The plant burns lignite. Cleco in January 2019 had said it would only operate the plant during summer months.

Cleco had invested in upgrades to the Dolet Hills plant in 2015 and 2016, and had previously said the plant was not expected to retire until 2046. Both SWEPCO and Cleco in their 2019 integrated resource plans (IRP) said they were preparing to shift their focus away from Dolet Hills, instead concentrating on power generation from other sources, including renewables. SWEPCO in its IRP had said it would “continue to evaluate operations” of the Louisiana plant.

Cleco Adding Solar, Wind

Cleco in its IRP said it wanted to procure up to 400 MW of electricity from solar, and up to 1 GW of capacity from wind, by 2038. SWEPCO, a subsidiary of American Electric Power, in its IRP said it plans to add 1.4 GW of wind generation capacity over the next decade. Cleco has been de-emphasizing coal-fired generation since its parent, Cleco Corporate Holdings, acquired NRG Energy’s South Central Generating business for $1 billion in 2018. As part of that agreement, approved by the Louisiana Public Service Commission in January 2019, Cleco said it was adding 3.5 GW of thermal power generation through South Central, but would reduce operations across 1.2 GW of acquired coal-fired capacity, shifting the then-721-MW Dolet Hills to seasonal operations, at a reduced capacity. It also announced it would stop burning coal by 2025 at a 580-MW unit at the Big Cajun II plant in New Roads, Louisiana.

Higher Prices for Coal

Cleco in its August 2019 IRP filing said prices for lignite coal had increased, negatively impacting the economics of the Dolet Hills plant, and noting “the economic difficulties that this coal unit is experiencing,” particularly when competing with natural gas-fired power in a state that ranks behind only Texas, Pennsylvania, and Oklahoma in natural gas production, according to the U.S. Energy Information Administration (EIA).

In the IRP, Cleco attributed the coal’s price volatility to “changes in quantity (mmBtus) delivered, not changes in cost. Unforeseen issues at the new mine [supplying the plant] have resulted in a prolonged period of lower than expected deliveries, which translate into higher than expected inventory costs on a $/mmBtu basis.” Cleco in the IRP said, “Dolet Hills will transition both its mining operations and plant operations to a seasonal dispatch, focusing primarily on the summer months [of] June through September.”

According to EIA, Dolet Hills has been the only coal-fired unit in Louisiana burning the state’s lignite coal. The rest of the state’s coal units burn Powder River Basin coal from Wyoming, or Illinois Basin coal from Illinois, Indiana, and Kentucky. Wednesday’s announcement comes one month after Indianapolis Power & Light announced it would close two coal-fired units at the utility’s largest power plant by 2023, after pressure from state lawmakers and environmental groups.

https://www.powermag.com/deal-announced-to-close-louisiana-coal-unit/?pagenum=2

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