Ameren: 1,200 megawatts of natural gas needed to comply with emissions rules
JEFFERSON CITY • Ameren Missouri says it will need to add 1,200 megawatts of combined cycle natural gas generation by 2020 in order to comply with the Environmental Protection Agency’s proposal to reduce carbon dioxide emissions linked to climate change.
The massive addition to the St. Louis utility’s power generation portfolio, at a cost estimated by a utility spokesman at about $2 billion, would be roughly equal to the size of its nuclear power plant in Callaway County. While the utility says its internal plans already called for more natural gas, it said the EPA proposal’s timeline would require more new plants sooner than necessary and lead to rate hikes of 10 to 15 percent by 2020.
“We don’t really need that generation, but in order to comply with this, we need to install something to get that rate down because (EPA’s proposal) is a rate-based formula,” said Mike Menne, Ameren Corp. vice president of environmental affairs.
The rule, and utility’s compliance strategies, could look far different by the time the EPA finalizes the regulations. The EPA has said it will finalize the proposal next year, but lawsuits and state implementation plans could greatly change its form.
Of particular concern in the EPA’s current proposal are interim carbon emission reductions that could kick in by 2020. That’s not far away, Menne said, which is why the utility is already in the early stages of planning for the new gas plants.
The utility touted its own plan, which Ameren said would make the new power plants unnecessary. Its plan would take several years longer to meet the carbon reductions envisioned by the EPA but would cost $4 billion less, Ameren says.
“We’ll still get to the final place, and we think it will be a lot less expensive for our customers,” Menne said.
Environmental groups, however, said utilities are underestimating the impact similar investments in energy efficiency and renewable energy could have. The Sierra Club released a policy paper arguing Missouri can meet EPA’s goal solely through efficiency and new solar and wind that offset coal plant retirements.
“There’s no reason they can’t do four to five times as much as they’re doing now” for energy efficiency, said Ashok Gupta of the Natural Resources Defense Council.
The new gas plants would come online around the same time Ameren plans to retire its coal-fired, 840-megawatt Meramec power plant in south St. Louis County. But that retirement wouldn’t reduce the utility’s rate of carbon emissions without new, lower-carbon generation offsetting it.
Menne’s comments came at a gathering organized by the Missouri Public Service Commission, which regulates the state’s investor-owned utilities and is seeking feedback to determine comments it and other state agencies may submit to EPA on the proposed rule.
Building that amount of new capacity would cost roughly $2 billion and require at least four combined cycle gas power plants, said Warren Wood, the utility’s vice president of external affairs. Wood said the utility does not yet know where it would build the new plants, but he said they will most likely be in eastern Missouri.
Constructing that many new power plants that quickly is not Ameren’s preferred plan, Wood emphasized. Delaying the rule’s implementation by several years would cut the amount of natural gas generation needed by half. “Our preferred plan is to build less combined cycle later with more renewables between now and then,” Wood said.
Ameren could meet EPA’s targets by the mid 2030s, which would only cause customer rates to increase by only “a couple percent” by 2020, Wood said.
Efficiency programs are weighted so they improve a utility’s emission rate without the need to build more generation. Gupta, at the NRDC, said efficiency carries less risk and is faster, but utilities tend to look at building more plants because of industry bias. Ameren and others would be better off putting money into efficiency rather than new power plants, he said.
“Even though people believe they’re doing all they can, all experience shows there is a lot more that can be done,” Gupta said.
Utilities, however, say much of the low-hanging fruit has already been picked and new programs will cost more and achieve less. “You get a lot of good energy efficiency up front but those programs become more and more expensive as time goes on,” Menne said.
The federal government plans to finalize the carbon rule in June, after which individual states have another year to craft at least a partial plan. Lawsuits are expected, casting uncertainty on the timing and form of the final rules. That could affect early compliance plans utility executives say are just beginning to shape.
The EPA’s proposed rules released June 2 call for reducing carbon dioxide emissions from power plants by roughly 30 percent from 2005 levels. Each state’s target depends on its makeup of power plants.
In coal heavy-Missouri, the EPA is pitching a reduction of 21 percent.
The EPA gives states two options to comply. The main approach is a rate-based formula that measures the amount of carbon emitted per unit of electricity. But the agency leaves open the option for states to pursue an overall reduction in carbon emissions.
Menne said Ameren initially liked that idea because of plans to retire its 60-year-old Meramec power plant by 2022. But a mass-based approach could penalize a utility if demand grows and new power plants are built, and Menne said Ameren will probably prefer the rate-based approach.
In order to make that work, the utility says it needs to add lower-carbon natural gas generation to replace the high-carbon coal plant.
New natural gas plants could exacerbate supply issues, which flared up last winter, said Paul Ling, director of environmental compliance at Kansas City Power and Light, the investor-owned utility in the state’s other large metropolitan region. Missouri’s natural gas pipelines aren’t designed to supply enough gas to both heat homes in the winter and fuel thousands of megawatts of new natural gas power plants, Ling said.
That’s a concern Ameren shares, Menne said. “The thing we’re most concerned about is can we get firm commitments to run these things?” he said.
