Power industry, state, consider cleaner energy

By Sam Harvey
Staff Reporter

In like fashion, power generation company NRG Energy and two public sector entities are closing in on a playbook for future improvements at the local Indian River Power Plant.

Indian River Power perennially tops Delaware’s Toxic Release Inventory (TRI) as the worst polluter in the state. But parent company NRG’s Ray Long (governmental affairs) has indicated the possibility that the company may spend as much as $1 billion on new, cleaner and more efficient “coal gasification” plant, either alongside or to replace the existing facility.

The project’s exact makeup depends on three converging factors:

(1) NRG needs to find green-light its own feasibility study, which is itself perhaps reliant on,

(2) a Public Service Commission (PSC) feasibility study. The PSC study may, among other things, recommend that the state encourage long-term contracting between power generation companies and power delivery companies. As Long pointed out, long-term contracting would “greatly assist” the company in its ability to attract financing for such a major construction project; and

(3) Meanwhile, the Department of Natural Resources and Environmental Control (DNREC) expects to have a new set of air quality regulations ready by mid-year.

According to DNREC’s Ron Amirikian (Air Quality Management), the pending regulations would offer some leeway, as far as which emissions-reducing technologies local companies, like NRG, would prefer to install. But one way or another, power generators will need to reduce mercury, sulfur dioxide (SO2) and nitrogen oxide (NOx) emissions, Amirikian pointed out.

NRG has been considering options for the past 18 months, Long said, noting ongoing experimentation with low-sulfur, Powder River Basin (PRB) coal.

“One option would be to go with the PRB coal and the upgrades the state is looking at,” he said.

PRB coal is cleaner, but burns at a lower temperature (therefore producing less electricity than the same amount of traditional coal). The $1 billion alternative would involve a move away from PRB coal, and toward coal gasification, using traditional coal.

As it stands, Indian River’s boilers run on pulverized coal (with a maximum sulfur content of 1.6 percent by total weight). As “gasification” suggests, the tentatively-proposed new plant would turn the coal into “synthesis gas,” or “syngas.”

The use of syngas would give Indian River Power some of the same emissions specifications as a traditional, natural-gas-fired power plant, Long explained. Coal gasification would dramatically reduce SO2, NOx and mercury emissions, and carbon dioxide (CO2) emissions would be significantly reduced as well.

In addition to the vast environmental improvements, Long admitted coal gasification had its economic benefits. “You’re not going to invest in something as novel as clean coal technology if you’re not going to make money in it,” he pointed out.

Another factor is space — there’s plenty of room to build a new syngas plant in the shadow of the older facility, without disturbing operations at Indian River Power, Long noted.

“I think we’d all love to see the project come here,” he said.

According to Long, NRG’s feasibility study might lead to continued experimentation with PRB coal, a new syngas plant, or any of a whole host of combinations thereof.

“We expect to complete our evaluation in the next six months,” he said. “At that point, we’ll decide whether we’re going to pursue this initiative, or take another course at Indian River.”

Construction of any additional power generation infrastructure would likely stabilize prices for end users, he added. “Bottom line, the Delmarva Peninsula needs more power,” Long said, noting population growth around Sussex County in particular.

However, if NRG needs the guarantees of long-term contracting to finance construction of new facilities, Delmarva Power’s Matt Likovich said there might be downside.

Delmarva Power, on the still-regulated delivery side of the industry, awards contracts to low-bidders in now-unregulated power generation.

“We’re looking at the best deal for our customers,” Likovich said. “And it’s pretty safe to say, market conditions being what they are, it would not be prudent to enter into long-term contracts at this juncture.”

Delawareans are bracing for rate increases in May, with residential customers expecting to pay at least 50 percent more than they do today. (Commercial and industrial users can anticipate even larger rate increases, which may also impact consumers, indirectly.)

Likovich blamed the situation primarily on lousy timing. No one could have predicted that the rate freeze imposed in 1999 would expire just when the market for energy-related commodities was at its most volatile, he said.

Coal has doubled in price since 1999, gasoline and oil prices have more than doubled, he pointed out, and natural gas prices are up nearly 350 percent since 1999, further boosting market prices around the region’s massive Pennsylvania-Jersey-Maryland (PJM) power grid.

He suggested there is no way to know if a still-regulated industry could have produced energy prices any cheaper than those projected for May. “Talking about what we would have had if deregulation had never happened is really speculative,” Likovich said. “It really depends on how well, or poorly, companies manage their purchasing, and their timing in purchasing.

“Yes, the market for choice hasn’t developed, but that’s not to say that it won’t develop,” he added. “Yes, the rate freeze in 1999 didn’t spur competition, but if the local rates had been out of line, maybe some third parties would have come into this market.”

Likovich recognizes that customers are concerned about the pending rate hikes, and offered assurances that Delmarva Power was working with the state, toward possible ways to mitigate that impact. He said the company was also trying to encourage its customers to start thinking about energy conservation, as a good way to cut costs and benefit the environment at the same time.