Dive Brief:
- American Electric Power (AEP) confirmed Tuesday in an email that the company has decided to close down its 1,590 MW Conesville coal generation facility in Ohio by May 31, 2020, two years ahead of schedule.
- The utility considered recent power auction results as well as the costs to continue operating the plant, determining it was not economically viable. Units 5 and 6 were originally slated to close down in 2022, but the company now says market conditions could lead to their mothballing as early as May 2019. Unit 4 will run through May 2020, at which point the plant will be shuttered.
- There had been some discussion of repowering Units 5 and 6 with natural gas but AEP never pursued that plan, working instead for several years to exit the competitive generation business in Ohio.
Dive Insight:
With the units struggling to clear in the PJM capacity auction and efforts to win subsidies for its plant denied, the AEP announcement is the latest sign of the coal industry's slow decline. The company informed employees of the decision on Oct. 5.
The company said it "unsuccessfully sought a buyer for Conesville Plant for a number of years," but made the decision to shut it down after considering "the costs of keeping the plant operational and the outcomes of recent competitive generation auctions."
The plant's closure may already be having ripple effects. Westmoreland Coal announced Oct. 9 that it had declared bankruptcy and the Conesville plant is a major customer of the coal supplier, according to S&P Global.
Conesville failed to clear in PJM Interconnection's capacity auction for the 2021-22 delivery year, and had struggled to clear portions of its capacity in the previous auction. Last year Ohio's Department of Taxation had lowered its assessment of the plant's value from more than $72 million to less than $35 million, resulting in significant revenue for local entities, according to the Coshocton Tribune.
AEP had pressed for customers to support its struggling plants, then looked to a possible restructuring of Ohio's energy markets before ultimately calling it quits on the plant and on merchant generation in the state.
AEP now says its "long-term strategy is focused on its regulated businesses and investment in infrastructure and the energy innovations."
As it has done following other plant closures in recent years, AEP says it will work state and federal agencies along with "parties who specialize in decommissioning brownfield sites," to ensure the Conesville closure meets all requirements.
Last year, AEP struck a deal with Dynegy to consolidate ownership interest in two co-owned plant. AEP sold the 330 MW Zimmer Plant in exchange for Dynegy's 312 MW share at Conesville, giving AEP about 92% ownership. Dayton Power & Light owns a share of Conesville Unit 4, and AEP officials said they had discussed the decision and were in agreement on retiring the unit in 2020.
