AES Indiana says converting 1,052 MW of coal to gas will be $381M cheaper than renewables and storage

Dive Brief:

AES Indiana plans to convert two coal-fired units totaling 1,052 MW at its Petersburg power plant to natural gas in 2025, which the utility estimates would be $381 million less expensive over 20 years compared with replacing the generating station with renewable energy and storage.
In the near term, The AES Corp. subsidiary’s integrated resource plan also calls for adding 240 MW of storage, up to 900 MW of wind, 90 MW of solar combined with storage and 75 MW of stand-alone solar by 2027, depending on the cost, according to a Monday presentation on the pending plan.
The plan includes little solar energy despite incentives in the Inflation Reduction Act for renewable energy and for “energy communities” like Petersburg, Indiana, that depend on fossil fuels, Wendy Bredhold, senior campaign representative for the Sierra Club’s Beyond Coal campaign in Indiana, said Monday in a statement.

Dive Insight:

Like many other utilities, AES Indiana regularly develops a road map for its resource mix, with input from stakeholders. The utility expects to file its latest plan for review at the Indiana Utility Regulatory Commission on Dec. 1.

The plan envisions adding 1,450 MW of stand-alone solar in the first half of the next decade, plus 450 MW of solar combined with storage and 300 MW of wind.

At the end of the 20-year plan, AES Indiana would have a generating portfolio that is 87% solar, wind and storage, according to the utility. AES Indiana owns and contracts for 3,634 MW, with its coal plants constituting about half its portfolio.

The utility retired one unit at the four-unit Petersburg plant last year and is set to retire its 401-MW Unit 2 next year.

Under the plan, AES Indiana’s carbon dioxide emissions would fall 69%, to about 4 million metric tons, in 2030 from about 12 million metric tons in 2018, according to the presentation.

AES Indiana expects the power plant’s use will fall sharply if it is converted from coal to gas, helping reduce its air emissions and water use.

Before the planned conversion, the plant’s two units will have 43% and 30% capacity factors, a measure of how often a generating facility runs at full output, according to the utility’s estimates. The capacity factors would fall to about 10% by the end of the decade for both units and edge lower through the 2030s, according to the presentation.

The utility included the IRA tax credits in its modeling, according to Kelly Young, a spokesperson for AES Indiana.

Citizens Action Coalition, an Indiana consumer and environmental advocacy group, is “very disappointed” in AES Indiana's decision to replace its coal-fired Petersburg Units 3 and 4 by refueling it with gas, according to Program Director Ben Inskeep.

“AES Indiana is one of many utilities that have had to sharply increase rates on captive consumers this year as a result of passing on spiking coal, gas, and purchased power costs, and this decision just doubles down on more volatile fossil gas,” Inskeep said Tuesday in an email.

The valuable interconnection rights at the Petersburg site will be used primarily by the gas refueled plant instead of by a larger expansion of clean energy solutions that could tap into the "energy communities" federal tax credit adder under the IRA, Inskeep said.

AES Indiana's preferred portfolio appears to shortchange local and distributed solar options, with the utility not committing to any significant amount of solar until the 2030s, he said.

Other utilities in Indiana are planning larger additions of solar in the near term than AES Indiana, according to Bredhold. CenterPoint Energy intends to add 765 MW of solar, and Northern Indiana Public Service Co. expects to add 2,300 MW this decade, Bredhold said.