Lawmakers pick natural gas winners and losers in energy bill talks

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In Pritzker’s original bill, which plants would close when was to be left to the Illinois Environmental Protection Agency. But objections to that approach by the developer of a large combined-cycle gas plant in Morris just beginning construction resulted in the new language that effectively will close smaller gas plants designed to operate only when power demand is high before the larger facilities that are intended to run a majority of the time.

New York-based LS Power owns four of those “peaker” plants, with two in south suburban University Park and two more in Rockford and Aurora. The firm acquired the plants over the past decade assuming that they would operate another 20 to 30 years. Now, the first of those plants could close as early as 2030 under the new proposal, with all of them shuttered no later than 2040.

The plants could stay open if converted to hydrogen, which doesn’t emit carbon. But LS Power executives say hydrogen isn’t close to being economic, so the plants most likely will just close.

“That stuff isn’t ready yet,” LS Power CEO Paul Segal says in an interview.

The facilities together employ 36, so the politically potent jobs argument isn’t one LS Power can make. Segal argues that premature closure of the plants will send electric bills soaring. That’s especially true, he says, if green ambitions to electrify large parts of the economy—home heating and transportation, for example—come to fruition.

Flexible power sources may well be in more demand than they are now. Plants like LS Power’s operate only when power demand is high—10 percent to 20 percent of the hours in a given year. Power prices during peak hours play an outsized role in determining the electric bills paid by consumers, who need access to electricity at all times. Higher peak prices mean higher overall rates.

Peakers, Segal argues, account for less than 5 percent of the power sector’s carbon emissions and more than 90 percent of its flexible generation resources. They turn on fast, and they turn off fast as well.

The $1.3 billion Morris plant, under development by Silver Spring, Md.-based Competitive Power Ventures, will employ hundreds during the construction phase but only about 25 once operational. When the energy bill was close to passage at the end of May, Harmon opted not to move forward after CPV threatened to pull the plug on the project. The company was unwilling to risk the chance the plant would be forced to close before 2045, and Harmon didn’t want to jeopardize the hundreds of union construction jobs.

Now, the new language hits LS Power in order to keep the CPV development on track. At least that’s Segal’s view. “This is as much a special-interest bill as any,” he says.

The 1,250 megawatts of generating capacity at CPV’s Three Rivers plant in Morris is more than half the combined 2,400 megawatts at LS Power’s four plants. The new language would allow Three Rivers to operate until 2045.

Environmentalists are unsympathetic to LS Power’s arguments.

“Gas companies balked at the supposed unworkability of the governor’s proposal because they claimed it involved too much ‘uncertainty,’” J.C. Kibbey, Illinois clean-energy advocate for the Natural Resources Defense Council, writes in an email. “Now they’re saying that a supposed framework that gives them the certainty they asked for is unworkable for different reasons.”

“The gas industry would have you and the public believe that they want to find some mythical ‘sensible’ approach to reducing our carbon emissions,” Kibbey adds. “But they will almost certainly continue to make these bad-faith objections to any and every meaningful climate policy. They will dangle their support in an effort to weaken proposals, but the support will never come.”

Still to be hashed out is the future of the Prairie State coal-fired plant in southern Illinois—effectively the last issue standing in the way of a bill that both organized labor and environmentalists will support, sources say. Pritzker, backed by the enviros, has insisted on a drop-dead closure date for the plant, which numerous municipalities in the state are contractually obligated to support into the 2030s and 2040s.

Unions want the plant to continue to operate if it invests in technology effective enough to capture at least 90 percent of carbon that otherwise would be emitted.

In the meantime, the current version of the bill would move up the timetable for the closure of all other privately owned coal-fired plants to 2030 from 2035. The industry in Illinois appears well on its way to meeting that deadline, with or without legislation.

The Senate Energy Committee has scheduled a hearing for this afternoon on the latest iteration in hopes that a breakthrough on Prairie State will happen in time for a vote tomorrow or later this week.

via Crain’s Chicago Business

August 30, 2021 at 06:02PM

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