HOUSTON, Texas—CPS Energy, a municipal utility in San Antonio, Texas, plans to shut its two-unit, 871-megawatt JT Deely coal station by 2018 to avoid spending as much as $3 billion for environmental equipment needed to comply with pending federal regulations, company officials said on Monday.
Late last year, CPS completed a $1 billion, 750-megawatt coal unit at the Calaveras Power Station, where the Deely units have been running since 1977 and 1978.
CPS Energy, the nation's largest city-owned utility supplying both natural gas and electricity, wants to reduce its reliance on fossil-fueled generation and boost its use of renewable resources, such as wind and solar power, to 20 percent, or 1,500 megawatts, by 2020.
"We're estimating that we are avoiding $3 billion of retrofits for a 33-year-old coal plant," said CPS Chief Executive Doyle Beneby. "We've chosen to invest those dollars today in clean sources that are affordable."
The utility on Monday also announced a 25-year agreement to purchase 200 megawatts of power from the Summit Texas Clean Energy coal-fired plant under development near Odessa.
Construction is expected to begin by early 2012 on Summit's 400-megawatt integrated gasification combined cycle (IGCC) plant which is designed to capture 90 percent of its carbon dioxide emissions.
Beneby said CPS will replace the Deely output with electricity from the Summit plant, along with additional renewable power and the potential purchase of an existing gas-fired power plant.
CPS owns 40 percent of the state's largest nuclear station, the 2,700-megawatt South Texas Project, but pared its investment in the planned STP expansion last year, months before NRG Energy Inc. dropped the project in the wake of Japan's Fukushima nuclear accident.
Stricter regulations being formulated by the U.S. Environmental Protection Agency to reduce air and water pollution as well as to control coal waste are expected to force retirement of between 30,000 and 70,000 megawatts of coal generation in the next few years, according to industry studies.
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"San Antonio's decision to phase out the Deely coal plant signals the beginning of the end of the coal-burning era and its associated air pollution and illness in Texas," said Eva Hernandez, a spokeswoman for the Sierra Club's Beyond Coal campaign.
Earlier this month, American Electric Power Co. said it would shut one-quarter of its coal fleet and invest as much as $8 billion to install pollution controls at remaining plants to comply with the new rules.
In Texas, AEP plans to shut one of three units at its Welsh station in East Texas. Welsh is located outside the primary Texas electric grid known as the Electric Reliability Council of Texas (ERCOT).
While environmental groups hailed Deely's early retirement and are clamoring for a number of lignite plants to shut, a recent ERCOT report concluded that the pending rules will not lead to significant coal closures.
"In ERCOT, the coal fleet has sufficient economic value to justify a significant amount of investment," Warren Lasher, ERCOT's manager of long-term policy and planning, told an industry meeting in Houston late last week.
Beneby said the while timing of coal plant closures might be delayed by a few years as EPA rules are finalized, "over the mid- to long-term, it's going to happen. We're preparing for it," he said.
(Editing by Lisa Shumaker)