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IMA Energy & Environment Blog

Gas, Coal Interests Collide Over Gas Plant Proposed for Central Illinois

by Bob Matyi, S&P Global

Natural gas and coal interests are colliding in the county that is home to Illinois’ state capital as local officials weigh whether to approve aid for a $1 billion, 1,100-MW, combined-cycle gas-fired plant proposed by Houston-based EmberClear.
While conflicts between supporters of the fossil fuels are hardly unique in the US, they perhaps are playing out more visibly in central Illinois, where EmberClear’s critics warn the proposed plant 15 miles from Springfield could hurt local coal generation and mining jobs.
Illinois Coal Association President Phil Gonet, who delivered that message to the Springfield City Council Tuesday night, said in a Thursday interview the gas plant could play havoc with the city’s economy.
“This power plant will directly compete with CWLP’s wholesale power sales and part of CWLP’s budget is dependent upon sales outside the city,” he said, referring to the locally owned municipal utility, City Water, Light & Power.

CWLP owns and operates a roughly 550-MW coal-fired generating system, and its newest coal plant, Dallman-4, was built in 2009. Currently, the city is burning coal exclusively from Arch Coal’s Viper underground thermal coal mine near Williamsville in Sangamon County.
Viper’s about 220 miners, who can make in excess of $70,000/year, produce about 1.5 million st/year of high-sulfur coal.
Gonet fears those coal jobs could go away, as well as those of some of CWLP’s power plant workers, if the city’s coal generation is undercut by cheaper gas-fired power.
John Kinnamon, EmberClear project manager for the Pawnee plant, said in a Thursday interview that opposition to the project was “to be expected. That’s how things are done in Illinois,” a quintessential coal state for more than a century.
However, EmberClear will not be deterred, he said. Even if the company does not receive the enterprise zone designation it is seeking from Sangamon County and the City of Springfield, it plans to push ahead with the plant.
Such a designation would give the company a sales tax exemption and partial abatement of property taxes that could be worth millions of dollars.
“We really like the site in Pawnee,” he said. “It’s not critical … the enterprise zone designation. We like to think of that site as a unicorn site — it’s perfect.”
According to Kinnamon, the site is near existing gas pipelines and electric transmission lines, not to mention its location in the Midcontinent Independent System Operator footprint.
Gonet, though, questions the economic wisdom of building a new gas plant in MISO territory. MISO’s auction in April for the 2017-2018 year cleared at only $1.50/MW-day in all zones, far less than the previous year’s $72/MW-day in zones two through seven, which includes downstate Illinois.
“Who in their right mind would build a natural gas plant in MISO?” Gonet said, adding: “I would think they would at least go to PJM,” whose footprint includes the northern part of Illinois and pays higher capacity prices to generators.
Kinnamon said EmberClear is confident in its ability to build and operate a profitable plant near Pawnee, Illinois. The facility is targeted for commercial operation in 2022.
He said the company has other gas plant sites optioned “all over that area,” noting EmberClear intends to construct multiple combined-cycle projects in the region.
Kinnamon believes an eventual buildout of 4,000 MW to 5,000 MW of gas-fired generation is possible in MISO Zone 4, which includes downstate Illinois. At present, he said, the zone has 11,360 MW of conventional thermal coal units, 1,065 MW of nuclear generation, 3,229 MW of gas-fired peakers and only 1,124 MW of combined-cycle gas generation.
Across the US’ traditional coalfields, there is a convergence between gas and coal, he said. And nowhere is this more true than in Illinois and neighboring Indiana.
“What’s glaring is if you look at the pipeline infrastructure in Illinois,” he said, adding: “It’s almost as robust as it is in … Ohio,” close to the Marcellus and Utica shale plays. Illinois, he said, is “suffering a bit from their history.”
In parts of Ohio and Pennsylvania, there has been pushback against gas development from some coal industry figures, including Robert Murray, founder and owner of Murray Energy, the largest privately owned coal miner in the US.
The Sangamon County board has already approved the enterprise zone request, 26 to 0, over Gonet’s objections.
Still, Gonet predicts the plant will be defeated. “I think the probability of this plant being built is very, very low,” he said, noting that Illinois currently has about a 20% surplus of electric generating capacity.
The Springfield City Council is expected to vote later this summer on the enterprise zone designation.
Julia Frevert, spokeswoman for Mayor Jim Langfelder, said in a Thursday email that city chief engineer engineer Doug Brown recently submitted a report about the plant to the council.
“It does show that the EmberClear plant will have a negative impact on the city of Springfield’s City Water, Light & Power,” she said.

 

For more information, visit S&P Global’s article here.

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