PSEG Power Considers Decommissioning Two Coal-Fired Plants

Tom Johnson | September 15, 2016 | Energy & Environment
Company indicates that low cost of natural gas has put economic pressure on coal and nuclear units

PSEG Power Hudson Generating Plant
Is PSEG Power going to shutter its coal-fired power plants in Hudson and Mercer counties?

The subsidiary of Public Service Enterprise Group is asking the regional power grid to be relieved of an obligation to bid electricity generated from the two facilities into a May power auction overseen by PJM Interconnection.

The request, made earlier this month, is essentially a procedural move, but some view the step as a signal that the two aging power plants, long pushed to be closed by environmentalists, may be retired by the company.

Officially, PSEG Power said it has not made a decision to close the plants, according to Michael Jennings, a spokesman for the company.

“But there is no question that the low cost of gas has put tremendous economic pressure on the profitability of coal and nuclear plants,’’ Jennings said. “Our two coal plants — Hudson in Jersey City built in 1968 and Mercer built in 1960 — are older units that are expensive to run.’’

From an industry perspective, the shuttering of the coal units is not much of a surprise. Coal cannot compete economically in a deregulated marketplace with cheap natural gas, readily and plentifully available in New Jersey from the Marcellus Shale formation in Pennsylvania.

Tougher environmental restrictions also have made coal units less viable, and they will become increasingly so if the Obama administration’s Clean Power Plan to reduce greenhouse gas emissions from power plants survive court challenges.

“It’s part of a trend,’’ said Paul Patterson, an energy analyst with Glenrock Associates in New York. “It’s called natural gas prices.’’

In 2015, coal accounted for 80 percent of the generating capacity retired nationwide, according to the Energy Information Administration. That trend is expected to accelerate, the agency said.

In the recent past, the Mercer and Hudson plants burned coal rarely, switching instead to natural gas when put into service. But those two plants have installed expensive pollution controls, at a cost of nearly $2 billion, to meet tougher environmental standards, making them less competitive with newer natural gas units.

The Christie administration has repeatedly said it wants to promote natural gas at the expense of coal. Five new natural-gas generating facilities have come on line over the past few years or are slated to do so soon, including a 540-megawatt plant in Sewaren PSEG began building earlier this year.

Before the company makes a decision on the coal units, Jennings said it needs to do “further analysis on market factors and the cost of both maintenance as well as the capital improvements needed to bring the plants up to the new performance standards required by PJM.’’

Jennings was referring to new standards adopted by PJM to ensure greater reliability of the power grid. Power plants receive lucrative payments to provide enough capacity to keep the lights on, but should they fail to provide the electricity when obligated they face stiff financial penalties.

In any event, environmentalists who have been pushing to close coal plants, are hopeful the decision will be made.

“For us, it’s been a long quest to get rid of coal,’’ said Jeff Tittel, director of the New Jersey Sierra Club, which filed a notice to sue the Mercer facility because the operation of the unit was harmful to the sturgeon population in the Delaware River.

“These are signs that the plants are no longer financial viable,’’ he said, referring to a letter PSEG sent to PJM, which noted that the two units unsuccessfully bid into the capacity auction held by the grid operator the past two yeas.

“It would be a boon for air quality in all of north Jersey,’’ added Doug O’Malley, director of Environment New Jersey. Besides being the biggest source of greenhouse gas emissions in the power sector, coal-fired units also are a major source of mercury, a particularly toxic substance.