There’s no question the Huntley Station in the Town of Tonawanda is in a bad spot.
Coal-fired power plants across the country have long been under the gun from environmentalists because, as electricity generation goes, coal is just about the dirtiest fuel you can use.
If that wasn’t enough, coal plants have come under attack on other fronts over the last few years. Natural gas now is so cheap, thanks to soaring shale gas production from places like the Marcellus Shale region in Pennsylvania, that it now provides around 30 percent of the nation’s electricity, up from 21 percent in 2008.
Most of that growth came at the expense of coal-fired plants, which went from providing 48 percent of the nation’s electricity in 2008 to 37 percent in 2012, as coal prices rose and efforts to reduce air pollution intensified, according to the U.S. Energy Information Administration.
It also doesn’t help Huntley that the overall demand for electricity is flat, caused by a combination of a still-sluggish economy and improving energy efficiency.
And to top it all off, Huntley’s already shaky outlook only got dimmer when Gov. Andrew M. Cuomo put his considerable clout behind a $150 million plan to convert its sister plant in Dunkirk, also owned by New Jersey-based NRG Energy, from coal to natural gas.
That conversion will add another 360 megawatts of generating capacity to the region’s already saturated power generation market, possibly as soon as late next year.
“Adding Dunkirk to the system makes it easier for NRG to retire Huntley, although transmission upgrades may be needed” to maintain the power grid’s reliability, said Cathy Kunkel, a research fellow at the Institute for Energy Economic and Financial Analysis.
David Gaier, an NRG spokesman, agreed that coal-plants are having a tough time competing against low natural gas prices. But he said the Dunkirk investment is independent from NRG’s plans for Huntley.
“Huntley stands on its own,” he said. “As of now, it’s an operating plant.”
Yet the proof of Huntley’s struggles is apparent in how little Huntley has been running during the past two years. In New York’s competitive wholesale electricity market, power plants submit bids stating how much they’re willing to sell their plant’s electricity for. If the price is low enough and demand is high enough, the bid is accepted and the plant operates. But if a plant’s cost is too high, it sits idle.
And Huntley has been sitting idle a lot, lately. After operating at 60 to 65 percent of its capacity from 2005 to 2008, the plant ran at just 19 percent of capacity in 2012 and 28 percent of capacity during the first 10 months of last year.
The Cleveland-based consulting firm, which is admittedly anti-coal, released a report last week warning that the Huntley plant was in danger of being mothballed because of its weakening financial position, including losses during three of the last five years, according to its estimates. The report was commissioned by another environmental group, the Clean Air Coalition of Western New York.
“We see little likelihood of Huntley making a financial recovery through the end of the decade,” Kunkel said.
It’s not that NRG has been neglecting the Huntley plant. The company has pumped $150 million into Huntley since 2005 to install equipment to reduce its emissions and to allow it to burn low-sulfur, Gaier said.
“People lose sight of the huge investment we made in controls and low-sulfur coal to clean up Huntley,” he said.
Two years ago, NRG proposed converting the Huntley plant to run on natural gas as part of Gov. Andrew M. Cuomo’s initiative to promote clean energy supplies and upgrade the state’s aging energy infrastructure, but state energy officials did not accept the plan.
“As far as we know it was not considered,” Gaier said.
None of that makes Huntley’s market any less challenging.
Electricity sales, which rebounded in 2010 after the recession, dropped in both 2011 and 2012, and the EIA predicts that they declined again last year. It’s not a short-term blip, either. The federal energy agency expects them to decline again this year and the year after.
Blame some of it on energy efficiency. We see it at home, where residential energy consumption dropped by 5 percent in 2011 and 2012. Household appliances are getting more efficient by the year. And those compact fluorescent light bulbs are a lot more energy friendly than the old incandescents.
Businesses are jumping on the energy-efficiency bandwagon, too. Office buildings are more efficient. Industrial users have been making efficiency upgrades too, while their overall demand for power still is slumping because of the lingering effects of the recession.
The sluggish economy isn’t helping either. Electricity use by industrial firms still hasn’t returned to the levels they were at in 2007, the EIA said.
The Somerset coal-fired plant in Barker is battling the same headwinds. It fell into bankruptcy in late 2011 and was taken over by its bondholders.
Huntley supporters have been hoping the state would take steps to ease the transmission bottlenecks that now keep upstate power plants from sending their electricity to downstate customers. It hasn’t happened.
“The Huntley plant is part of what the governor described as cheap abundant power that will help lower downstate rates,” said Ted Skerpon, president of Local 97 of the International Brotherhood of Electrical Workers. “The IEEFA was very short-minded in the fact that they did not look at any other options, not to mention they held no conversations with NRG.”
Town of Tonawanda officials also noted that the report used outdated tax payment figures from 2012, which did not reflect a reduction in the plant’s payments under its PILOT agreement that has since taken effect. Those payments are less than half of the roughly $14 million a year that NRG paid before the agreement took effect.
“We’ve been adjusting for the last four or five years,” Supervisor Anthony Caruana said of the tax payment agreement that was negotiated in 2008 but did not take effect until the payment NRG made early last year.
“But losing them would be significant,” he said.