Originally published December 8, 2015, at delawareonline.com and December 9 in The News Journal.
The Indian River Power Plant in Millsboro is in the cross hairs for closure. NRG Corporation invested $360 million in air pollution control technology a few years ago and it is now tied for the cleanest burning coal plant in the country. NRG also closed three smaller generation units, reduced cooling water intake, and spent money capping a coal ash storage area. Despite these efforts, it is the last coal-burning power plant in the state and environmental groups want to close it.
Closing this power plant will hurt in several ways. The produced power will have to be replaced by importing power from out of state, probably from another coal fired plant. A longer transmission distance means using more energy and spending more money just to bring energy to the public. Train service to the southern peninsula is largely dependent on coal shipments so service may suffer. Voltage quality is already marginal in Sussex County and will probably become worse. Dozens of high paying jobs will be lost as will the tax revenue generated by the power plant and its employees. The loss of the Indian River power plant will leave Delaware 100 percent reliant on natural gas fired power plants for reliable power. Twice in the last several decades natural gas supplies have become so tight nationally its use has been restricted and prices have soared. Tight natural gas supplies almost caused blackouts last year. We need fuel diversity.
Other power plants in Delaware have switched to natural gas. Getting a natural gas pipeline to Millsboro is prohibitively expensive and not really an option. Delaware power plants have cut carbon dioxide emissions in half since 2007 and emissions are lower than targets set by the state for 2020, and for targets set by the federal government for 2030. Closing Indian River will have no impact on global warming as developing countries open a new coal burning plant every week, and even Germany has forty such power plants under construction. Renewable power is unreliable for base load power needs.
Power produced in Delaware is sold into a thirteen state region and Delaware is one of only two states with a carbon dioxide tax so power plants here have trouble competing. If carbon dioxide taxes are not dropped Indian River might have to close. Carbon dioxide emission permits only cost about $2/ton when the air pollution investment was made. Delaware regulators changed the rules in 2013 to reduce the number of permits available specifically to increase the auction price, and thus increase revenue to spend on “green” projects. The tax is not reducing emissions and the money raised sits unspent but still the tax goes on.
As permit costs rose from $2/ton to almost $6/ton electricity, production was cut in half. We forecast permit costs will rise to $10/ton by 2017 reducing power production further. The marginal cost to sell an additional Megawatt hour of power from Indian River is currently 19% higher than its competitors. Our analysis suggests NRG will probably make a small profit in 2015 that may disappear as production volume continues to fall.
The rule change to increase tax revenue from permits was not approved by a three-fifths majority as required by the Delaware Constitution. A lawsuit will be heard in Superior Court Jan. 14, and a stay has been requested to stop further auctions and compliance with these illegal rules. It is past time to end this wasteful tax that is doing essentially nothing for the environment but is adding tens of millions of dollars to electric bills, and those higher costs will likely cause the loss of well-paying jobs and is a barrier to attracting new businesses to Delaware.
View the Chart on how rising carbon permit costs results in lower operating hours for power generators.