Transcription

Decommissioning USPower PlantsDecisions, Costs, and Key IssuesDaniel RaimiOCTOBER 2017

Decommissioning US Power Plants:Decisions, Costs, and Key IssuesDaniel Raimi AbstractIn recent years, hundreds of large power plants have retired across the United States, withhundreds more nearing the end of their useful lives. At the same time, large-scale growth in natural gas,wind, and solar power is changing the nation’s electricity mix. Although much research has been carriedout on the decommissioning of nuclear power plants, far less work has examined what happens to plantsites when generating units that burn coal, oil, or natural gas are retired or when wind or solar facilitiesreach the end of their lives. This report describes the options faced by plant owners after a plant has beenretired. It examines the costs associated with decommissioning different plant types and highlights keyissues that present opportunities and challenges for generating companies, regulators, local governments,and communities. Key issues include the large costs of environmental remediation and monitoring forcoal-fired power plants and their combustion residuals, whether companies in deregulated markets areadequately saving for decommissioning, state and local policies for wind and solar decommissioning, andthe economic and fiscal impacts of decommissioning power plants in rural areas.Key Words: power plant decommissioning, power plant retirement, decommissioning costs, coalcombustion residualsJEL Codes: H23, H32, H71, H77, Q28, Q38, Q40, Q48, Q52, Q58 Raimi: Senior Research Associate, Resources for the Future, [email protected] you to Dallas Burtraw at Resources for the Future, who provided the initial framing for this work andcontributed frequently with comments and connections. I also thank Jessica Chu at Resources for the Future forexcellent mapping work and Michael Greenberg for early research assistance. My gratitude goes to Kelly Lefler,Carly Page, and Ben Steinberg at the US Department of Energy for collaboration and comments throughout theresearch and writing process and to Jayme Lopez at the US Bureau of Land Management. Ed Malley from TRCSolutions Inc. provided useful data and context at different stages of research. I also extend my thanks to numerousindividuals from ABB Inc., Burns & McDonnell, Duke Energy, the Edison Electric Institute, EnvironmentalLiability Transfer Inc., the Florida Public Service Commission, HDR Inc., Nixon Peabody, the North CarolinaSustainable Energy Association, NRG Inc., Southern Company, and XCel Energy for lending their time andexpertise during numerous interviews. Funding for this project was provided under the National Science FoundationAward Number 1559339. 2017 Resources for the Future (RFF). All rights reserved. No portion of this report may be reproduced withoutpermission of the authors. Unless otherwise stated, interpretations and conclusions in RFF publications are those ofthe authors. RFF does not take institutional positions.Resources for the Future (RFF) is an independent, nonpartisan organization that conducts rigorous economicresearch and analysis to help leaders make better decisions and craft smarter policies about natural resources and theenvironment.

Contents1. Introduction . 11.1. Structure of This Report . 11.2. Key Findings and Recommendations . 22. Background . 32.1. Regional Trends . 53. Key Decisions . 73.1. Assess Options for Decommissioning . 93.2. Maintain and Put on Standby . 93.3. Sell As-Is . 93.4. Go “Cold and Dark”. 113.5. Decommission. 134. Fuel-Specific Decommissioning Processes and Costs . 164.1. Coal-Fired Plants . 194.2. Natural Gas and Petroleum-Fired Plants. 264.3. Onshore Wind . 284.4. Offshore Wind . 324.5. Solar Photovoltaic and Concentrated Solar Power . 345. Key Issues . 385.1. Paying for Decommissioning in Regulated and Deregulated Regions . 385.2. Local Economic and Fiscal Considerations . 405.3. Decommissioning in Rural and Urban/Suburban Areas . 426. Conclusions . 456.1. Costs of Decommissioning . 456.2. Planning and Saving for Decommissioning. 456.3. Community Impacts of Decommissioning . 456.4. Suggestions for Future Research . 46References . 47Acronyms and abbreviations

AROs asset retirement obligationsBLM Bureau of Land ManagementCCRs coal combustion residualsCERCLA Comprehensive Environmental Response, Compensation, and Liability ActCSP concentrated solar powerELT environmental liability transferGW gigawattsMSA metropolitan statistical areaMW megawattNGCC natural gas combined cycleNGST natural gas steam turbinePCBs polychlorinated biphenylsPV [solar] photovoltaicRCRA Resource Conservation and Recovery ActTVA Tennessee Valley Authority

Resources for the Future Raimi1. IntroductionAs of 2015, roughly 6,300 electricgenerating units aged 40 years or older wereoperating in the United States. These unitsrepresent roughly 350 gigawatts (GW) ofelectric generating capacity, or approximatelyone-third of the nation’s total generatingcapacity. In the coming years and decades,many of the older units at these plants willretire, with important implications forelectricity markets, investors, andcommunities where plants operate. 1At the same time, the generating fleet ischanging, as the number of natural gas, wind,and solar plants grows rapidly. For wind andsolar facilities, most utilities, regulators, andcommunities have virtually no experiencedecommissioning utility-scale installations.Although most of these facilities will operatefor decades to come, understanding the keyissues associated with decommissioning newpower generation can help mitigate anynegative impacts for ratepayers, investors, andcommunities.Once units retire, plant owners are facedwith choices over how to repurpose each site.This report examines key issues that arisewhen owners decide to decommission anindividual unit or an entire plant, including thefollowing: What choices do plant ownersface? What policies and market incentivesaffect each option, and how do they varyacross states? What are the costs ofdecommissioning, and who bears them? Whatare the local economic and fiscal implicationsof decommissioning power plants?Because a rich literature exists examiningdecommissioning issues associated withnuclear and conventional hydroelectric plants,those sources are excluded from this analysis.Instead, it focuses on those that have recentlyexperienced large-scale retirements (coal,petroleum, and natural gas), along with thosethat are currently seeing widespreaddeployment (wind and solar) and will facedecommissioning in the decades to come.1.1. Structure of This ReportThis report begins with an overview ofrecent power plant retirements in the UnitedStates, along with a brief analysis of wherefuture retirements are likely to occur in thecoming decades. Section 3 offers a frameworkto describe key decision points for power plantowners after a plant retires, discussing therationale and risks behind each major option.Section 4 describes the cost ofdecommissioning for different fuel types byaggregating hundreds of cost estimates,primarily from regulatory filings. This sectionexamines the key cost drivers fordecommissioning plants of each fuel type andidentifies areas where existing accountingprotocols may not reflect the true costs ofdecommissioning. Section 5 synthesizes anddiscusses in detail the key issues facing plantowners, regulators, and communities as theyconsider how to decommission retiredfacilities. The discussion focuses on threetopics: (1) how planning for decommissioningcosts varies across market structures (i.e.,traditionally regulated versus deregulatedstates); (2) the potential economic and fiscal1Throughout this paper, units refers to individualgenerating units such as natural gas combustionturbines, coal-fired boilers, or individual wind turbines.Plants refers to the facilities where these individualunits are located, often including multiple generatingunits and incorporating transmission equipment, fuelprocessing facilities, and other infrastructure. The bulkof this analysis focuses on the retirement of plants.www.rff.org 1

Resources for the Future Raimiimpacts for communities wheredecommissioning occurs; and (3) thedifferences between decommissioning plantsin rural and urban locations. Section 6concludes and offers suggestions for futureresearch. 1.2. Key Findings andRecommendations1.2.1. Key Findings Hundreds of large power plants haveretired in recent years, and hundreds morewill retire over the coming decades.Planning properly for the decommissioningof these facilities is essential to minimizenegative impacts to local environments,economies, electricity ratepayers, andtaxpayers. Partly because of recently enacted federalregulations, decommissioning of coal-firedpower plants and management of wastematerials will be more costly than most hadanticipated. A 2009 study estimates thatclosing all the nation’s 155 “wet” ashimpoundments would cost roughly 39billion over 10 years, and billions more willlikely be needed for long-term monitoringand remediation. Existing decommissioningsavings funds may not be sufficient tomanage these costs for some utilities. In certain locations, particularly in somestates with deregulated power markets, nolocal, state, or federal policy ensuresadequate funding for decommissioning. Inthese locations, plant owners may not beadequately saving for decommissioning,potentially exposing shareholders,ratepayers, and/or taxpayers tounanticipated costs in the coming years. When power plants are sold, environmentalliabilities typically transfer to the newowner. However, if the new owner goesbankrupt in the future, environmentalliabilities may revert to the original plantowner if they are not fully addressed in bankruptcy proceedings. This issue willtend to arise more frequently in stateswhere decommissioning funds are notaccrued in advance of plant retirement.Full decommissioning often involvesextensive environmental remediation, thecosts of which are uncertain until work hasbegun. This may incentivize some plantowners to delay decommissioning and itsassociated costs, in some cases for years,which could lead to increasedenvironmental damage as plant conditionsdeteriorate.Decommissioning of power plants hasimportant economic and employmentimplications in the communities where theyhave operated. Although thedecommissioning process requires dozensof temporary workers, the retirement of apower plant can displace hundreds of longterm employees.The local fiscal implications ofdecommissioning can also be significant. Insome regions, particularly sparselypopulated rural areas, large power plantscan make up a sizable portion of the localtax base. In these locations, decommissioningcan substantially reduce revenues for localgovernments and school districts.Numerous federal, state, and localprograms incentivize decommissioning andredevelopment of industrial property.These programs are often beneficial forcommunities where they occur but can shiftthe cost of decommissioning andremediation from shareholders andratepayers to taxpayers.Although data on decommissioning costsare limited, on a per-megawatt (MW) basis,it appears that the highest decommissioningcosts are for offshore wind and coal plants.Natural gas plants on average have thelowest decommissioning costs, followed bypetroleum. Solar and onshore wind fall inbetween the two (Table 1).www.rff.org 2

Resources for the Future RaimiTABLE 1. DECOMMISSIONING COST ESTIMATES PER MEGAWATT OF CAPACITY2016 (thousands)No. ofFuel typeMinimumMean MaximumestimatesOffshore wind7 123 212 342Coal28 21 117 4665 24 94 138Concentrated solar power (CSP)Solar photovoltaic (PV)22– 89* 57 179Onshore wind18 2 51 222Petroleum/petroleum gas19 2 31 103Gas (various types)28 1 15 50*Negative cost estimates indicate that the salvage value of plant materials exceeds decommissioning costs.1.2.2. Recommendations To mitigate against large unplanneddecommissioning costs, prudent policywould require plant owners to either: (1)provide adequate financial assurance fordecommissioning before construction ofa plant; (2) accrue decommissioningfunds over the life of the power plant, orboth. In some states, particularly those withtraditional cost-of-service regulations,such policies are currently in place. Instates where these policies are not inplace, state governments and regulatorscould move to implement such policiesfor existing plants. Because plant owners have moreinformation about historicalenvironmental issues than do potentialbuyers, and because environmentalliabilities may not be uncovered untilafter a plant is decommissioned,extensive due diligence by potentialbuyers is advisable. In locations where power plants providea large share of the local employment ortax base, careful planning between theplant owner and state and local officialswill be crucial to minimize negativeeconomic and fiscal impacts ofdecommissioning.2. BackgroundSince the year 2000, roughly 3,300generating units totaling roughly 115 GW ofcapacity have been retired across the UnitedStates. The bulk of these retirements havecome from coal (accounting for 40 percent ofretired capacity), natural gas steam turbine (29percent), and petroleum liquids (13 percent)units. Because petroleum liquid generatorstend to be smaller than most coal- or gas-firedunits, the greatest number of retired units(1,054) have been those fueled by petroleum,followed by 545 coal units, 372 natural gassteam turbines, and 310 natural gascombustion turbines (Table 2).www.rff.org 3

Resources for the Future RaimiTABLE 2. ELECTRICITY RETIREMENT SUMMARY STATISTICS BY FUEL TYPE, 2000–2015Capacity ofNumber ofAverage age Average retiredUnit typeretirements (MW)units retiredwhen retiredunit size (MW)Coal49,9365455492Natural gas (all)42,5139953843Combined cycleCombustion turbineCombustion engineSteam turbinePetroleum liquidsNuclearConventional hydroBiomassOnshore windMunicipal solid wasteSolar PVAll 1235Source: Data from EIA (2016).FIGURE 1. CAPACITY OF UNITS RETIRED (MW)25,00020,00015,00010,000OtherOnshore windBiomassConventional hydroNuclearPetroleum liquidsNG combined cycleNG combustion turbineNG steam turbineCoal5,00002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Source: Data from EIA (2016).Note: In the early 2000s, a large amount of natural gas steam turbine capacity was retired, along with asubstantial number of petroleum units. Since 2010, the majority of retirements have come from coal-firedplants, though retirements of natural gas and petroleum units have also been substantial.www.rff.org 4

Resources for the Future RaimiNotably, retirement and decommissioninghave different meanings. When a generatingunit or an entire plant is retired, it no longerproduces electricity. However, the assets ofthe plant, such as buildings, turbines, boilers,and other equipment, may remain in place.Decommissioning takes place only after a unitor plant retires and refers to the process ofenvironmental remediation, dismantlement,and restoration of the site. Data on retiredunits are provided here because the US EnergyInformation Administration (EIA) does notcollect data on the type and timing ofdecommissioning.12,224 MW of capacity. California is home tothe largest number of retired units (299) andthe second-greatest retired capacity (12,118MW). As with Texas, most of California’sretirements (6,810 MW) have been NGSTunits. California has also seen 2,150 MW ofnuclear capacity retired.In recent years, coal retirements in particularhave accelerated (Figure 1), driven by increasedcompetition from low-priced natural gas, lowerprojections for future electricity demand, and to alesser extent, environmental regulations (Burtrawet al. 2012).In Florida, the state with the third-largestnumber of retirements, 67 petroleum-fired unitstotaling 4,017 MW of capacity have retired,followed by 71 natural gas–fired units totalingjust over 2,000 MW. Large-scale retirements ofcoal-fired units have occurred in over a dozenstates, led by Ohio (7,518 MW), Pennsylvania(5,468 MW), and 15 other states with more than1,000 MW of coal-fired retirements. Figure 2highlights the states and fuels where the mostretirements have occurred since 2000.2.1. Regional TrendsAmong states, Texas has seen the mostcapacity retired (14,657 MW) since 2000. Thebulk of these retirements have come from 62natural gas steam turbines (NGST), totalingCalifornia and Texas are the two leadingstates for renewables retirement, with 441MW and 64 MW of onshore wind retiring,respectively. Although little solar photovoltaic(PV) capacity has been retired to date (7MW), the bulk of these retirements (6 MW)have occurred in California.FIGURE 2. CUMULATIVE RETIRED CAPACITY (MW) FOR SELECTED FUELS IN SELECTED STATES14,00012,00010,0008,0006,0004,0002,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015FL PetroleumPA CoalCA NGSTOH CoalTX NGSTSource: Data from EIA (2016).Note: This figure highlights the most substantial retirements by state and fuel type, showing that the largestsingle source of retirements since 2000 has been natural gas steam turbines (NGST) in Texas. Retirements havealso been driven by coal in Ohio and Pennsylvania, NGST in California, and petroleum units in Florida.www.rff.org 5

Resources for the Future RaimiFigure 3 provides a nationwide overviewof plant retirements since the year 2000,mapping just those plants where generatingcapacity exceeded 100 MW. Along with thetrends highlighted above, the figure illustratesthe prevalence of coal-fired retirements in theMidwest and Southeast and the retirement ofpetroleum-fired plants in Florida, New Jersey,and New York.Looking forward, the oldest operatingpower plants follow similar geographic andfuel-specific trends. Figure 4 shows alloperating fossil fuel–fired plants that are 40years old or older, with most aging coal plantsconcentrated in the Midwest and Southeast,while older petroleum plants are locatedprimarily in the Northeast. Older natural gasplants are distributed broadly across theUnited States but show concentrations inTexas, California, Oklahoma, the Northeast,and along the Gulf Coast. The figure does notshow nuclear or hydroelectric plants, as theyare not the focus of this report, nor does itshow wind or solar facilities, as just one windfacility and zero solar plants are older than 40years.FIGURE 3. POWER PLANT RETIREMENTS ( 100 MW), 2000–2015Source: Data from EIA (2016).Note: This figure shows where large plant retirements have taken place from 2000 through 2015 and highlightsthe prevalence of natural gas retirements in Texas and California, coal retirements in the Midwest andSoutheast, and petroleum retirements in Florida and the Northeast. Some plants use multiple fuels. Plants withany nuclear or coal units are labeled as such. For facilities with both petroleum- and gas-fired units, the plant islabeled according to which fuel source provided the dominant generating capacity.www.rff.org 6

Resources for the Future RaimiFIGURE 4. OPERATING COAL, GAS, AND PETROLEUM PLANTS 40 YEARS OR OLDER ( 100 MW), 2015Source: Data from EIA (2016).Note: This figure shows the location of large fossil fuel–fired power plants aged 40 years or older. It highlightsthe broad distribution and large number of plants that will need to be retired in the coming decades, withparticular concentrations of natural gas in Texas, California, Oklahoma, the Northeast, and along the Gulf Coast;coal plants in the Midwest and Southeast; and petroleum plants in the Northeast. Some plants use multiplefuels. Plants with any nuclear or coal units are labeled as such. For facilities with both petroleum- and gas-firedunits, the plant is labeled according to which fuel source provided the dominant generating capacity.3. Key DecisionsPerhaps the most important single decisionassociated with decommissioning is how theplant site will ultimately be used. Forexample, when plants are located in citycenters or near other amenities that createstrong demand for land, financial incentivesencourage owners to either sell the site orfully decommission and remediate forresidential, commercial, or industrialdevelopment. For plants located in rural areasor other locations with weak demand for land,owners have less financial incentive to fullydecommission and remediate a site,sometimes resulting in extended periods of thefacility sitting idle. In other locations,preexisting access to natural gas pipelines,electricity transmission, or other infrastructuremay incentivize owners to repower (i.e.,construct new generating units) at the site.Regardless of location, plant owners willassess the value of their existing assetsalongside the costs they may face under eachof the four options described below andpresented in Figure 5.1. Maintain the plant for potential restart. Ifnot restarted (or after restart), the ownerultimately decides from the other threeoptions. With proper maintenance, plantscan be kept in this condition for years.2. Take the plant to a “cold and dark”condition. Under this option, the ownerconducts limited environmentalremediation and perhaps partialdemolition, then retains and secures thesite. The bulk of the facility is left as-is,with an uncertain future. The plant ownerwww.rff.org 7

Resources for the Future Raimiretains environmental liabilities andfinancial obligations.3. Decommission and repower or repurposethe site. The desired end use of thefacility will determine the extent ofdemolition and environmentalremediation.4. Sell the plant as-is. Depending on thecondition of the units, other structures,and the site itself, the plant owner mayfind a buyer who will decide how andwhen to repurpose the site. The newowner assumes environmental liabilitiesand financial obligations associated withthe site. However, if the new owner goesbankrupt in the future, environmentalliabilities could revert to the original plantowner.FIGURE 5. DECOMMISSIONING DECISION TREEwww.rff.org 8

Resources for the Future Raimi3.1. Assess Options forDecommissioningOnce an owner has decided to retireindividual units or an entire plant, the decisionof how to decommission will depend on thepotential value of the assets, including plantequipment, transmission equipment, land,permits, and other assets. Owners must alsoevaluate and consider the costs of remediatingenvironmental issues, along with the risks ofpotential future liability associated with thoseenvironmental concerns.To thoroughly assess their options, expertssuggest that owners examine five key areasthat can vary substantially among plants:1. Above-ground costs: those costsassociated with managing regulatedmaterials above-ground (e.g., asbestos,polychlorinated biphenyls (PCBs),mercury)2. Below-ground costs: those costsassociated with managing surface andbelow-ground environmental issues (e.g.,coal pile, coal combustion residualimpoundments, petroleum releases)3. Demolition and land reclamation costs4. Salvage value of plant equipment andscrap5. Property value of siteBecause power plant owners’ area ofexpertise is producing electricity rather thandeveloping property, they may have littleappetite for conducting a detailed analysis onthe potential for redevelopment at a given site.However, such an evaluation is essential todetermine the potential opportunities andliabilities in each case, as conditions can varywidely from plant to plant.3.2. Maintain and Put on StandbyIn some cases, plant owners may defer thedecision of whether to retire a plant, insteadidling the facility and ceasing the bulk ofoperations, but leaving it with the ability torestart in a period of days or weeks. The plantwould retain its environmental permits unlessit undergoes major changes, in which case itmay become subject to new regulations underUS Environmental Protection Agency (EPA)guidelines, potentially requiring newpermitting.The plant is kept in good working order,and although it is not available for dispatch,routine maintenance would mean ongoingcosts for the owner. In general, maintaining isnot a decommissioning option, but instead atemporary period when the plant is neitheroperating nor in the process of beingdecommissioned. This may be a preferredoption when substantial uncertainty existssurrounding issues such as electricity marketsor environmental regulations, and owners areuncertain whether a given plant will be neededor profitable in years to come.Once a unit or plant is put into this state,the owner may either restart or retire it, thenfollow any of the three options describedbelow: sell as-is, go cold and dark, ordecommission. The decision of whether torestart or decommission is similar to the set ofissues plant owners face when decidingwhether to keep a plant in service or retire it.Because the focus of this report is on the set ofdecisions faced by owners once they decide todecommission a plant or generating unit, itdoes not cover putting a plant on standby.3.3. Sell As-IsPlant owners may wish to sell a plant as-is,the simplest of the four options examinedhere. Potential buyers of these properties areprimarily those wishing to redevelop the siteand use the location’s existing assets. Thebuyers of the property will face the same setof decisions as the original plant owners butoften bring different expertise to theredevelopment process.www.rff.org 9

Resources for the Future RaimiAs noted above, power plant operators arein the business of generating and sellingelectricity, not real estate development. Insome locations, such as densely populatedurban areas where land is valuable, real estatedevelopers may seize on the opportunity topurchase a site, demolish the existing plant,remediate any contamination, and redevelop.Such developers will bring expertise in thelocal real estate market but are unlikely tohave the experience of power plant ownerswith regard to managing environmentalliabilities (see Section 3.3.1).Power plants often have assets attractive toa range of developers. For those interested inresidential, commercial, or mixed-usedevelopment, particularly in regions withstrong real estate markets, the value of theland can be substantial. In addition, a plant’smain buildings are sometimes locallandmarks, sturdily constructed and offeringappealing aesthetic traits such as aged brickand high ceilings.For developers interested in light industrialactivity such as logistics, plants often haveaccess to transportation infrastructure such ashighways, waterways, and rail lines. Forheavier industrial purposes, power plant sitesoffer access to electrical substations. Inaddition, plant owners may be able to transfervaluable water rights or permits to newowners, lowering costs for new or modifiedindustrial operations.Some firms specialize in acquiring,decommissioning, and redeveloping industrialsites with environmental liabilities. Thesecompanies, known as environmental liabilitytransfer (ELT) firms, typically have expertisein assessing and remediating industrialfacilities, then repurposing those sites. Suchsales typically are not overseen by state orfederal regulators, though they may comeunder scrutiny if a sale occurs in the context ofbankruptcy.In some cases, ELTs will purchase afacility as-is and assume its environmentalliabilities because the potential redevelopmentvalue of the site exceeds the costs ofremediation. In other cases, ELTs may

As of 2015, roughly 6,300 electric generating units aged 40 years or older were operating in the United States. These units represent roughly 350 gigawatts (GW) of electric generating capacity, or approximately one-third of the nation’s total generating capacity. In the coming years