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Los Angeles sets plan to end coal use by 2025

20 Mar 2013 19:37 GMT

Washington, 20 March (Argus) — The Los Angeles Department of Water and Power (LADWP) outlined plans yesterday to end its use of coal-fired generation by 2025, affecting the beleaguered Navajo Generating Station in Arizona and the Intermountain Power Plant (IPP) in Utah.

LADWP approved a long-term power sales agreement to stop taking coal power from the 1,800MW IPP in Delta, Utah by 2025, and will draft a final agreement to end the utility's 21pc interest in the 2,250MW Navajo plant by 2015.

Salt River Project, which manages the Navajo plant, and LADWP will review the agreement for consideration this summer. The agreement would end the parties' power contract four years ahead of the current 2019 expiration date. LADWP currently receives 477MW of coal-fired power from the plant.

California law essentially prevents LADWP from renewing its contract because the plant would not be able to meet state limits on CO2 emissions for long-term baseload contracts. The state's cap-and-trade program and renewable portfolio standard also encouraged early termination of the contract.

The news makes the future all the more uncertain for the Navajo plant. Salt River Project still awaits a lease extension from the Navajo Nation and a recently issued Best Available Retrofit Technology (BART) proposal from the Environmental Protection Agency could require about $1bn in investments for additional emission controls. In addition to LADWP and Salt River Project, the power plant is co-owned by the US Bureau of Reclamation (24pc share), Arizona Public Service, Nevada Power and Tucson Electric Power.

LADWP also approved a long-term power sales agreement to stop taking coal power from the Intermountain plant in Utah by 2025 at the latest, with efforts to begin that transition to a smaller 600–1,200MW natural gas plant by 2020. LADWP currently takes 875-1,200MW of coal-fired power from IPP.

For the deal to go through, the city and 35 other purchasers must agree unanimously to the plan by the end of this year. Of IPP's 36 power purchasers, six are California municipalities and Los Angeles is the largest of them with a 44.6pc entitlement share.

Under the state's cap-and-trade program the utilities have to use allowances they were given for their ratepayers' benefit to cover the carbon emissions from the power they import from IPP and the Navajo plant in Arizona. Once those allowances are expended, the utilities would have to purchase allowances, which traded recently in the $14-14.40/metric tonne range.

Coal-fired power is about twice as carbon intense as natural gas-fired power.

For years, the California municipalities have been pushing for IPP to cut its carbon emissions, including using integrated-gasification combined-cycle technology with carbon sequestration and other technologies.

Coal accounted for 41pc of the energy delivered to customers of LADWP in 2011, according to the city's integrated resource plan published last December. The power derived from coal came from IPP in Utah and Navajo.

The Navajo plant takes its coal from Peabody Energy's Kayenta mine in Arizona, according to fuel receipts supplied to the Energy Information Administration. Navajo took 7.8mn st of coal in 2011.

IPP took 5mn st of coal in 2011, and in 2012 took its coal from Utah mines operated by Rhino Resource Partners, Hidden Splendor Resources, Arch Coal, Alton Coal and the Murray Energy-owned Westridge.

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