Tuesday, March 11, 2014
People who live and work around Casco Bay noticed an unusual sight during the week of Jan. 21: Smoke was rising from the 421-foot stack of Maine's largest power plant, Wyman Station in Yarmouth.
The Wyman Station power plant on Cousins Island in Yarmouth can pump out enough energy to power 893,000 homes.
Gabe Souza/Staff Photographer
It's a sight they may not see many more times.
Because it burns costly oil, Wyman has been largely an on-call plant for years, fired up only when another big plant goes offline, or when very hot or very cold weather spikes the region's demand for energy.
Now a combination of factors -- including rising fuel costs, ownership moves and pending changes in rate structures -- has created a scenario that seems to put the plant on the brink of obsolescence.
No one is yet saying that Wyman is headed for a permanent shutdown. But the possibility is real enough that officials in Yarmouth are beginning to think about what might become of the 128-acre waterfront parcel where the plant is located -- and how to respond to the loss of $2 million in annual revenue from a 56-year-old facility that is still the town's largest property taxpayer.
"We want to talk about the tax base, but also, how do you leave this community?" said Town Manager Nat Tupper. "We don't want to be left with a chain-link fence and no one around."
Wyman can pump out enough energy to power 893,000 homes, and the plant was proving its value during the week of Jan. 21.
It was cold and power demand soared, making wholesale electricity expensive. That was an opportunity for Wyman and its lead owner, Florida-based NextEra Energy Resources.
Based on prices recorded by ISO New England, the region's grid operator, NextEra could have taken in roughly $1 million in energy payments if it ran Wyman at full capacity for 12 hours, less fuel and labor costs.
That revenue would be on top of monthly payments NextEra gets for keeping the plant on standby.
This formula has been a winning one for NextEra, but three recent development raise questions about the future:
• In late December, NextEra announced it was selling 19 hydroelectric dams in Maine to a Canadian company. As a result, Wyman and a small, oil-fired generator in South Portland called Cape Station, which is operated remotely from Yarmouth, are now the only oil-fired plants in NextEra's national portfolio, which heavily favors renewable resources such as wind and solar power.
• Roughly 45 percent of the region's electricity now comes from natural gas units. Gas is so much cheaper, compared to oil, that New England's wholesale cost of power fell 23 percent last year, to its lowest level since 2003. This has made oil-fired plants uncompetitive most of the time.
• Wyman Station may become even less able to compete in the coming years. There's an energy surplus in New England, which is driving down prices at the annual auction where ISO-New England contracts for power. The grid operators say they're going to eliminate a price floor that has been in effect for some time at next year's auction. If prices drop too low, Wyman simply won't be able to make a profit -- even as a backup source during extreme weather.
That's a worry for ISO-New England, because the region has become dependent on natural gas, and the network of supply pipelines hasn't caught up with the demand for heat and power. On the coldest days, some gas-fired plants struggle to get enough fuel.
Meanwhile, New England's fleet of oil-fired units is aging. Most are at least 30 years old. Oil plants account for only 1 percent of New England's generation these days, but they represent 20 percent of the region's capacity. During periods of peak demand, like last month's arctic blast, plants such as Wyman Station remain critical to a reliable electric system.
Thirty years ago, Wyman Station ran frequently and paid half of Yarmouth's tax burden. Now it covers less than 8 percent, and last year kicked in $2 million on its appraised value of $95 million. The value falls every year, and Tupper, the town manager, said he assumes Wyman is approaching the end of its useful life. He wants to engage NextEra in discussions about the future of the site, located on the southwest tip of Cousins Island.
NextEra Energy declined a request by the Press Herald to tour the plant and discuss the company's plans, citing competition issues in the bulk-power market.
NO CHANGES PLANNED
But in any case, Wyman Station won't abruptly go offline. Power generators are required to notify ISO-New England about closure plans, and NextEra hasn't made a retirement request. NextEra also made no effort to "delist" the plant and withdraw from the capacity market during last month's power auction, according to ISO-New England records.
Union officials who represent the 45 plant operators working at Wyman say they asked NextEra in December about the future of the plant, when the company announced the sale of its Maine hydro dams. They were told no changes are planned at this time.
"It's a great question and we have had some consternation over it," said Bill Dunn, assistant business manger for Local 1837 of the International Brotherhood of Electricial Workers. "But we have no rock-solid information that the company has any intention of doing something different."
Judging from the plumes rising from the plant during the week of Jan. 21, Wyman Station was really cranking.
Windy days and near-zero temperatures prompted ISO-New England to put in place procedures meant to beef up the region's power supply. Generators were told to halt any unneeded repairs and be available. On Thursday, Jan. 24, New England sucked up 20,814 megawatts at 7 p.m., a couple of thousand megawatts shy of a winter record set in 2004.
The impact on the wholesale energy market was dramatic. Compared to the prior week, the cost of natural gas rose more than 100 percent, from $6.85 per million BTU to $14. Real-time electric prices that had averaged $55.75 a megawatt-hour the week before shot up to $174.07 mwh, a 212 percent increase.
There's no way for the public to know exactly how many hours, and at what power levels, NextEra ran Wyman Station during the cold snap. But with tight gas supplies and electricity worth so much during the period, the gross sum could have added up to millions of dollars, according to Daniel Peaco, a former Central Maine Power Co. manager and now president of LaCapra Associates, an energy consulting firm with offices in Boston and Portland.
"You have to have an unusual combination of demand, gas prices and unavailability of other units for them to run and make that kind of money," he said.
MAKING ECONOMIC SENSE
Power plants need to cover their marginal costs, such as fuel and labor, as well as long-term capital costs, such as maintenance and taxes. Unless the plant faces a major capital expense, Peaco said, it may make economic sense for NextEra to continuing owning the plant and running it, as is.
That view is shared by Don Sipe, a former Public Utilities Commission attorney who specializes in energy law.
"I don't think they have to make a lot of money," he said. "So why close it? What we don't know is if they have a big maintenance cost staring them in the face. That would kill it more than low electricity prices would."
Every discussion of the future of Wyman Station includes speculation about natural gas. Converting to efficient, cleaner-burning gas turbines would increase the plant's value and run-time. Florida Power & Light announced plans to do just that in 1999, but never followed through.
As it happens, Yarmouth, Falmouth and Cumberland currently are entertaining bids from natural gas providers to extend a pipeline to their towns, and NextEra has been part of the discussion. A small gas line might wind up connecting Wyman Station, Tupper said, but don't expect to see gas turbines.
"NextEra has signaled to me that they aren't going to make a conversion of fuel sources out there," he said. "They are talking about gas for house steam, to keep the equipment warm and ready. But they aren't looking at gas for power production."
Tux Turkel can be contacted at 791-6462 or at: