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IEEFA Analysis Finds Aging Coal-Fired Plant in Owensboro, Ky., Increasingly Unviable, Urges Timely Closure of Both Units

Research Memorandum to Mayor and City Commission Recommends Shutdown of Elmer Smith Unit 1 in 2019, Unit 2 by 2022; Research Shows High Operational and Compliance Costs Cannot Compete with Renewables

CLEVELAND, July 19, 2016 (IEEFA.org) — The Institute for Energy Economics and Financial Analysis today published an analysis concluding that the aging coal-fired Elmer Smith power plant in Owensboro, Ky., must be retired and that the Owensboro Municipal Utilities would do well to invest in renewable electricity generation instead.

The analysis, by David Schlissel, director of resource planning at IEEFA, describes how the Elmer Smith plant has become increasingly expensive to operate and will likely continue to be a drain on ratepayers.

“Our findings show that the facility is long past its prime, that it cannot compete with other sources of generation, and that, as a result, ratepayers in Owensboro are needlessly subsidizing a large portion of the cost of the power from Elmer Smith that is being sold to wholesale customers.,” Schlissel wrote in a companion commentary on IEEFA’s website. “Tens of millions of dollars of new investments will be needed to keep the plant running and, using the utility’s own analyses, shows that retail rates will increase by 20 percent by 2018 and 80 percent by 2025 if both units at Elmer Smith are not retired.”

Schlissel’s independent review, to be presented in a memorandum to Owensboro Mayor Ron Payne and the Owensboro City Commission in a public meeting tonight, was prepared at the request of the Ohio River Valley chapter of the Sierra Club Beyond Coal Campaign.

“This analysis of the economics of continued operation of Elmer Smith shows the need for our community-owned utility company to make wiser decisions to solve the serious problems caused by our current way of generating energy,” said Mary Cupp, chair of the Pennyrile Group of the Sierra Club in Owensboro. “Owensboro residents cannot be expected to continue to shoulder the high economic costs of operating these antiquated coal-fired power plants.”

The memorandum emphasizes the millions of dollars required to make the plant compliant with emission standards. It encourages Owensboro utility managers to follow through on plans to shut down Elmer Smith Unit 1 in 2019, it encourages them to follow through on that plan, and it urges closure of Unit 2 by 2022 at the latest.

It explains how current energy markets—marked by cheap natural gas and low wholesale electricity prices—have made the Elmer Smith station a high-cost alternative, and it notes the rapid rise of renewables driven by technological innovation and lower costs.

In addition to calling for the timely retirement of both units of the Elmer Smith plant, the IEEFA memorandum recommends that:

  • OMU avoid any commitment now or in the near future to build or purchase an equity investment in an existing or a new natural gas (combined cycle gas turbine, or CCGT) plant in order to avert being tied into long-term commitments to gas-fired capacity as prices for renewable wind and solar resources continue to decline.
  • OMU explicitly analyze the costs and benefits of including significant investments in solar and wind capacity and energy efficiency as part of a portfolio of alternatives (possibly along with some new natural gas- ossibly along with some new natural gas-fired capacity) to the continued operation of ESS Units 1 and 2.
  • OMU make full copies of its integrated resource plans and any supporting analyses available to the public.

Unit 1 of the Elmer Smith station is 52 years old; Unit 2 is 42 years old.

Schlissel is a long-time consultant, expert witness, and attorney on engineering and economic issues related to energy. He has testified in more than 100 court proceedings or cases before regulatory bodies.

Full memorandum here.

Related commentary: “A Kentucky Coal-Fired Plant Is No Longer Viable”

Media contact: Karl Cates, [email protected], 917.439.8225
Mary Cupp, [email protected], 270.926.1559
Wendy Bredhold, [email protected], 812.604.1723

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About IEEFA

The Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy and to reduce dependence on coal and other non-renewable energy resources.

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