Dynegy To Shut Down ~2 GW in MISO, Says IL Must Preserve Jobs By Keeping Plants (Ohio Arguments?)
May 04,2016
Dynegy Inc. announced plans to shut down multiple Illinois coal-fueled units.
Units one and three at the Baldwin Power Station in Baldwin, and unit two at the Newton Power Station in Newton, are expected to shut down operations over the next year.
In total, Dynegy is requesting that MISO remove 1,835 megawatts (MW) from MISO Zone 4.
An additional 500 MW are targeted for shutdown, and a final determination is likely later this year.
Dynegy blamed the lack of compensation via the MISO capacity market for the shut-downs
However, as Dynegy acquired the plants either before the existence of a MISO capacity market, or at a time the capacity market existed but knowing full well what the design and pricing of the capacity market was, it's hard to take Dynegy's complaints seriously, as but-for the government-compelled purchases of capacity by end users, Dynegy would be receiving zero dollars for its capacity
We also chuckle at Dynegy's statement in a news release that Illinois policymakers need to take action (likely via a separate Illinois-only capacity market construct, or movement to PJM, presumably with a Southern IL local capacity zone) to, "preserve the jobs and economic base," of the region, yet in Ohio, Dynegy is railing against arguments from its competitors who say that state support is needed to maintain Ohio jobs and economic activity via PPAs with certain Ohio-based generation.
We readily admit that the sought Illinois-only capacity market (or move to PJM) differs greatly from the Ohio PPAs in some respects, however, they are similar in two important respects. First, as far as load is concerned, both are out-of-market subsidies for capacity that load would not purchase but-for the mandate. Second, although the Illinois capacity market may be nominally competitive and open to all bidders (an admitted flaw of the Ohio PPAs), Dynegy's existing assets have numerous incumbent advantages (lower going-forward fixed costs due to depreciation, preferred siting) that, to us, makes the end result of an Illinois-only capacity market (or South IL PJM local zone) practically indistinguishable from the Ohio PPAs, since the end result is that a "preferred" asset class is going to be preserved.
Along with the previously announced retirement of Dynegy's 465 MW Wood River Power Station, some 2,800 MW of generation in Illinois will retire, or approximately 30% of the power generation capacity in Southern Illinois, Dynegy said