Dynegy Inc. on Tuesday 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. The decision to shut down operations was made after they once again failed to recover their basic operating costs in the most recent MISO capacity auction.
Earlier this year, Dynegy announced the Wood River Power Station would retire in June for similar reasons. In total, approximately 30 percent of the power generation capacity will be lost in Southern Illinois. According to a 2014 economic impact study by Development Strategies, the Newton and Baldwin stations combined have historically supported nearly 4,000 direct and indirect jobs and $1 billion annually in economic activity. Newton is responsible for $5 million in property taxes and Baldwin pays $4.8 million each year.
“This is a difficult decision, and we don’t take it lightly,” said Robert C. Flexon, chief executive officer of Dynegy. “For 40 years, the employees of the Baldwin and Newton power stations have generated reliable and affordable power for the people of Illinois. The men and women of these stations, just like the Wood River employees, have proudly and professionally served and safely operated these facilities for decades while contributing greatly to their communities.”
Competitive generating assets in MISO Zone 4, regardless of fuel type, are unable to support their operating costs in the existing MISO market design. Generators are compensated in two ways — through the capacity market and through the energy market. The out-of-state utilities offer their capacity into the annual auction at little to no cost because they are more highly compensated through their home state regulatory process, putting competitive generators at a tremendous disadvantage.
This same issue also applies to the energy market, where utilities also offer their energy in at no cost and continuously dispatch their baseload plants regardless of price as they are able to pass through their variable costs to ratepayers. Since generators in Zone 4 are not regulated, they rely entirely on the capacity and energy markets which are, in effect, suppressed by the regulated utilities’ offering practices. MISO’s market design does not penalize or prevent this practice. This dynamic prevents Zone 4 generators from receiving an adequate level of compensation to cover their generating costs. If Newton and Baldwin were located in PJM, as northern Illinois plants are, or Zone 4 was regulated as the other MISO generators outside of Illinois are, no shutdowns would occur.
“This is a losing model that exports southern and central Illinois jobs and economic base to the surrounding states resulting in a catastrophic economic outcome for downstate Illinois,” Flexon said. “As has been demonstrated repeatedly, there is a large disparity between how central and southern Illinois competitive generating stations are treated compared to generating stations in northern Illinois and MISO participants outside of Illinois. Central and southern Illinois competitive units in MISO Zone 4 are wrongly grouped with out-of-state utilities rather than the competitive power producers in northern Illinois and PJM. This must change.”
U.S. Rep. John Shimkus (R-Illinois), a senior member of the House Energy and Commerce Committee, released the following statement in reaction to the decision.
“The Democrats’ War on Coal has threatened to devastate two more communities in Illinois with this announcement that power plants in Baldwin and Newton will be retired,” Shimkus said. “The heartbreaking trend of power plant shutdowns and mine closures across the country is the not merely the result of market forces, but of a deliberate campaign by the environmental left to keep America’s most abundant source of reliable electricity in the ground.
“My thoughts will remain with the workers, families and communities who depend on coal and coal-fired power as I continue to fight to block and repeal the Democrats’ anti-coal policies that are devastating rural America.”
The Illinois Chapter of the Sierra Club also released a statement about the closures.
“Dynegy’s decision to phase out units at these coal-fired power plants is a signal of the profound shift that’s happening right now in America’s energy landscape,” chapter Director Jack Darin said. “It is essential that we invest in the livelihoods of workers and communities historically dependent on coal, and work to maximize opportunities for the skilled workforce at the plants impacted by Dynegy’s announcement.
“Clean energy technology is growing every year in Illinois, but we must act now to get energy policy right to ensure that every Illinois community can thrive in the clean energy economy,” he said. “The Sierra Club will continue to fight statewide for policies like the Illinois Clean Jobs Bill that will jump-start the state’s energy economy to allow for new, family-sustaining jobs for the workers impacted by a rapidly changing energy market.
“Workers and communities need the long-term stability that the clean energy economy can bring when we update our policies to make Illinois a national leader in technologies of the future. ”