Ohio’s 1950s-era coal plants, Kyger Creek and Clifty Creek, remain financially unviable despite increases in grid market payments. Experts argue these plants, supported under Ohio’s House Bill 6, continue to drain ratepayer funds without turning profitable. The current state of these plants raises questions about the efficacy and future of coal subsidies in the region.
Ohio’s coal plants have faced financial difficulties for years, even with legislative support. The recent surge in capacity auction prices by PJM Interconnection does not cover the substantial subsidies provided to the Ohio Valley Electric Corporation (OVEC) plants. Historical data shows these plants have consistently required financial backing, and past efforts to make them profitable have fallen short. Legislative attempts to repeal these subsidies have also been unsuccessful.
Financial Challenges Persist
The PJM Interconnection grid market’s capacity payments aim to ensure power availability to meet future demands. With aging coal plants being phased out, power generation costs are increasing. Despite record-high prices in PJM’s recent capacity auction, the revenue generated will not offset the substantial subsidies required to cover operating costs. Waggoner from the Sierra Club’s Beyond Coal campaign highlighted that even high capacity prices won’t bring OVEC into profitability. HB 6, the 2019 law, continues to mandate ratepayer subsidies, costing nearly $200 million this year alone.
“Even with a super high price, OVEC is still going to be in the red,” stated Neil Waggoner.
Ratepayers face ongoing charges to support these aging facilities, with total costs possibly exceeding $1 billion by 2030. This situation continues despite significant increases in payments to power generators within the PJM Interconnection service area.
Economic Viability in Question
Economic experts argue the current capacity payments are insufficient to make the OVEC plants economically viable. Analyst Devi Glick indicated that the OVEC plants require average capacity payments of around $418 per MW-day to break even, whereas the recent auction set prices at approximately $270 per MW-day. The gap between required and actual payments highlights the financial challenges facing these plants. Seryak from RunnerStone posited that new PJM rules might necessitate even higher prices for OVEC to become profitable.
“Future energy market prices, OVEC’s future coal costs, and OVEC’s environmental compliance costs will also be important factors determining the extent of its losses or profitability,” Seryak emphasized.
Blake from American Electric Power and OVEC noted the auction’s positive impact but acknowledged these payments alone won’t suffice. Ohio residential utility customers currently pay between $1.30 and $1.50 monthly, varying by the utility provider.
Attorney Kimberly Bojko contested Blake’s claims, arguing that customers are bearing the burden of OVEC’s operational costs and debts. Seryak added that this financial structure leads to inefficient energy production, with the OVEC plants operating at a loss and passing these costs to ratepayers.
The future profitability of OVEC plants remains uncertain despite recent capacity auction results. The ongoing financial support of these plants raises important questions about the sustainability and efficiency of coal subsidies in Ohio’s energy landscape. With substantial costs being transferred to ratepayers, the economic and environmental implications of maintaining these aging coal plants continue to be a point of contention.
