Despite hot summer weather in the Owensboro area of western Kentucky, customer demand for electricity has not been sufficient for the municipality to operate Elmer Smith for more than a few hours during peak times of the day, according to James Roberts, veteran fuels and byproducts manager for the municipality.
OMU’s lament, Smith said, is an all-too-familiar one for U.S. coal producers: Persistently low natural gas prices, slack demand and, until just a couple of months ago, mild weather that sharply lowered capacity factors for marginal coal-burning generating units.
As of July, Roberts did not know when OMU will lift the force majeure and resume receiving regular deliveries of coal from suppliers. He did not reveal how much coal the municipality currently is accepting from them. But during the past year, OMU awarded a 1.35-million-ton contract over three years to Armstrong; a 1.2-million-ton contract over three years to Western Kentucky Minerals; 690,000 tons over three years to Peabody; and 300,000 tons over three years to KenAmerican Resources.
The force majeure and inventory issue come as a nonprofit Cleveland, Ohio, group, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a newly released report that OMU should retire both units of Elmer Smith by 2022 for economic reasons. IEEFA performed its analysis at the request of the Sierra Club, a national environmental group fiercely opposed to coal and coal generation.
Elmer Smith’s units went into commercial operation in 1964 and 1974, so the oldest unit is more than a half-century old. OMU already has said it probably will retire Unit 1 by 2019, but has not announced a potential retirement timetable for Unit 2.
In any regard, OMU officials have acknowledged that changes are coming to its generation portfolio, although they have not said if Kentucky’s third-largest city is likely to add gas-fired generation or renewables such as wind, solar, or even hydro energy to replace one or both units of Elmer Smith.