AES Indiana gets green light to convert Petersburg power plant from coal to natural gas

Only two of the Petersburg plant’s four original generating units still receive coal from the shipments that arrive by rail. Those two units produce enough electricity to power more than 170,000 homes. (IBJ photos/Eric Learned)

Indiana utility regulators on Wednesday approved a sweeping plan by AES Indiana to stop burning coal at its massive Petersburg Generating Station in favor of natural gas, despite opposition from the coal industry and some elected officials.

The Indiana Utility Regulatory Commission voted 5-0 to allow AES Indiana to convert two coal-fired units at the plant into natural gas units, a move that the utility calls “a repowering project.”

“Allowing AES Indiana to move forward with the Petersburg Repowering Project supports AES Indiana’s ability to provide a reliable source of electricity, which is important to its customers and to Indiana’s economy,” the state order said.

The utility, formerly known as Indianapolis Power & Light Co., said the plan is expected to result in at least $281 million in savings to ratepayers over the next 20 years.

The approval will make AES Indiana the first large utility in Indiana to abandon coal as a fuel source. In addition, AES Indiana is adding 1,300 megawatts of wind, solar and battery storage near the Petersburg plant through competitive projects.

“For more than a decade, AES Indiana has taken significant steps toward reducing our carbon footprint by planning for a future that includes generation investments focused on cleaner, more efficient energy options,” said Brandi Davis-Handy, president of AES Indiana, in written remarks. “We’ve transitioned to a more balanced energy portfolio that aligns with the state’s all-of-the-above energy policy while also maintaining affordability and reliability for our customers. With this approval, we can continue reliably serving central Indiana and meet the growing and evolving energy demands of tomorrow.”

The 800-acre Petersburg site is about 125 miles southwest of Indianapolis on the White River. It is the largest of the utility’s  three generating stations and the only one that still burns coal.

Altogether, AES Indiana plans to invest $1.1 billion in Petersburg, a town of about 2,300 people, to keep the plant running. AES Indiana is the largest employer in the city and surrounding Pike County, with about 240 workers. A spokeswoman for AES Indiana said Wednesday the company expects to lower that figure to 100 workers in Petersburg after the repowering.

The utility plans to construct a natural gas lateral pipeline approximately one mile long to connect with Midwestern Gas Transmission Co.’s interstate pipeline. The natural gas will heat water into steam, which will spin a turbine, power generators and produce electricity.

The IURC ordered that AES Indiana be awarded a certificate of public convenience and necessity to undertake its repowering project. If all goes to schedule, the huge power plant will burn its last load of coal by the end of 2026 in favor of cleaner natural gas.

The company has estimated the cost of the repowering project at $293 million, which the IURC approved and will allow the utility to recover in the form of higher rates.

The project was opposed at the last minute by Republican U.S Senator Mike Braun, who said Indiana needs more energy to support the grid.

“While new energy will almost certainly need to come from non-coal sources, I am concerned that taking offline legacy sources of energy too quickly will have lasting implications that cannot be reversed,” he wrote to the IURC in October.

Braun won election on Tuesday for governor, a move that will give him a measure of authority over the IURC. The governor appoints the commissioners to four-year terms and can remove commissioners at any time for cause.

Despite that, the regulators approved AES Indiana’s petition, without ever naming Braun or his letter in its 49-page order.

The coal industry, too, had opposed AES’s petition. Reliable Energy, an Indiana company representing coal interests, filed a petition in October, taking issue with the figures in AES Indiana’s request for proposals, saying the number was substantially different from the sworn testimony of an expert witness for the utility.

Reliable Energy asked the IURC to reopen the hearing, but regulators declined to do so. “We find that REI’s Petition to Reopen the record is completely unfounded,” regulators wrote.

Reliable Energy released a statement, which read in part: “Indiana currently faces some of the highest electricity rates in the country. It is also the top energy-importing state in the MISO region. The recent decision by the IURC not only ignores warnings from independent electric grid experts about a potential reliability crisis, but it also ignores the cost to ratepayers of prematurely shutting down their baseload power sources. The bottom line is that this decision will increase AES customers’ rates without adding more needed generation.”

Citizens Action Coalition, a consumer advocacy group, gave the commission kudos for its ruling.

“We applaud the Commission for having the courage to stand up to what was most certainly immense political pressure, and to reject the demands of the deep-pocketed coal lobby,” Kerwin Olson, the group’s executive director, wrote in an email to IBJ. “The dirty and expensive Petersburg coal units should have been retired years ago.”

The two active units at Petersburg were installed in 1977 and 1986. The company retired two older units several years ago.

Olson added: “Kudos to AES-IN for maintaining their path towards a coal-free future. That said, we remain extremely disappointed that AES chose to repower Petersburg with fossil gas instead of replacing those units with renewable energy and storage. Increasing reliance on volatile fossil gas continues to expose captive customers to the significant risks associated with fossil fuels, and does little to address the urgency of the climate crisis.”