Report says re-powering Dunkirk NRG plant will create jobs, millions in economic impact

Mar 26, 2013

NRG Energy has released the results of an internal study into the economic impacts of re-powering, versus retiring, their Dunkirk power facility.

The study was commissioned by NRG but carried out by a team of industry groups led by Longwood Energy Group (LEG). It predicts extensive economic and ratepayer benefits in Western New York, and statewide, if the re-powering of the station goes ahead.

NRG’s director of development, John Baylor, says the numbers in the study are gratifying.

“We were very happy with the results of this study, the results demonstrated what we believed would happen all along in that there are significant ratepayer savings and economic impacts from building generation in Western New York.”

The LEG study looks at the impact on the economy, energy prices, and emissions in New York by comparing two future scenarios:

“One in which the existing Dunkirk coal plant is replaced by a new combined cycle plant, and the other in which Dunkirk is retired.”

The report covers a 10 year time-span, presenting a scenario starting in 2018 when the plant could be fully functional.

The LEG analysis finds that a re-powered, natural gas Dunkirk station could reduce the wholesale cost of electricity in the region through using more efficient generation and a cheaper energy source. It also predicts the creation of thousands of jobs and billions of dollars of economic impact over 10 years.

Jobs in Western New York:

The Dunkirk station employed more than 140 people when it was running at full capacity as a coal-fired power plant. Due to the high efficiency of the combined cycle unit proposed for the re-powered station, the plant would require less personnel in the long term.

The plant would provide 26 jobs in the city of Dunkirk, plus 500 construction jobs during the three year construction period.

The study also predicts that indirect and induced jobs will be created elsewhere in the economy due to the impact of the re-powered plant.

Over the 10 year period between 2018 – 2027, it is projected that more than 3,000 jobs would be created as a result of annual operations and maintenance (O&M) spending.

Additionally, over the same time frame, the report predicts the creation of nearly 11,000 jobs as a result of reduced energy prices. The LEG analysis claims that ratepayer benefits will lead to additional increases in spending by workers and firms that will result in job creation.

Statewide, the number of jobs projected to be added due to O&M spending is 3,160. The vast majority of jobs created through activities related to the plant are predicted to be in the Western New York region.

The report anticipates 32,300 jobs would be created statewide through a trickle-down of ratepayer benefits.

The graph below shows the predicted impact of re-powering in several industries around the state. A spike in jobs is expected in state and local Government, the health care sector, retail trade, and the construction industry.

Credit LEG NRG Dunkirk final report

Economic impacts

The results of the NRG internal study forecast that re-powering the Dunkirk station will cut the cost of electricity for New York ratepayers by, on average, more than $140 million per year over a ten-year period.

Adding savings from reductions in capacity costs – payments made to generators to ensure there is always adequate generation to meet market demand – the report anticipates savings in New York state will exceed $300 million per year.

“The $300 million a year, or the $3 billion in total, related to what the impacts would be of having an efficient generator like this in Western New York providing reliable and low-cost power to all of the state,” NRG’s John Baylor says.

“The impacts that we’re seeing in this study equate to about $90 million per year of ratepayer savings for ratepayers in Western New York. You get a lower cost fuel and a higher efficiency unit, and that equals lower cost power.”

As well as savings, the report anticipates that the project will increase gross state product over the same period of operations an average of $348 million per year statewide, more than $130 million of which is expected to accrue in Western New York.

“This operation, according to this study, would add about $136 million a year to the local economy. And so, it demonstrates the importance of having projects like this in the Western New York region and this is above and beyond the generation benefits of having New York state reliability,” Baylor says.

However, the prices, costs and savings presented in this report are all calculated in today’s dollars, and the activity of the international, national, and state economies in the next five years could significantly alter these projections.

Emissions reductions

The efficiency of the combined cycle system, plus the use of cleaner natural gas is expected to reduce the emissions of New York’s power production significantly, according to the report.

The LEG analysis anticipates:

"Building the new Dunkirk plant will decrease New York generators' aggregate annual SOx emissions by as much as 6 percent, NOx by as much as 4.5 percent, and CO2 by as much as 1.3 percent."

This projection is based on the theory that the re-powered Dunkirk station will be able to displace operations of the state’s most inefficient energy generators.

“The efficiency of this unit would allow you to produce cheaper power at lower emissions and you may have impacts out of state, and we expect to see less imports from out of state.”

“By adding more clean generation in the state, you’re depending less on older, less efficient generation which has more intense emission profiles.”

Baylor acknowledges that this may create a situation for older stations in New York similar to the challenges the Dunkirk facility currently faces, where coal-generation simply cannot be sustained as a viable business. But he says there is a need for the kind of economic and environmental benefits a re-powered Dunkirk could provide.

“With the addition of this particular unit in Western New York, we’re not increasing the amount of megawatts in New York state in total, so we’re not diluting the market further and trying to force other units offline. We see a need, and we see an opportunity and a place for a unit like this in New York’s generation portfolio.”

NRG investment

The report shows that costs for construction of a combined cycle plant in Dunkirk are estimated at $506 million.

NRG has stated previously that they plan to bankroll the project, and Baylor says the investment would have a significant impact in the city of Dunkirk and the wider Western New York region.

“I think the repowering is huge for the city of Dunkirk, and they have been such a vocal advocate for this project because they understand what the impact of this plant would be.”

“The tax implications, the job implications, and then just the economic activity around a project like this is very large. And you can see in the numbers from the study, $136 million per year for Western New York and a lot of that is going to be centered in and around the Dunkirk and Chautauqua County area.”

The report shows that about 26 percent of the construction budget is set to be allocated in the Dunkirk region, totaling a $131,560,000 investment.

More than $30 million would be spent in the rest of New York state, but the lion’s share (68%) of the construction and operations and maintenance budget is allocated for out-of-state spending in the report.

In a written statement, NRG spokesperson David Gaier says that the company anticipates having to get most construction materials from outside New York.

“Most or all of the labor will be in state and in region.  However we are being conservative in estimating that the majority of the equipment (not the actual construction, which of course takes place in Dunkirk) would not be available within NY, such as turbines, HRSG, steel, etc.”

The majority of costs associated with O&M requirements are expected to be focused in the Dunkirk region.

Credit LEG NRG Dunkirk final report
Credit LEG NRG Dunkirk final report

Tuesday March 26 marks NRG’s deadline for filing their re-powering proposal, and Baylor says he’s quietly confident.

“I think these numbers make me feel more confident, but in development everything is a risk in terms of what goes forward and what does not. But I think what this study does is it demonstrates what we believed all along.”

Baylor says the economic and rate-payer benefits outlined in the study will be taken into account by the New York Public Service Commission, the New York ISO and the Governor when their proposal is reviewed.

“It accomplishes a lot of the policies that have been laid out by this Governor, to use cleaner fuel sources, to improve overall efficiency of generation in the state, reduce emissions, improve land and water use across the state and support the growth of a renewable industry. And this project accomplishes all of that.”

The date for a decision about the future of the Dunkirk power plant is not yet known.

Learn more about the NRG Dunkirk power station