Dynegy to exit California, eyes Ohio for future growth
Energize Weekly, July 15, 2015
Power plant behemoth Dynegy Inc says that it will likely exit renewable-heavy California in favor of greener pastures, or in its case the American Midwest, where it has spent $2.8 billion on coal and gas-fired plants just this year.
“I will minimize any investment possible in the state of California because the business environment there is so hostile to generators that it’s not worth putting money into California,” Dynegy CEO Robert Flexon told Bloomberg. He said that grid operators in the Midwest and East, such as PJM Interconnection and ISO New England (ISO-NE), do a better job of compensating generators of coal and gas-fired generation assets.
California, on the other hand, has seen a glut of solar power that has driven down prices to below zero in some instances, causing generators of fossil-fuel plants to lose revenue even though they are producing power. Flexon said that the state “not friendly to a generator that needs to actually make a profit.”
Instead, the company will look toward markets that “have the best market design”, which to Flexon is PJM and ISO-NE. According to the Columbus Business First, Dynegy would be interested in furthering its investment in the Midwest, where earlier this year Dynegy signed a deal to take ownership of Duke Energy’s 11 power plants, mostly in Ohio. A Dynegy executive told the Columbus Business First that, if American Electric Power (AEP) were to be willing to sell its power plants in the Buckeye state, then Dynegy would be “very interested.”
Dynegy recently opposed efforts by AEP and fellow utility FirstEnergy Corp to lobby the Ohio Public Utilities Commission for a return to electricity rates based on cost of production as supposed to supply and demand, saying that utility profits shouldn’t be subsidized by ratepayers.
Flexon told Bloomberg that he anticipates a “fairly meaningful uplift” in its capacity revenue through PJM’s transitional auctions as well as in the 2018-2019 auction. He also said that the “bidding behavior will be interesting” following Dynergy’s decision to convert its Zimmer coal-fired power plant to stored fuel oil instead of natural gas, citing new PJM rules.