December 14, 2018
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Proposed sale of Maine’s largest power plant a sign of region’s changing energy market

YARMOUTH, Maine — Maine’s largest power plant is up for sale, placing its future into question and offering a reminder of how much New England’s energy market has changed over the years.

NextEra Energy Resources, based in Juno Beach, Fla., earlier this week disclosed in its quarterly earnings report that it was selling Wyman Station, an oil-fired power plant in Yarmouth, as well as a much smaller oil-fired generator in South Portland known as Cape Gas. Combined, there are four units with the capacity to generate roughly 822 megawatts of electricity, according to ISO-New England, which administers the region’s energy market.

Anyone who has been in or around Casco Bay is familiar with Wyman Station, which began operating in 1978 on the shore of Yarmouth’s Cousins Island. Its smokestack is visible for miles, including from Portland’s Eastern Promenade.

It is the largest power plant in the state in terms of capacity, but that doesn’t translate to outsized importance. In fact, the plant, which many consider an eyesore in Casco Bay, is just a big backup generator that only gets switched on during desperate times.

“Those plants are subject to whatever the market price for energy is,” said Steve Stengel, a NextEra spokesman, “and if the costs are higher than what the market price is, they don’t run.”

Because Wyman Station is run on oil, it’s a more expensive operation compared to nuclear plants, natural gas-fired power plants, hydropower facilities and wind farms. It’s what the company calls a “peaking plant,” which means it only runs during periods of very high — or peak — electricity demand in the region.

Oil-fired power plants have become an increasingly less important source of electricity generation in the region over the past decade, as natural gas prices have dropped. In 2000, oil-fired plants accounted for 22 percent of the energy production in New England compared with less than 1 percent in 2012, according to ISO-New England. During the same period, natural gas plants went from providing 15 percent of the region’s electricity to 52 percent.

NextEra’s decision to sell Wyman Station and the Cape Gas unit is not surprising, according to Jeffrey Thaler, a visiting professor of energy policy, law and ethics at the University of Maine.

Thaler, who is a Yarmouth resident, said Wyman Station only ran on a few especially cold days last winter.

“People don’t realize how big the plant is in terms of number of megawatts because it has not operated at full potential for so long,” Thaler said.

Wyman Station and Cape Gas are the only oil-fired assets in the company’s energy generation portfolio, which consists mostly of wind farms, though it also owns the Seabrook Nuclear plant in New Hampshire. They are also the only assets NextEra has left in Maine. On March 1, the company closed the previously announced sale of its hydropower dams in Maine to Brookfield Renewable Energy Partners. If a buyer for the oil-fired assets is found, it would mean NextEra’s complete pull out of the state.

Stengel said NextEra was moving its portfolio toward assets with long-term power purchase agreements, something its oil-fired assets in Maine didn’t have.

“We’ve made the decision to sell because it reduces our merchant exposure,” Stengel said. “Well, what does that mean? It means it reduces the exposure we have to market prices.”

Wyman Station may sit idle the majority of the time — neither NextEra nor ISO-New England would disclose when the last time the plant was operating at full capacity — but that doesn’t mean it’s not generating revenue for NextEra.

Having backup power plants is still an important piece of New England’s energy infrastructure, so operators of those peaking plants are paid to, well, just be.

There are two markets in play here: The energy market and the forward capacity market. The former is the market in which NextEra gets paid by utilities when it generates electricity during those periods of high demand, while the latter market — the forward capacity market — is the market in which NextEra gets paid just to have Wyman Station available to produce electricity.

“The objective of the forward capacity market,” according to ISO-New England’s website, “is to purchase sufficient capacity for reliable system operation for a future year at competitive prices where all resources, both new and existing, can participate.”

NextEra is paid roughly $2 million each month to be on standby to generate electricity, according to the results of a forward capacity auction administered in 2009 by ISO-New England that covers early 2013. Those payments are meant to cover the costs of maintenance and staff needed to operate the plant if needed. Wyman Station employs between 40 and 50 people, according to NextEra.

The question facing NextEra — and the owner of any oil-fired power plants — is whether the forward capacity market payments are enough to make it a viable business, according to Tom Welch, chairman of the Maine Public Utilities Commission. The PUC hasn’t regulated Maine’s power generators since deregulation went into effect in 2000, but Welch is still a keen observer of the industry.

“With oil units, the question is always lurking: Are we getting enough money out of the forward capacity market given that we don’t run often, and [is] it worthwhile to keep the plant sitting there?” Welch said. “It’s always a question for oil-fired and other kind of units that don’t run much — if they want to be around and for how long.”

NextEra hasn’t given any indication that it plans to shut down Wyman Station, but that doesn’t mean a future owner wouldn’t.

NextEra did participate in the most recent forward capacity auction, which was held in February for 2016-2017. While participating in the auction means there’s an obligation for NextEra’s oil-fired plants to be online through that period, there are ways around it, according to Marcia Blomberg, a spokeswoman for ISO-New England. Blomberg points out that the results of the auction aren’t set in stone, as power generators can “buy or sell their future commitments in reconfiguration auctions or private agreements between parties.”

NextEra’s decision to sell its Maine assets places the future of Wyman Station into question.

Whoever buys the plant is going to have to make a decision, said Thaler. There are three main possibilities, as Thaler sees it. A new owner could maintain it as an oil-fired power plant, firing it up when needed and otherwise collecting monthly forward capacity market payments. A new owner could invest in converting the plant to use natural gas, an option NextEra discussed several years ago but didn’t pursue. A third, speculative option would be to buy the power plant for the real estate. A new owner could dismantle the power plant and ship it off to be reassembled elsewhere and redevelop the site, Thaler said.

“You could do something with that 128 acres other than a power plant,” he said.

The 117-acre parcel — there’s a second, eight-acre parcel — has an assessed value of nearly $108.7 million, according to Yarmouth’s property tax assessor’s database. A call to Nat Tupper, Yarmouth’s town manager, seeking comment on the future of Wyman Station was not returned on Friday.

NextEra’s decision to pull out of Maine is not significant in and of itself — “companies come and go,” Thaler said — but it does serve as a reminder of how much our energy market has changed.

“I think it’s a symbol of a change in our energy use,” he said. “While we’re still highly dependent on oil for heating and for transportation, when it comes to electricity our whole economy has just shifted. … Coal and oil are becoming more and more disfavored fuels when it comes to electricity generation.”

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