Blog   |   Jan 5th, 2017 Power Plant Playbooks – It’s Prudent to Plan

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To call the last two years in the U.S. electric generating sector “turbulent” is to put it mildly. Since the beginning of 2015, more than 135 U.S. power plants with a total capacity of over 18,000 megawatts have been shut down, typically coal- and oil-fired generators put out of business by cheap natural gas and heavy environmental compliance costs but also some no-longer-economic nuclear stations as well.

Finding new uses for old power plants come with challenges, but they also afford big opportunities. While there are often issues of environmental remediation and asbestos removal, many generating stations were sited on rivers and harbors in order to facilitate fuel deliveries, and can represent “prime waterfront land” when cleaned up and reused.

Here at TRC, we’ve consulted with owners of more than 30 power plant sites in recent years, and that experience has shown us the importance of approaching the whole process with a playbook–a plan that asks and answers the right questions to help owners and stakeholders make the best decisions. We recently got a chance to present some of what we’ve learned to several hundred participants at the PowerGen conference in Orlando in mid-December.

We define the overall universe of potential outcomes for power plants that have reached the end of their useful life or become economically non-viable with what we call the Four R’s: retire, retrofit, replace, or redevelop. To determine whether it makes sense to mothball a plant, re-power it (with typically natural gas replacing coal or bunker oil as the fuel source), build a replacement plant on the site, or raze it and sell the land, three of the most important questions we ask are:

  1. Is there a market to sell the plant as-is? This is the option that represents the least risk and least cost to a plant owner, particularly with a new owner assuming all environmental and demolition liability.
  2. If buyers won’t step up to purchase the site as-is, does it make sense to demolish the plant and go to market with a vacant piece of land? This involves a careful assessment of the demolition costs, the potential scrap value of metal equipment and other reusable materials, and the likely value to a developer re-using the site for industrial, retail, maritime, or even mixed-use housing or office space.
  3. What does it cost to do nothing? That will never be zero, because plant site owners will always face costs such as local property taxes, security staff, and sometimes groundwater or environmental monitoring. But in periods when real-estate values and energy costs are in flux, doing nothing may, for a period of time, prove to be the smartest option.

Many power plants were built to effectively last forever by utilities who never expected them to close–and in many cases, that actually increases their value for re-use. Here in TRC’s home state of Massachusetts, for example, Exelon recently sold the New Boston Station, known locally as the South Boston Edison plant, and its 15 acres for $24.25 million to Hilco Redevelopment Partners and its partner, Redgate. The plant complex includes an 1892 brick and marble building with Beaux Arts flourishes and soaring arched windows that’s likely to become an acclaimed architectural centerpiece in a new housing/office/retail/restaurants complex with a marina. It’s a deal that also unburdens Exelon of a unit that rarely got called to run in New England’s competitive electric markets, and also potential environmental cleanup and liability issues.

Not every power plant deal will turn out to be the kind of win-win-win that the South Boston Edison plant will be for the developers, the community, and the plant owner. But when you approach deciding the fate of a power plant and its location with the right playbook, you can greatly improve the odds of a positive outcome.

Blog Author

Ed Malley

Ed Malley

Ed Malley is a Vice President at TRC with 25 years of technical, financial and legal experience in the environmental consulting and petrochemical industries. He currently leads TRC’s RE POWER™ Program for transforming aging power plants through retirement, retrofit or replacement. Previously, Ed managed TRC’s Exit Strategy program in the greater NYC area, and completed two major brownfield development projects on 30 acres of water front property, transforming these former power plant and industrial sites into mixed use developments. Prior to joining TRC, Ed was Director of Engineering for a large specialty chemical and petroleum company, where he managed the engineering, procurement and construction program for capital projects. He also restructured global operations, upgrading ten plants to modern standards and closing thirty plants for sale and beneficial reuse. Ed has Chemical Engineering, MBA and Law degrees and is admitted to practice law in NJ and NY. Contact Ed at