Last month, the Garden State passed a major milestone: Its Board of Public Utilities (BPU) approved the shutdown of its last two coal-fired power plants, making it the eighth member of the coal-free states club. The Logan and Chambers Cogeneration power plants will be shut down for good at the end of May, and the plants will be quickly demolished to make way for new solar and storage generation. As if that wasn't good enough, the deal also returns nearly $30 million to Atlantic City Electric (ACE) ratepayers.
So how did this win-win-win happen?
Logan and Chambers, both located in southern New Jersey along the Delaware River, came online in 1994 and entered into contracts to sell their electricity to ACE for 30 years. At the time, it seemed like a good idea to lock in long-term power prices from "state of the art," supposedly cheap coal plants, but a lot can happen to energy markets and technology in 30 years. After deregulation in the late 1990s, the fracking boom, and the clean energy revolution, by the mid-teens ACE ratepayers were stuck with dirty and expensive electricity, and the BPU was requiring quarterly reports about any possible ways to terminate the contracts early. But of course the plant owners were not interested.
Then there was a change of ownership, and with it a new vision. Starwood Energy Group recognized that the plants were unlikely to be competitive after their power purchase requirements expired in 2024. They partnered with Energy Management, Inc (EMI), and hatched a plan that would:
Retire the plants early and demolish them;
Use existing interconnection rights to bring new solar or battery storage (or both) online;
Replace the electricity that it owed to ACE under the power purchase agreement through 2024 with cheaper electricity bought on the PJM wholesale market; and
Provide a monthly refund to ACE customers to account for the fact that the purchased electricity will be cheaper than what Logan and Chambers produced.
New Jersey is one of the smallest, most densely populated states along the coast, making it extremely vulnerable to climate impacts. The need for climate action is increasingly urgent considering the new report from the Intergovernmental Panel on Climate Change that found that coal must be completely phased out if the world is to limit warming to close to 1.5C. It was clear that a deal to retire New Jersey’s final coal plants was critical for reducing the state’s emissions. Luckily, ACE understood that this was an opportunity to make good on their climate action promises and help protect New Jersey from the impacts of the climate crisis.
While Starwood and ACE were at the negotiating table, the Sierra Club and its allies helped highlight the need for immediate action on this deal. We published op-eds and got ACE customers to email the company’s CEO to express their support for replacing these dirty, expensive coal power plants with clean, renewable energy. We also launched a digital ad campaign calling on the company to do the right thing, using images that evoked the recent flooding across New Jersey from the remnants of Hurricane Ida in September 2021. Already concerned about the climate impacts of their operations and interested in doing their part to address the climate crisis, ACE also worked to ensure that the changes to the complicated power purchase agreement would be financially beneficial to its customers over a wide range of possible scenarios.
A deal was finally reached in December 2021, which included an additional $5 million for ACE customers, and it was approved by the New Jersey Board of Public Utilities in March 2022. This historic decision marked the end of coal burning in New Jersey and was a critical step from ACE to lower the carbon footprint of its electric supply while also securing a refund for its ratepayers. This moment would also not have been possible without Starwood Energy looking to directly transition to cleaner, cheaper renewable energy at these sites. The deal represented “a huge step forward,” Board of Public Utilities Chair Joseph L. Fiordoliso said just before the proposal was passed, and “a day to celebrate … as we ensure future generations a liveable earth.”