TransAlta announced that it has signed a long-term tolling agreement with Puget Sound Energy (PSE) to convert its Centralia Unit 2 facility – Washington state’s final remaining coal plant – to natural gas-fired generation.
The agreement provides a fixed-price capacity payment that provides PSE the exclusive right to the capacity, energy and ancillary service attributes of, as well as the dispatch rights to the 700 MW facility.
“Our Centralia facility has a long history of providing reliable and affordable power in the Pacific Northwest region. We are pleased to extend the useful life of this asset and support the ongoing reliability needs of PSE and, by extension, its customers,” said John Kousinioris, President and Chief Executive Officer.
“The facility is scheduled to cease coal-fired generation at the end of 2025, and the conversion to natural gas will lower the emission intensity profile of the facility by approximately 50%,” said John Kousinioris, President and CEO of TransAlta.
Approximately US$600 million of capital expenditures will be required to extend the useful life of the facility and convert it from coal to natural gas-fired generation. The target commercial operation date is late-2028 and the facility will operate until the end of 2044 under the terms of the Agreement. TransAlta anticipates declaring a final investment decision (FID) after receipt of all required approvals in early 2027. The Agreement is subject to customary regulatory approvals, including PSE receiving satisfactory approval from the Washington Utilities and Transportation Commission.
“When the facility re-enters operations, it will generate long-term contracted cash flow for TransAlta, earning a full return on and of capital within the contract term,” Kousinioris said. “The company is well positioned to execute this project given our deep technical, operational and engineering experience gained in previous coal-to-gas conversions.”
TransAlta also operates power plants in Canada, and in mid-2017, ATCO and TransAlta-the two biggest coal power producers in Alberta-announced plans to convert their coal units to natural gas. ATCO planned to make the switch by 2020, and TransAlta planned to do the same by the end of 2023. ATCO ultimately chose to sell all its Canadian-based fossil-fuel assets, including nine units in Alberta.
In January 2022, TransAlta officially stopped burning coal across all of Canada. The conversion of Keephills Unit 3 from coal to natural gas was the last of three planned conversions at the power producer’s facilities in Alberta. At the time, the company said it had spent C$295 million ($232.27 million) on coal-to-gas conversion projects at its Keephills, Sundance and Sheerness facilities.
