Merrimack Station, the big power plant in Bow, is used to being in the middle of battles, whether they involved the half-billion-dollar scrubber, tax payments to Bow or the temperature of Merrimack River water.

Now it finds itself in the midst of global attempts to limit climate change. Protesters will gather in front of the main gates on Saturday, urging that the region’s largest remaining coal-fired generator be shut down because of coal’s extreme impact on global warming.

Not surprisingly, the investors who bought Merrimack Station from Eversource two years ago think the protests are misguided. But the reasoning may surprise some people: The key point, says James Andrews, president of Granite Shore Power, is that the plant hardly ever runs anymore.

“This is not your grandfather’s Merrimack Station,” said Andrews during a tour of the facility Thursday. “We are not a baseload station.”

It certainly won’t be running Saturday – not because of protesters but because the New England grid can get all the electricity it needs more cheaply from other sources.

One-tenth the output of 2010

Merrimack Station was built in the 1960s, but over the past decade it has been producing less and less electricity each year.

In 2017, according to emissions data gathered by the consulting firm MJB&A, Merrimack Station produced 238,000 megawatt-hours of electricity. That’s roughly equivalent to the plant running full-speed for just 23 days over the entire year, and is just one-tenth the amount of power it produced in 2010.

In fact, said Andrews, even though Granite State Power has owned the plant for two years it hasn’t had any coal delivered by rail. The mountains of coal left behind by Eversource have sufficed and may last this winter as well.

The cutback in output has come for economic reasons. Natural gas and renewable power like solar, wind and hydro can usually create electricity much more cheaply than a coal-fired plant, partly because handling a solid fuel like coal is more difficult than handling a liquid such as natural gas. Renewable sources, of course, use no fuel at all.

As a result, when companies throughout New English place their daily bids saying how much they need to get paid to make electricity, Merrimack Station’s bid is almost never low enough to be chosen by ISO-New England, the group that runs the six-state power grid.

The exception comes in extreme weather when all the producers on the grid are struggling to generate the amount of electricity that is needed. That can happen on very hot days when everybody’s air conditioner is blasting, but Merrimack Station’s real role comes in stretches of very cold winter weather when most natural gas is being used for heating. That diversion of gas takes many gas-fired plants out of the electricity mix and raises the wholesale price for each kilowatt of electricity. It’s not unknown for the wholesale price to increase by 10 times or more in the course of a single day during a cold snap, making it profitable for Merrimack Station to run.

Andrews said Granite State Power assumes that most, if not all, of the plant’s production will happen between Dec. 15 and March 15.

Capacity payments

While this means Merrimack Station can be very profitable at times, it is unclear whether income from what is known as the energy market –the money paid for each kilowatt produced – would be enough to cover Merrimack Station’s hefty fixed costs. There are about 63 full-time positions at Merrimack Station, about two-thirds of them under the IBEW electrical workers’ union, Andrews said.

Merrimack Station, like the other power plants bought by Granite Shore Power from Eversource, also makes money from what is called the capacity market. This is a separate auction run each year by ISO-New England under which power plants guarantee to be available to produce power three years down the road, in return for set payments that are determined by auction.

“Every generator is competing against every other generator. It’s a competitive auction, a competitive marketplace,” said Andrews.

The idea of capacity markets is that by paying an extra amount for plants to always be on standby, officials can guarantee that enough electricity will be available three years down the road to meet New England’s needs at all times, even if extreme weather hits or there’s an emergency shutdown of a major electricity producer.

Critics call this an unnecessary subsidy for inefficient plants but most of the country has some version of a capacity market. Texas is unique in operating solely with an energy market; it made it through an extreme heatwave last month without any brownouts, which some critics say shows that capacity markets may not be needed.

At least $20 million a year

Merrimack Station – which is actually two generators in one building, both built in the 1960s – bid a total of 448 megawatts into the most recent capacity auction, which covers the summer of 2022 through the summer of 2023. Per-company figures aren’t released, but the clearing price for that auction was $3,800 per megawatt each month, indicating that the plant would receive at least $20 million for that year even if didn’t produce a single watt of electricity.

New Hampshire Business Review crunched the numbers and estimated that $189 million will be paid to Merrimack Station in capacity auction payments from 2018 through 2023.

Granite Shore Power is a group of investors in the energy sector who gathered together and created a New Hampshire company specifically to buy Eversource’s power plants when the utility finally finished divesting itself. Granite Shore bought a series of power plants from Eversource: Merrimack Station plus gas-and-oil-fired Newington Station, coal- and wood-fired Schiller Station in Portsmouth, small plants in Tamworth and Northumberland, and five turbine units that use jet fuel and which can come online very quickly to meet demand spikes on the grid.

All told, NHBR estimated, Granite State Power will receive $415 million in capacity payments for the former Eversource plants for the period 2018 through 2023.

“That allows that reliability mission that ISO has, to make sure that when there’s a need they can call on any of those assets, 24/7/365, to be available to generate,” said Andrews.

Future uncertain

New England’s capacity auction payments are declining each year as the market matures, so it’s unknown how long Merrimack Station and other Granite Shore Power plants will continue to make enough to stay open. But unless something changes radically, they will all be open through at least 2023, even if they don’t actually produce much power.

“At some point would our fixed-cost structure remain so high that we are uncompetitive? … That’s a possibility,” Andrews said.

Andrews said Granite Shore Power is looking at other alternatives, noting his participation in a trip to Denmark with other state business leaders to learn about offshore wind power. During Thursday’s interview he called the thermal power plants – plants that burn coal, oil, gas or wood to create heat that generates electricity – a necessary way to keep the lights on while the power grid changes to a cleaner, renewable future.

“There is going to be a need for a transition from where we find ourselves to where all of us want to be,” he said. “In the meantime … it’s important that the station be here for the critical time that it’s needed.”

(David Brooks can be reached at 369-3313 or dbrooks@cmonitor.com or on Twitter @GraniteGeek.)

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