AK Steel Cancels $310 Million Energy Project
07/09/2012 - The proposal to build a $310 million cogeneration plant on site of AK Steel Corp.’s steel mill has been canceled, according to the Middletown Journal.
The proposal to build a $310 million cogeneration plant on site of AK Steel Corp.’s steel mill has been canceled, according to the company.
The decision announced Friday, 6 July 2012, jointly by AK Steel and Air Products and Chemicals Inc. ends about four years of debate about whether to build the facility. Plans were to construct a first-of-its-kind plant in North America at AK Steel’s Middletown Works to capture waste gas from the blast furnace of the steel plant and convert it to steam and electricity. It was developed by Air Products of Allentown, Pa., which has an expanding Middletown office.
It was a sign of another significant investment in the city by Middletown’s largest employer. AK Steel employs approximately 2100 people in Middletown and another approximately 300 people at its headquarters in West Chester Twp.
AK Steel is one of the region’s largest companies, with annual revenues of more than $6 billion.
“It’s unfortunate it didn’t work out, but also it’s strictly economics,” said Barry Racey, AK Steel spokesman. “Cogeneration is a good technology and it’s good for the environment and it’s good as an alternate way of generating electricity and steam, in our case.”
However, at today’s electricity prices and future projections, it’s cheaper for AK Steel to buy electricity than it is to generate it.
The average Ohio industrial retail price for electricity was 6.21 cents per kilowatt hour in 2011, compared to 6.71 cents in 2009 and 5.76 cents in 2007, according to the U.S. Energy Information Administration.
“Despite a contingent $30 million grant from the U.S. Department of Energy, current and projected electricity costs do not justify the economics of proceeding with the project,” AK Steel and Air Products said in a statement with the release.
Air Products said it still has interest in providing its technology to others.
“We believe this technology has much to offer and there are additional opportunities out there in the market. We are currently in discussion with others in terms of using this technology and there is a good level of interest,” said Art George, Air Products spokesman.
Air Products suspended the Middletown project in April 2011, citing rising costs due to economic issues and federal regulatory uncertainty.
It appeared the project could have been revived this year when state Sen. Bill Coley, R-Liberty Twp., introduced Senate Bill 289 to amend Ohio law to qualify waste blast furnace gas for the renewable energy market. Ohio Gov. John Kasich signed the law this spring.
Today, the steel plant’s blast furnace gas is burned off. The proposed facility could have been used to generate about one million megawatt hours of power annually, enough to serve more than 85,000 Ohio homes, according to Air Products.
“The economic recovery has been very gradual and much slower than normal. There is still plenty of electricity in the grid. Natural gas prices are way down,” said Mark Parr, managing director of KeyBanc Capital Markets, an analyst who covers AK Steel.
“Energy cost inflation may not be as big of a potential issue as when people were talking about it four or five years ago.”
AK Steel will continue to explore energy-efficient technologies.
“We think these types of projects in the future are good for both job creation and environment in the state and will continue to utilize innovative technology like this. Just at the moment, they’re not economy viable,” Racey said.
The cogeneration plant would have joined hundreds of millions of investment being poured into Middletown related to AK Steel. Construction finished at the end of 2011 on an approximately $400 million coke plant by SunCoke Energy Inc. to supply the steel plant. SunCoke’s project created more than 100 jobs.
Air Products is in the middle of an $80 million expansion of its existing Middletown facility, 2500 Yankee Road, to upgrade its equipment and infrastructure. AK Steel is its largest customer.
