Calpine: expanded Mankato gas plant the best option for Xcel

Calpine Corp. (NYSE: CPN) told the Minnesota Public Utilities Commission on Aug. 13 that a second gas-fired unit at its Mankato plant is a better option for Northern States Power-Minnesota (NSPM) ratepayers than the utility’s on-again, off-again conversion of its coal-fired Black Dog power plant to natural gas.

Calpine was offering its own comments on June 12 arguments submitted by the Minnesota Department of Commerce, Division of Energy Resources, the environmental group intervenors in this case and the Xcel Large Industrials group related to the 2010 Resource Plan filed by Northern States Power. Northern States Power is a unit of Xcel Energy (NYSE: XEL).

The comments filed by the department provide “clear and convincing evidence” of a need for Xcel to obtain approximately 400 MW of natural gas combined-cycle capacity in the 2017-2018 period to reliably serve its customers at reasonable rates, Calpine said. As Calpine has demonstrated in this proceeding and a companion proceeding related to Xcel’s application for a Certificate of Need for the Black Dog repowering project, Calpine’s proposed 345 MW expansion of its existing Mankato Energy Center (Expansion Proposal) is uniquely positioned to meet the need identified by the department beginning in 2017, Calpine said.

Calpine said its Expansion Proposal:

  • offers a competitive alternative to Xcel’s current proposal to undermine the rigors of competitive scrutiny by locking in some unspecified number of future self-build projects under the guise of “contingency planning”;
  • is the optimal resource to meet the need for natural gas combined-cycle capacity identified by the department; and
  • addresses the concerns of the environmental intervenors that Xcel reduce its dependency on “obsolete coal capacity” in an environmentally responsible manner that can back up increasing amounts of intermittent solar and wind capacity.

Calpine wants the commission to include its Mankato Expansion Proposal in any preferred plan to be approved by the commission in this proceeding. Inclusion of the Calpine proposal in any preferred plan would remain subject to negotiation and commission approval of an appropriate power purchase agreement between Calpine and Xcel, Calpine noted.

Calpine’s Expansion Proposal includes 290 MW of incremental baseload capacity (i.e., combined-cycle capacity) plus 55 MW of incremental duct-fired peaking capability for a total of 345 MW. This new capacity would be available to meet the need in 2017.

Calpine said its proposal better matches the needs of the residents of Minnesota with an economical and logical expansion of an existing resource without the risk of an unnecessary overbuild or likely cost overruns inherent in Xcel’s current “contingency plan” proposal and/or previous proposal to shut down its existing, coal-fired Black Dog Units 3 and 4 and build an entirely new natural gas combined-cycle plant adjacent to the existing plant.

“Relying on independent power producers to build new generation insulates ratepayers from potential stranded costs and the significant financial risks associated with such capital-intensive projects,” Calpine argued. “For example, Calpine’s Expansion Proposal involves a fixed price tolling agreement under which Calpine would assume the financial risks associated with construction of its project. Ratepayers would not be asked to reimburse Calpine for any construction cost overruns, or to provide ratepayer recovery of the costs Calpine has incurred to date in support of its Expansion Proposal. As Calpine has noted in this proceeding and in the Black Dog Certificate proceedings, the Mankato Energy Center was developed and constructed to accommodate the expected installation of a second unit in a cost-effective and environmentally-responsible manner.”

Xcel currently plans to shut the Black Dog coal units in 2015

Expect the aging coal-fired units of the Black Dog power plant to be hit with mounting equipment failures as they head for retirement in 2015 because of reduced upkeep, the company said. NSPM made that point in a July 11 filing at the Minnesota Public Utilities Commission as part of an annual cost adjustment case. The filing is a grab-bag of replies to comments made by the Minnesota Department of Commerce, Division of Energy Resources.

One point of information has to do with tube leaks at the Riverside, High Bridge and Black Dog plants. “In 2003, the Company began the planning process to convert the Riverside and High Bridge plants to natural gas-fired plants as part of [the Metro Emissions Reduction Program (MERP)],” the utility wrote. “Prior to conversion, these plants were powered by coal boilers put into service in the mid 1950s and early 1960s. Since the coal boilers were set to be retired as part of MERP, the most economical and prudent operational mode in the preceding years was to run them with minimal maintenance which thus led to an increase in the number of boiler outages and tube leaks at these two plants between 2003 and 2006. The plants were then retired and converted to natural gas in the 2007–2009 time period. Currently, the Black Dog plant is being run in a similar mode since its coal units are to be retired in 2015.”

The Xcel website said Black Dog is a coal- and gas-fired station. The original Unit 1 boiler/turbine and the Unit 2 boiler, were 1950s era coal units and were replaced with a natural gas combined-cycle (Unit 5), which includes a natural gas-fired turbine-generator combined with a heat recovery steam generator. Exhaust heat from Unit 5 powers the Unit 2 steam turbine. The repowering project, completed in summer 2002, boosts output from the two original units by more than 100 MW and results in cleaner power production. Units 3 and 4 are dual-fuel boilers with steam turbines that continue to use coal as the primary fuel. Natural gas is the backup or topping fuel used to obtain maximum generation for both units. Unit 3 has 108 MW of capacity and Unit 4 has 170 MW, the website shows.

NSPM has shelved, due to a slump in projected power demand, the long-planned conversion of Units 3 and 4 at Black Dog to burning natural gas, said NSPM in a resource plan update filed in December 2011 at the Minnesota Public Utilities Commission. The utility’s revised forecasts and refreshed analysis conclude that NSPM’s next generating resource is no longer needed in 2016, which led to the Black Dog repowering being shelved. Its next capacity need will be in 2018 under the revised forecasts.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.