Wisconsin enjoys power reserve, despite Kewaunee and EPA

Wisconsin utilities have prioritized generation construction and enjoy a healthy planning reserve margin and adequate capacity, while continuing to balance newly-added capacity against an economic downturn and subsequent slowing of energy demand growth, said a report from the Wisconsin Public Service Commission.

Some of the expected or planned new generation facilities were renewable energy projects, projects which were proposed to meet Wisconsin’s Renewable Portfolio Standard (RPS) requirement. Recent examples of such projects cited in the report include Wisconsin Power and Light’s Bent Tree Wind Project (approved by the commission, 200 MW), Wisconsin Electric Power’s Glacier Hills Wind Project (approved, 162 MW), and its planned Rothschild biomass facility (approved, 50 MW).

This is the seventh biennial Strategic Energy Assessment (SEA) issued by the commission and was posted to the commission website on Nov. 14. The SEA provides a picture of past and future electric energy needs and sources of supply. It brings to light issues that may need to be addressed to ensure the availability, reliability, and sustainability of Wisconsin’s electric energy capacity and supply.

The recent economic downturn has translated into lower peak demand growth in Wisconsin, the report noted. Wisconsin utilities forecast between 0.3% and 1.7% annual load growth through 2018. This is similar to the 1% forecast from the last SEA.

In earlier SEAs published in the 1990s, reserve margins had been a concern. Actual reserve margins fell to less than 10% on multiple occasions in that decade, prompting the commission to mandate that utilities maintain a higher planning reserve margin. The recent economic downturn, coupled with the state’s generation construction in the past several years, created additional capacity. Planning reserve margins have declined slightly since the last SEA, though. Wisconsin’s planning reserve margins are forecasted to remain above 11.6% through 2018. The planning reserve for the critical 2013‐2014 period is 16%‐22%.

Major retail electricity providers and/or transmission owners that submitted demand and supply data for this SEA include: American Transmission Co. LLC (ATC), Great Lakes Utilities (GLU), Madison Gas and Electric (MGE), Manitowoc Public Utilities (MPU), Northern States Power-Wisconsin (NSPW) (d/b/a Xcel Energy), Superior Water, Light and Power Co. (SWL&P), Wisconsin Electric Power (WEPCO) (d/b/a We Energies), Wisconsin Power and Light (WP&L) (d/b/a Alliant Energy) and Wisconsin Public Service Corp. (WPSC).

Roughly 44% of Wisconsin’s nameplate capacity is available through coal, with natural gas combustion turbine and combined cycle facilities providing over one third of the nameplate capacity. The increased presence of renewable projects in Wisconsin continues to change generation mix proportions in the state. Wisconsin’s actual energy generation proportions differ greatly from the state’s nameplate capacity. Approximately two thirds of actual generation is supplied from coal and only about 9% of actual generation comes via natural gas.

Between the beginning of 2010 and this SEA, over 1,800 MW (approximately 360 MW is wind) of additional new generation capacity for Wisconsin utilities has been brought into service. Units that became operational during that time include: the coal-fired Elm Road Units 1 and 2 of We Energies, the Bent Tree Wind Project, Glacier Hills Wind Park, Marshfield Combustion Turbine, and the Point Beach Unit 1 and 2 uprates.

Wisconsin generators continue to update their current coal facilities to comply with federal emissions requirements. The status of emission control projects at the coal-fired Columbia Units 1 and 2 has moved from “filed an application” in the previous SEA to “under construction” in the current SEA. Columbia is co-owned by WPL WPSC and MGE. In addition, the Edgewater Unit 5 selective catalytic reduction (SCR) project of WPL is underway.

MGE intends to retire the gas/coal-fired Blount Units 3, 4, and 5 in 2013. Blount Units 6 and 7 are operated as natural gas only units as of April 2010, the report noted.

Commission fairly comfortable right now about Kewaunee nuke retirement

In December 2005, the Nuclear Regulatory Commission (NRC) granted a license extension to Point Beach Nuclear Power Plant Units 1 and 2, which authorizes the facility to operate until at least 2030. The Kewaunee Nuclear Power Plant was granted a license extension in February 2011, which authorizes it to operate until at least 2033. On Oct. 22, Kewaunee owner Dominion Resources (NYSE: D) announced plans for the plant’s closure in 2013 due to economic concerns.

“Wisconsin currently has capacity beyond the minimum required planning reserve margin for several years,” said the report. “However, changes to Wisconsin’s generation fleet, such as the Kewaunee Nuclear Power Plant closure, and the EPA’s new rules (either recently proposed or those anticipated in the near future) may change Wisconsin’s generation mix in the coming years. Decisions of retirement, mothballing, emission retrofits, or new generation are beginning to be addressed in the MISO footprint.”

Within the air emissions control challenge lies a potential opportunity for Wisconsin, other states in the Midwest ISO regional energy market, and MISO itself to work together on a coordinated compliance plan that sets a reasonable timeline for meeting EPA requirements while minimizing customer costs, the report said. Since Wisconsin has been at the front edge of a construction cycle, newer units in Wisconsin have a benefit over generation located in other parts of the MISO footprint because they have environmental controls that likely will be in compliance with EPA requirements.

“Other states may not be as well positioned with their capacity mix in the near future, and Wisconsin utilities may increasingly serve as energy exporters if other states become capacity strapped in the next few years,” the commission report said. “Nonetheless, additional analysis is needed to identify realistic assumptions about the benefits that may flow to ratepayers from this capacity and energy. Furthermore, important changes to the transmission system and operation will likely be a prerequisite to Wisconsin selling any excess capacity or energy. For instance, some transmission infrastructure improvements in the Chicago and Northern Indiana area may be needed.”

Wisconsin utilities still generate a strong majority of our state’s daily electricity and any exports through baseload coal generation facilities. Depending on the exact compliance rules implemented by EPA, Wisconsin utilities may have to respond with new or retrofitted generation facilities that meet all the emission restrictions, or may be required to purchase emission allowances. During the next two years, coordinated plans will be developed in the MISO reliability footprint to meet the new EPA rules, the report noted.

There is about 70,000 MW of coal capacity in the MISO footprint. About 60,000 MW of that will need to address the new EPA rules by 2015‐2017, depending on legal challenges, the report said. “The coordination of planned outages and obtaining access to the supply chain for design engineering, project management, equipment, and skilled labor will be a severe challenge,” it added. “Some entities or generators are exploring options for compliance with the new EPA rules without causing reliability problems in the interim.”

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.