The planned Thetford gas-fired combined-cycle plant, with an initial capacity of 700 MW and an eventual target of 1,400 MW, will in part replace capacity from seven small, old coal-fired units that Consumers Energy plans to shut.
That was one of the points made by John Russell, CEO and President of Consumers Energy, during an April 25 earnings call for parent CMS Energy (NYSE: CMS). Asked how the Thetford plant, which is now in the air permitting process at 1,400-MW in size, fits into the future generation picture, Russell said there are several elements in play.
“First of all, the coal plants, you’re aware, we’ve got seven small coal plants that we’re looking to retire in the ’15, ’16 timeframe,” Russell said. “That will take out about 1,000 MWs.” He said Thetford would be timed to come into operation about the time those units shut.
Then there are two major power purchase agreements (PPAs) that Consumers has, one for power out of the gas-fired MCV plant and one with the Palisades nuclear plant of Entergy. The agreement with Palisades runs through 2022. Consumers assumes the Palisades plant is going to continue to run and it’ll have that power, Russell said.
Even with the PPAs and other power sources, there is a capacity shortfall that appears in about 2017. But the company will have a “glut of power” on the market between now and 2017, Russell said. “I think you’ve seen the MISO results recently that talked about nearly 20% overcapacity in the area,” said Russell about the capacity situation and how it plays into the Thetford plan. “So the timing of the plan is critical as we go forward.”
Russell said about the Thetford gas-fired project, located on a site where some old turbines of Consumers will be retired when this project comes on-line: “We have a site, we’ve got almost 300 acres on the site, gas is on the site, transmission is on the site…. We’ll have the latest technology today. It’ll be a combined-cycle plant. There were a lot of plants that were built in Michigan in the late ’90s that were peaking plants. So they were simple cycle plants. That’s not really what we’re looking for here. This is going to be a baseload unit to pick up, in part, for what we retire and mothball on the coal side of our fleet.”
Consumers plans to file this summer with the Michigan Public Service Commission for a Certificate of Necessity on the Thetford project.
Consumers coal plants back to about normal dispatch levels
On where the Consumers Energy coal plants are in terms with competing natural gas, Russell said in answer to an analyst question that “just a walk-around number for you, anywhere from $2.50 for gas or $3 is where our western coal units begin to be in the money. So in other words, they’re dispatched at or ahead of gas. So that has also helped in the first quarter too that the gas prices are well over that $3 level. And we’re dispatching the coal now as we usually have.”
Thomas Webb CFO and Executive Vice President of Consumers Energy added about coal stockpiles at its power plants: “We’re down from over 60-day supply a year ago, down in the 40-day zone, which is more the place we’d like to be.”
Russell said the coal plants are up to about a 64% capacity utilization early this year, against 56% last year, with this year’s level about the usual run rate.
Consumers recently asked MISO for extra year for seven coal units
Consumers said in its April 25 quarterly Form 10-Q report that in March, it submitted applications to MISO to delay the mothballing of the seven coal units by one year, to 2016. Consumers said in the Form 10-Q that it will continue to evaluate its options for the units, which include:
- installing more environmental equipment on the units to reduce emissions further in order to meet new environmental standards and continue to operate the units;
- seeking a further extension of compliance deadlines for new environmental standards;
- converting the units to natural gas instead of coal;
- decommissioning the units; or
- a combination of these options, depending on customer needs and market conditions.
“With the potential closure of these plants and the potential tightening of the MISO capacity market, Consumers could experience a shortfall in generation capacity of up to 1,500 MW in 2016,” said the Form 10-Q. In order to address future capacity requirements and growing electric demand in Michigan, Consumers updated its balanced energy initiative, a comprehensive energy resource plan designed to meet the short-term and long-term electricity needs of its customers through:
- energy efficiency;
- demand management;
- expanded use of renewable energy;
- development of new power plants;
- power or generating asset purchases to complement existing generating sources; and
- continued operation or upgrade of existing units.
CMS defines “mothball” as placing a generating unit into a state of extended reserve shutdown in which the unit is inactive and unavailable for service for a specified period, during which the unit can be brought back into service after receiving appropriate notification and completing any necessary maintenance or other work. Generation owners in the Midwest ISO region must request approval to mothball a unit, and MISO then evaluates the request for reliability impacts.
The seven units up for mothballing in 2015 and/or 2016, their power ratings, and their net generation in 2012, are:
- B.C. Cobb Units 4-5, 312 MW, 1,564 GWh;
- J.C. Weadock Units 7-8, 310 MW, 1,566 GWh; and
- J.R. Whiting Units 1-3, 324 MW, 1,344 GWh.
The larger, newer coal units that will keep operating are:
- J.H. Campbell Units 1-2, 615 MW, 2,747 GWh;
- J.H. Campbell Unit 3, 770 MW (not including nearly 7% of unit ownership by other parties), 4,606 GWh; and
- D.E. Karn Units 1-2, 515 MW, 2,200 GWh.