Black Hills works on RFPs for new wind and gas-fired capacity

The preferred Electric Resource Plan for Black Hills Colorado Electric relies on a two-year power purchase agreement (PPA) beginning in 2015, seasonal firm market power in several years, a gas-fired 40 MW LM6000 turbine added in 2017, and a 74 MW GE 7EA also added in 2017.

The 40 MW LM6000 in 2017 represents replacement capacity for the coal-fired Clark Station, which is currently shut and due to be retired effective Dec. 31, 2013.

Black Hills filed its latest Electric Resource Plan (ERP) on April 30 at the Colorado Public Utilities Commission. It covers a planning period of 25 years from January 2013 through December 2037. The Resource Acquisition Period (RAP) covers the period January 2013 through December 2019.

The evaluations conducted for this ERP include modeling that was used to select the replacement capacity for the Clark Station coal-fired units and capacity necessary for expected future load growth, completion of studies and modeling to determine if the gas-fired Pueblo 5 and 6 should be life extended or retired, and modeling to determine the cost to add Eligible Energy Resources sufficient to comply with the Renewable Energy Standard (RES) and implemented by commission rules.

The proposed LM6000, to be operational in 2017, is the replacement capacity that the Clean Air-Clean Jobs Act allows the company to “develop and own as utility rate-based property.” An application for a Certificate of Public Convenience and Necessity (CPCN) to construct the LM6000 was filed separately with the commission on April 30, along with an application to retire Pueblo Units 5-6 at the end of 2013.

The ERP evaluation work showed the need for a new resource by 2017 to meet the indicated resource need in Black Hills’ service territory. The company plans to acquire this resource through a Phase II competitive solicitation.

Black Hills looking to possibly add 30 MW of wind capacity

Black Hills said it will be able to provide all of the retail and total renewable distributed generation (DG) required by the RES Statute and RES Rules through 2023. Retail DG renewable energy credits (RECs) will be provided by the resources in the company’s solar programs and wholesale DG RECs will be provided by the 29 MW Busch Ranch Wind Project in Huerfano County, which began commercial operation in October 2012.

However, without additional Eligible Energy Resources, the company is proposing to test the market for wind. On April 23, Black Hills issued a request for proposals (RFP) for the acquisition of up to 30 MW of wind resources to determine if these resources can be acquired at a net cost savings (avoided costs greater than the cost of the Eligible Energy Resources) and therefore not have a negative impact on the Renewable Energy Standard Adjustment (RESA) balance. Black Hills is pursuing the acquisition of up to 30 MW of wind resources to take advantage of the extension of federal tax credits to the end of 2013 under the American Tax Relief Act (ATRA).

The company’s August 2008 ERP filing was made subsequent to the July 2008 transfer of the electric utility assets and operations in Colorado of Aquila Inc., doing business as Aquila Networks-WPC. The 2008 ERP addressed the unique situation where the company faced an abrupt loss of the majority of the capacity, associated energy, and reserves used to serve its customers due to the termination of an existing Power Purchase Agreement (PPA) with Public Service Co. of Colorado (PSCo) on Dec. 31, 2011. The PSCo PPA supplied approximately 75% of the company’s capacity, including associated energy, and the majority of the company’s reserve margin.

The following significant resource changes have occurred or have been agreed to since the filing of the company’s 2008 ERP:

  • The Energy Displacement Agreement referred to as the Sunflower Swap terminated on Dec. 31, 2010.
  • The PPA with PSCo expired on Dec. 31, 2011.
  • Two utility-owned LMS 100 gas-fired combustion turbines at the Pueblo Airport Generating Station (PAGS) began commercial operation on Jan. 1, 2012.
  • The PPA associated with two non-utility-owned 1×1 combined cycle units at PAGS became effective Jan. 1, 2012.
  • As a result of the Clean Air–Clean Jobs Act, the company has agreed to retire the two coal-fired units at Clark Station in Cañon City as of the end of 2013.
  • A condition assessment study was completed for Pueblo 5 and 6.
  • The Busch Ranch Wind Project became operational in October 2012.

In April 2010, the Clean Air–Clean Jobs Act (CACJA) was signed into law, requiring utilities to reduce emissions from power generation. The commission then found that the retirement of the Clark Station coal-fired units by the end of 2013 was needed and in the public interest. This retirement was incorporated into Colorado’s Regional Haze State Implementation Plan. Black Hills has until the end of 2017 to complete its emissions reduction plan by constructing and having on line its replacement capacity for the Clark Station coal-fired units.

In 2012, the company hired CH2M HILL to perform a high-level condition assessment of Pueblo 5 and 6 and a high-level cost estimate addressing the likely components requiring replacement or refurbishment for a life extension of the units. The estimate of the costs associated with extending the life of Pueblo 5 and 6 was $54m.

Based on this estimate, the company performed some limited sensitivity modeling to determine if extending the life of Pueblo 5 and 6 was a cost effective option. The model did not select life extension of Pueblo 5 and 6 at the cost estimate level provided by CH2M HILL, nor at 70% or 50% of that cost level.

The company’s generation resources consist of two coal-fired steam units, two natural gas-fired steam units, two natural gas combustion turbines, and three diesel plants. The Clark units are located in Cañon City; the Rocky Ford diesels are in Rocky Ford; and Pueblo 5 and 6, Pueblo diesels, Airport diesels, and PAGS are located in Pueblo.

RFP for combustion turbine capacity still in the works

The company currently meets electric demand and energy needs, in part, via purchases from the open market, and through the following purchased power contracts and electric generation assets:

  • Pueblo Airport Generating Station (PAGS) natural gas-fired combustion turbines with a total capacity of 180 MW;
  • Clark Station with a total capacity of 42 MW that will be retired on Dec. 31, 2013;
  • Pueblo 5 and 6 natural gas-fired units with a total capacity of 29 MW that are planned to be retired on Dec. 31, 2013;
  • Three diesel stations with a total net capacity of 30 MW;
  • Black Hills Colorado IPP PPA expiring in 2031, which provides 200 MW of power from Black Hills Colorado IPP’s combined-cycle turbines;
  • One PPA, expiring Dec. 31, 2013, whereby Black Hills purchases 50 MW of economy energy;
  • An agreement in place with the Western Area Power Administration between the western and eastern transmission grids to facilitate 5 MW of power transfers;
  • The Busch Ranch Wind Project in Huerfano County, which entered commercial operation in 2012, consisting of sixteen 1.8-MW wind turbines.

In addition to the 40 MW LM6000 resource in 2017, the Baseline 1 Plan included the addition of a 74 MW combustion turbine (CT) (GE 7EA) in 2017. Pursuant to a commission rule, the company intends to issue an RFP for the acquisition of this new resource. The competitive bid process will allow all resources an opportunity to bid and be compared. In this ERP, the company has included the bid policies, RFPs and model contracts necessary for this upcoming effort.

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.