NRG Energy (NYSE: NRG) on June 5 took another shot at a finding by local transmission owner National Grid that transmission-only projects are a better economic choice than NRG’s proposed options to fuel the coal-fired Dunkirk plant with natural gas.
NRG on June 5 filed with the New York State Public Service Commission supplemental comments and a third party assessment of the two benefits studies conducted by NRG’s consultant, Longwood Energy Group LLC (LEG), and alternatively the report conducted by National Grid, upon which National Grid based its recommendations filed with the commission on May 17.
The two reports: “Report and recommendations comparing repowering of Dunkirk Power LLC and transmission system reinforcements,” published by National Grid on May 17 (called the “National Grid Report”), and “NRG Dunkirk Repowering Project Economic Impact Analysis,” published by Longwood Energy Group on March 20 (called the “LEG Report”), were each submitted to the commission as it looks for options to replace Dunkirk, which is in its last days as a coal-fired facility.
As NRG stated in its initial reply on May 22, many aspects of the National Grid report are flawed and raise serious questions concerning the findings which led it to recommend development of their transmission upgrades over the Dunkirk repower or gas conversion options, NRG said.
NRG has subsequently engaged London Economics International LLC (LEI), a well-known firm with expertise in performing energy market and macro-economic cost-benefit studies, including extensive experience in market analysis for the New York power market and neighboring regions, to conduct a review of the two reports.
LEI identified the differences in the modeling framework, modeling inputs and assumptions. LEI also compared the results of the two reports and considers potential explanations for the differing conclusions.
LEI’s assessment of the National Grid report identified a number of factors that contributed to the different results between the two studies and led to an understatement of benefits for the Dunkirk Repowering project, NRG said. In LEI’s opinion, the differences are partially related to modeling inputs, but also to varying analytical approaches with respect to what measures should be used for the evaluation.
In terms of measuring consumer benefit, National Grid focuses on production cost benefits, while LEG reports both market price impacts and production cost savings. LEI said that: “National Grid is incorrect in dismissing market price impacts altogether. Indeed, given the constructs of the NYISO markets for energy and capacity (and given that these market products form the majority of the supply costs of power to consumers) market prices are more relevant for a cost-benefit analysis focused on the consumer.”
Additionally, while National Grid has provided an assessment of potential delivery cost impacts, these are cost related only, and do not take into account any capacity and energy market impacts or macroeconomic benefits, NRG said. Therefore, this aspect of the analysis does not offer a complete picture, it added.
Sierra Club backs National Grid, with some additional suggestions
On April 1, NRG submitted its Dunkirk proposal to the commission with these options:
- Option 1—a new 422 MW combined-cycle gas turbine (CCGT) and refueling the existing 75-MW Dunkirk Unit 2 with natural gas.
- Option 2—the refueling of the existing Dunkirk Units 2, 3 and 4 with natural gas.
- Option 3—installation of 285 MW of natural gas-fired peaking units.
The Sierra Club weighed in on the side of National Grid in a June 6 filing, asking the commission to reject the repowering alternatives proposed by NRG. The Sierra Club also recommended that the commission require National Grid to implement, to the extent practicable, demand response and energy efficiency programs to alleviate potential operational or reliability concerns associated with Dunkirk’s retirement during the time between completion of the initial set of transmission projects (2015) and completion of the remaining transmission projects (2018-2019).
The Sierra Club retained Pinewood Power Solutions LLC and PSM Consulting Inc. to provide technical recommendations on the proposed repowering alternatives and transmission upgrades. The Sierra Club-hired consultants reviewed the materials filed with the commission and offered the following observations and recommendations:
- The transmission analysis performed by National Grid (“2012 Study”) was done in accordance with applicable reliability standards.
- The shunt capacitor bank solutions proposed by National Grid are appropriate to address the low voltage problems identified in the 2012 Study.
- The transmission solutions proposed by National Grid are appropriate to address overload conditions identified in National Grid’s 2012 Study.
- It would be advantageous for National Grid to consider demand response technologies as part of the planning and operational steps taken in the period of time between completion of the initial set of transmission projects (2015) and completion of the remaining transmission projects (2018-2019).