A version of this article first appeared on sister publication GenerationHub on June 3, 2013.
Portland General Electric (NYSE: POR) has completed competitive bidding processes and subsequent negotiations to construct a new, gas-fired baseload energy project and to acquire and construct a new wind farm.
PGE said June 3 that it has also signed a new memorandum of understanding with the Bonneville Power Administration to seek mutual transmission capacity solutions, resulting in the company’s decision to suspend permitting and development of the proposed Cascade Crossing transmission project.
The power plants and the memorandum of understanding (MOU) significantly advance the company’s implementation of its current integrated resource plan, which the Oregon Public Utility Commission (OPUC) acknowledged in November 2010.
PGE has entered into the following:
- An agreement to construct a new 440-MW natural gas-fired power plant near Boardman, Ore., to be called the Carty Generating Station. Projected cost: $440m to $455m, excluding allowance for funds used during construction.
- Agreements to acquire development rights for and to construct a new wind farm in southeastern Washington with a nameplate capacity of 267 MW. Projected cost: $520m to $535m, excluding allowance for funds used during construction.
- A non-binding MOU to participate in negotiations with BPA to pursue ownership of regional transmission capacity to meet PGE customers’ needs via an innovative exchange of capacity and assets.
The power plants emerged as the best-performing bids to balance cost and risk in requests for proposals PGE issued in 2012, seeking resources to help meet customer energy needs and the Oregon Renewable Portfolio Standard.
“These two new resources will serve our customers with clean, cost-effective, efficiently generated power for decades to come,” said Jim Piro, PGE president and CEO. “We conducted a rigorous RFP process, and I am confident that we selected the least-cost, lowest-risk proposals for our customers.”
The new MOU with BPA stems from continued discussions between PGE and BPA to explore common interests surrounding PGE’s proposed Cascade Crossing transmission project.
BPA deal covers 1,500 MW of transmission capacity
The new, non-binding MOU provides that PGE and BPA will explore a new option under which PGE could acquire perpetual ownership interest of approximately 1,500 MW of transmission capacity. In exchange, PGE could make investments in BPA’s system, transfer assets or transmission capacity, and/or facilitate implementation of operational efficiency solutions for use by BPA. As a result, PGE has decided to suspend permitting and development of the Cascade Crossing project.
Under the MOU, PGE and BPA will work to reach a definitive agreement concerning the options described in the MOU. However, PGE pointed out that there is no assurance that the MOU will result in a binding agreement.
The MOU reflects progress PGE and BPA have made on discussions surrounding Cascade Crossing under a previous MOU signed in January. Changing market conditions have created an opportunity to explore lower-cost alternatives that could provide needed transmission capacity for PGE with reduced environmental impacts, the utility noted.
Plans for new energy projects in the Pacific Northwest have changed and other new transmission lines have been completed or are in development, increasing available capacity, PGE said. In addition, electricity demand and forecasted growth have slowed. The new MOU identifies an option that could meet PGE’s retail customers’ needs for the next 10 years.
In a subsequent phase, PGE could acquire up to an extra 1,100 MW of perpetual transmission capacity ownership, which could include system upgrades and expansions. Timing and costs of these transmission capacity resources may be clarified through future discussions with BPA.
“This is a unique opportunity that has only occurred because of our joint planning discussions with BPA on our Cascade Crossing project,” Piro said. “The new MOU lays out a path for PGE to capture the value of additional available transmission capacity more effectively, delaying PGE’s need for new transmission infrastructure. While it’s not an easy decision to suspend permitting and development of Cascade Crossing, it’s the right thing to do for our customers, the region and the environment.”
In January, PGE announced plans to also build another new 220-MW natural gas-fired plant adjacent to its existing natural gas-fired Port Westward and Beaver plants in Columbia County, Ore. Construction of that project, designed to meet customers’ growing need for flexible capacity, began in May and will create up to 200 construction jobs. The plant is expected to cost between $300m and $310m, excluding allowance for funds used during construction.
Portland General Electric, headquartered in Portland, Ore., is a fully integrated electric utility that serves approximately 830,000 residential, commercial and industrial customers in Oregon.
New baseload gas plant to be built next to coal plant targeted for shutdown
The 440-MW natural gas-fired power plant will be built for PGE adjacent to its Boardman Generating Station by Abengoa S.A. (MCE: ABG), an international developer and contractor that applies technology solutions for sustainable development in the energy and environment sectors. Abengoa specializes in carrying out complex turnkey projects for thermal generation.
The new plant, which will use a G-class turbine manufactured by Mitsubishi Power Systems Americas, will be capable of producing enough electricity to serve about 300,000 residential customers. Abengoa submitted the best-performing bid to meet customers’ need for a baseload resource, using a new bidding option encouraged by the OPUC to give independent developers access to sites already controlled by PGE.
A total of 18 bids representing eight distinct generating projects were submitted in response to PGE’s request for proposals. PGE will own and operate the new facility, which is scheduled to be online in 2016. The project will create up to 500 jobs during construction and about 20 full-time positions when operating.
The existing Boardman plant is a 585-MW coal-fired facility. PGE operates the Boardman plant and owns 65% of it. The plant owners, under clean-air agreements, recently installed new, interim air emissions controls and plan to cease burning coal at the site by the end of 2020.
Wind deal involves second phase of Puget Sound Energy project
PGE has entered into an asset purchase agreement to acquire the development rights to phase two of the Lower Snake River wind farm, currently under development by Puget Sound Energy near Dayton, Wash., northeast of Walla Walla. The project will be built for PGE by general contractor and independent renewable power developer RES Americas Construction using 116 wind turbines manufactured by Siemens Energy, each with a nameplate generating capacity of 2.3 MW, for a total nameplate capacity of 267 MW. The transaction is expected to close in August 2013, subject to customary conditions.
PGE will own and operate the wind facility, creating up to 300 jobs during construction and about 18 full-time operating positions. The facility is expected to be complete in 2015 and generate enough power to serve about 84,000 residential customers. Timing of construction and project milestones have been structured to enable the project to qualify for federal production tax credits that will reduce the cost of the facility for PGE’s customers by about $253m during the life of the project.
Phase two of the Lower Snake River wind project was the best-performing proposal from among 64 bids representing 39 distinct generating projects that were submitted in response to PGE’s request for proposals for renewable resources.
Together with PGE’s existing owned and contracted renewable power generating resources, the new wind facility will allow PGE to comply with state standards requiring the utility to supply 15% of the power it delivers to customers from qualifying renewable sources beginning in 2015.