An expanded Mankato Energy Center is an ideal resource addition for Northern States Power d/b/a Xcel Energy (NYSE: XEL) as part of its request for proposals (RFP) for new power supplies, said Calpine’s (NYSE: CPN) Todd Thornton.
Thornton, Vice President of Commercial Development for Calpine, provided Sept. 27 testimony at the Minnesota Public Utilities Commission in support of Calpine’s April 15 bid to supply power out of its existing, gas-fired Mankato plant. Other offers were made in that RFP, including a Northern States Power bid to supply its own new gas-fired capacity.
There is an estimated 500 MW of forecasted resource need for the 2017 to 2019 timeframe that has been approved by the Minnesota commission. Calpine’s proposal to meet much of that needed involves the planned completion of its existing Mankato Energy Center through the addition of one natural gas-fired combustion turbine generator (CTG), an additional heat recovery steam generator (HRSG), and related ancillary equipment. Calpine’s bid would result in an incremental 345 MW of integrated combined-cycle and peaking capacity, as measured under winter conditions.
Calpine’s proposal achieves the goal of installing additional electric generation capacity to help meet customer demand with state-of-the-art, environmentally responsible technology, Thornton noted. This new resource is an ideal complement the state’s strong interest in promoting intermittent wind and other renewable resources, he added. In addition, installing combined-cycle capacity at this time will provide a valuable hedge against the risk of intermediate and baseload resource retirements in light of anticipated environmental regulation or unforeseen factors.
Calpine is already an active participant in the wholesale power market in Minnesota, Thornton pointed out. The existing Mankato Energy Center is a 375-MW natural gas-fired combined-cycle facility located in the City of Mankato, Blue Earth County, Minn., the output of which is sold to Xcel under a long term Power Purchase Agreement (PPA) approved by the commission.
The current plant consists of one Siemens 501FD CTG, one Nooter/Erikson HRSG, a Toshiba TCDF 40L steam turbine generator (STG) and other ancillary equipment.
Mankato was designed with this expansion in mind
The Mankato Energy Center was originally designed and built with the expectation that it would be expanded into a 720-MW natural gas-fired, combined-cycle facility by adding an additional CTG and HRSG, which will be fully integrated with the existing STG and balance of plant. “Indeed, a significant reason why Calpine was able to offer such a competitive bid price is because the existing STG is oversized relative to current operations and can accommodate the steam output of an additional power train,” Thornton added. “Calpine’s bid reflects the ability to avoid the purchase and installation of expensive equipment that otherwise would be required in the development of new combined-cycle capacity.”
As part of the application process to receive commission and state environmental agency approval for the construction of the Mankato Energy Center in 2004, Calpine also designed the water, gas and electrical systems as well as the site layout to accommodate the ultimate completion of the plant. For example, the existing 20-inch gas pipeline lateral is capable of delivering enough gas for a 720-MW facility and the award-winning water agreement with the City of Mankato is sufficient for the completion of the plant.
“Acceptance of Calpine’s bid will allow Minnesota to take advantage of what is widely predicted to be a sustained era of low natural gas prices, and will provide flexible load following capability to support the State’s continued investment in intermittent wind and other renewable resources,” Thornton argued. “Calpine’s Proposal is a comparatively lower cost and more energy efficient resource than the other gas-fired bids in this proceeding.”
Also providing Sept. 27 testimony on behalf of Calpine was Paul Hibbard, Vice President at Analysis Group Inc., an economic, finance and strategy consulting firm headquartered in Boston. He said Calpine’s bid is the lowest cost of all the gas-fired bids offered in the RFP, with the costs redacted from the public version of his testimony.
“With respect to economic considerations, Mankato is the least expensive option among the thermal energy resources offered in this procurement by Xcel, Calpine, and Invenergy,” Hibbard wrote. “This conclusion appropriately relates to long-term costs, based on the levelized cost of electricity, as seen from the perspective of Xcel’s ratepayers.”