Great River Energy, others pitch options for Xcel capacity needs

Great River Energy (GRE) filed a Dec. 6 brief with the Minnesota Public Utilities Commission saying the commission should consider GRE’s offer of capacity to Northern States Power d/b/a Xcel Energy (NYSE: XEL) along with other offers made.

The commission has determined that Xcel needs 150 MW to 500 MW of accredited capacity of peaking or intermediate resources within the 2017-2019 time frame. This competitive resource acquisition proceeding is focused on addressing that need.

The bidders responding to an Xcel request for proposals offered the following options:

  • Calpine (NYSE: CPN) expand the existing natural-gas-fired Mankato Energy Center combined cycle facility by 290 MW of intermediate capacity and 55 MW of peaking capacity;
  • Geronimo Energy – build 100 MW of solar generation using photovoltaic panels, located on up to 31 sites adjacent to substations, ranging from 2 MW to 10 MW per site;
  • GRE – two capacity credit proposals to sell Xcel Midcontinent Independent System Operator (MISO) Zone 1 Resource Credits (ZRCs);
  • Invenergy Thermal Development – two peaking proposals for gas-fired combustion turbines (CT), one at an expanded Cannon Falls facility with one new CT unit, and the other a new Hampton Energy Center with two CTs;
  • Xcel – two peaking proposals for gas-fired combustion turbines, with one option to build one 215-MW CT at the existing Black Dog station (called Black Dog Unit 6), and the other to build two 215-MW CTs at a greenfield site near Hankinson, N.D.

GRE said it does not oppose any of the alternatives offered in this proceeding. After review of the proposals and the analyses conducted, GRE said its proposal, combined with another proposal, provides a least cost alternative that meets Xcel Energy’s need for capacity and that best manages uncertainties in forecast and resource need timing.

Xcel said that GRE’s proposal should not be accepted because the proposal ranks third in cost. Xcel Energy also asserted that GRE’s proposal should not be selected because building additional facilities would provide greater reliability than relying on capacity credits.

When used in combination with Xcel Energy’s own Black Dog Unit 6 and Red River Valley Unit 1 gas-fired projects, GRE said its proposal has the third lowest cost among the 20 alternatives evaluated in this docket even if all three years of GRE’s low capacity proposal (100 MW) are included.

If the first year of the GRE proposal were excluded, as offered by GRE witness Stan Selander, then GRE’s capacity credits in combination with Black Dog 6 and Red River Valley 1 would be one of the two least-cost options, GRE argued. As another option, the first two years of GRE’s proposal could be excluded, if that would better fit Xcel Energy’s needs based on the updated information available when the decision is made.

“No party has disputed that GRE’s proposal can be implemented in a manner that makes it a least-cost alternative,” GRE added. “No party has disputed that GRE’s proposal is flexible. The assertion Xcel Energy makes in its Initial Brief that adding new physical capacity is superior to using capacity credits to meet Xcel Energy customer’s ‘needs in the mid-to long-term’ is unsupported in this proceeding and is unsupported in fact.”

  • First, GRE noted, no witness testified that building new capacity is superior to using capacity credits to meet capacity needs.
  • Second, it is anticipated that GRE’s proposal would be coupled with another proposal that includes construction of a new facility, but on a delayed basis. The proposal combined with another proposal would still result in Xcel Energy adding new capacity in the mid- to long-term. GRE emphasized that its proposal does not exclude new generation from being built. It instead allows for flexibility in timing when new generation is built.
  • Third, owning GRE’s proposed capacity credits is equal to Xcel Energy owning its own capacity in the MISO market. Purchased capacity credits can and are being used to meet MISO reserve margin requirements and can and are being used to meet reserve requirements in Minnesota integrated resource plans.

GRE has capacity beyond what is required to serve its load, including MISO’s reserve requirements associated with that load, in the time frame under consideration in this proceeding. GRE’s offer is for capacity only, and Xcel Energy’s needs are for capacity only – not energy, GRE said.

In its 2012 Integrated Resource Plan proceeding, GRE came under criticism by an intervenor because it holds surplus capacity on its system. In that proceeding, GRE noted that it is pursuing bilateral capacity sales opportunities to take advantage of the current capacity length in its portfolio. “Participation in this proceeding is one such action GRE is taking,” GRE added.

Department of Commerce says two of three top options are the best

In its own Dec. 6 brief, the Minnesota Department of Commerce said it is sticking with its prior stance that Calpine’s expanded Mankato gas-fired plant and Invenergy’s Cannon Falls gas-fired project are top options.

The department wrote: “Following review of the negotiated [power purchase agreements], the Department recommends that the Commission select the two most reasonable and prudent projects of the following three projects: Calpine’s Mankato project, Invenergy’s Cannon Falls project, and Xcel’s Black Dog Unit 6 project. … Absent differences negotiated in the PPAs, the Department recommends as the best combination the Black Dog and Calpine projects. The Department also recommends that the Commission consider requiring Xcel to issue an all solar RFP [Request For Proposals] in consideration with other information that is known in the context of Xcel’s next IRP [Integrated Resource Plan].”

Geronimo Energy said in its Dec. 6 brief: “Geronimo’s Distributed Solar Energy Proposal (the ‘Solar Proposal’) is the most reasonable and prudent alternative to meet Xcel’s need in the 2017-2019 timeframe. It provides Xcel with needed capacity through a no-emission, renewable resource that has the lowest cost of all proposed resources and minimizes risks to ratepayers. The Solar Proposal is clearly in the public interest and, under Minnesota law, it must be selected first, before consideration of any nonrenewable resources.”

Invenergy said in its Dec. 6 brief: “The Invenergy proposals best meet Xcel’s needs regarding the size, type and timing of resource additions. In particular, Invenergy provides the appropriate peaking resources to meet the needs on the Xcel system. The Invenergy proposals will provide the needed capacity reliably, efficiently and at a reasonable, fixed cost. Moreover, the Invenergy proposals will provide this needed capacity in a manner consistent with all relevant rules and regulations and in a manner compatible with the natural and socio-economic environments, providing significant benefit to the Minnesota host communities.”

Calpine said in its Dec. 6 brief that it is limiting its arguments to a rebuttal of contentions made by Invenergy. “Calpine limits its Reply Brief to address certain claims by Invenergy Thermal Development, LLC (‘Invenergy’) that the record developed in this proceeding supports the selection of its proposed combustion turbine (‘CT’) at Cannon Falls rather than Calpine’s combined cycle Expansion Proposal. Invenergy’s arguments are without merit and elevate supposition over objective analysis. The detailed record developed in this case shows that consideration of ratepayer costs, Xcel’s changing resource mix needs, and Minnesota’s energy and environmental policy goals supports the selection of the Calpine Expansion in this procurement.”

Xcel says it wants final PPA negotiations with Calpine and Invenergy

In its Dec. 6 brief, Xcel said that the commission should:

  • Determine that Xcel’s potential range of capacity need in the 2017-2019 timeframe is in the range of 100-150 MW in 2017, increasing up to 300-500 MW in 2019.
  • Select Xcel’s Black Dog Unit 6 proposal to meet a portion of the range of potential capacity need because it is the least cost resource.
  • Select Invenergy’s Cannon Falls and Calpine’s Mankato proposals as the next least cost resources to meet the rest of Xcel’s need, and direct Invenergy and Calpine to finalize the terms and conditions of their proposals in PPA negotiations with Xcel, including exploring delay and cancellation options.
  • At the end of the PPA negotiation process, select the PPA that offers the best value, including flexibility and security for ratepayers.
  • Hold Xcel’s Red River Valley Unit 1 in reserve for selection in the event that neither the Invenergy nor Calpine PPAs prove to be acceptable after final negotiations.
  • Direct Xcel to provide the commission in the fall of 2014 and 2015 with an updated assessment of its capacity needs for the 2017-2019 timeframe.
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.