Due largely to the need to shut the coal-fired Hoot Lake power plant in 2020 for clean-air reasons, Otter Tail Power is planning for 211 MW of new gas-fired capacity to possibly come on-line by 2021.
Otter Tail on Dec. 2 filed its latest resource plan with the Minnesota Public Utilities Commission. The plan details specific action items that Otter Tail intends to complete within the first five years of the planning period, as well as potential resources that might be used in the following 10 years.
Considerable unknowns and variables, outside of Otter Tail’s control, will impact the actual resources the company selects and implements in the future, the plan noted.
“This resource plan may be one of the most straight-forward resource plans that the Commission has recently reviewed,” Otter Tail wrote. “No new resources are proposed for addition during the first five years of the plan. In the period after the first five years, the only questions are those regarding the specific type and timing of resources to replace Hoot Lake Plant and expiring capacity purchase contracts. As is detailed in this plan, a natural gas resource is the first resource selected in almost all of the 78 Strategist runs submitted in this plan. The timing (2019-2021), type (simple-cycle vs. combined-cycle), and size of the natural gas resource are the only attributes that vary among the different Strategist runs. While it may be useful to discuss and consider the attributes of this resource in this plan proceeding, because this addition occurs several years into the future, the specific timing, type, and size of the gas addition can be better addressed in the Company’s next resource plan, which will likely be filed in mid-2016.”
Since the 2010 version of the resource plan and the subsequent Baseload Diversification Study, Otter Tail has added 62.4 MW of wind generation and entered into a capacity-only power purchase agreement (PPA) for Midcontinent Independent System Operator Zone 1 capacity that will cover Otter Tail’s capacity needs until June 2021.
Otter Tail is projected to be capacity deficient beginning in the summer of 2021 when the Hoot Lake Plant is retired and PPAs expire, and the deficiency grows from that point throughout the study period as demand continues to grow.
The company’s preferred resource plan developed by the Strategist Proview optimization analysis calls for the addition of a 211 MW simple cycle frame unit in 2021. The preferred resource plan is the least cost plan developed by the Strategist model without the consideration of environmental externalities, CO2 values, or other proposed environmental regulation and using base case assumptions for load growth, fuel prices (natural gas and coal), solar, wind, market energy prices, capacity prices, and capital costs. The preferred plan is expected to cost $3.376bn, a net present value in 2014$ of revenue requirements (NPVRR).
Major near-term projects are at Big Stone and Hoot Lake
In the five-year action plan for the years 2014-2018, the major construction activities are for the Big Stone Plant air quality control system (AQCS) project and the Hoot Lake Plant Mercury and Air Toxic Standards (MATS) upgrade. In 2017, the company likely will begin preliminary engineering for the planned resource addition to be operational in 2021.
The AQCS project at the coal-fired Big Stone Plant is well underway. Engineering is 75% complete and ahead of schedule per the tracking index. The project’s cumulative cash flow through September 2013 is $109.2m out of a total project budget of $405.2m. Of the equipment, construction and service contracts, 27 out of 31 have been awarded. The total value of these contracts is $284.2m. The foundations are nearly complete. The structural steel for the scrubber and baghouse, as well as the selective catalytic reduction system is being erected. The project remains on-track for cutover in 2015, with startup and testing to follow. Otter Tail owns 54% of the plant.
The Hoot Lake Plant MATS upgrade project also is on schedule. The Activated Carbon Injection (ACI) system is being installed and the ACI silo has been set on the foundation. The components for the electrostatic precipitator (ESP) upgrade are being fabricated in Cleveland, Ohio. The new transformer/rectifier sets are on order for shipping to the site in early 2014. The Hoot Lake maintenance outage for installation of the ESP components is scheduled for April/May 2014. Beginning in June 2014, testing will begin and the system will be operational for the MATS compliance deadline of April 2015. The current projected final cost of the project remains at $8.6m.
The Hoot Lake upgrade only buys the plant another five years of life. The eventual Hoot Lake Plant replacement is the main focus of the current resource plan. Strategist modeling runs show new gas generation being added in 2019 in the Energy Market Off sensitivities or 2021 in the Energy Market On sensitivities. The replacement in the majority of the sensitivities is a large simple-cycle combustion turbine. Permitting for this facility would begin about four years in advance of the commercial operation date.
Hoot Lake Unit 1 was retired in 2005, with the now-operating and to-be-retired in 2020 units being Unit 2 (53.5 MW nameplate) and Unit 3 (75 MW nameplate).