Kentucky Utilities, Louisville seek approval of 700-MW gas project

The Kentucky Public Service Commission is in the early stages of reviewing a Jan. 17 application from Kentucky Utilities and Louisville Gas and Electric for approval of a 700-MW gas-fired project and a 10-MW solar project.

On Jan. 21, the commission approved the intervention in this case of the Kentucky Industrial Utility Customers group, which represents large industrial customers of the utilities, which are both units of PPL Corp. (NYSE: PPL).

Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU) had announced in October 2013 their plans for this gas-fired project at the coal-fired Green River power plant site, with the formal application filed on Jan. 17 at the commission.

The two utilities are jointly seeking Certificates of Public Convenience and Necessity (CPCN) for the construction of an approximately 700-MW net summer rating natural gas combined cycle combustion turbine facility at KU’s Green River Generating Station in Muhlenberg County, Ky. (called the Green River NGCC), including a 20-inch natural gas pipeline to serve that facility, and an approximately 10-MW solar photovoltaic facility at KU’s coal-fired E.W. Brown Generating Station in Mercer County, Ky.

The environmental regulations and the operating characteristics, age, and size of the coal-fired steam generating units at the Green River, Tyrone and Cane Run stations mean that those units should be retired, the utilities told the commission in the application. “The combination of those retirements and the Companies’ forecasted load resulted in the need to construct a new generation facility,” they added in referring to a prior such case. “In that case, the Commission authorized the construction of a new natural gas combined cycle combustion turbine at the Cane Rune Station and the purchase of natural gas generating facilities from Bluegrass Generation Company.”

The construction of the gas-fired Cane Run project has progressed very well and is on schedule to be in operation in 2015. However, the Federal Energy Regulatory Commission did not authorize the 495-MW Bluegrass Generation purchase as presented, and, therefore, that purchase was not completed. Even with the addition of the new gas facility at Cane Run, the companies’ load forecast indicates a reserve margin capacity shortfall of 71 MW in 2016 which will grow to 367 MW by 2020 and 1,573 MW by 2035. Thus, the construction projects proposed in this case are essential for the companies to provide reliable, low-cost power to their growing native loads.

The total projected capital cost for the Green River NGCC, including the gas pipeline, is approximately $700m. The total projected capital cost for the Brown Solar Facility is about $36m.

Subject to the necessary approvals, KU will own 60% and LG&E will own 40% of  the Green River NGCC. KU will own 64% and LG&E will own 36% of the Brown Solar Facility.

With the Bluegrass purchase abandoned, Green River NGCC became necessary

Paul Thompson, the Chief Operating Officer for KU and LG&E, said the inability to complete the Bluegrass purchase, combined with the companies’ forecasted load growth, require the companies to augment their existing generation capacity. Therefore, the companies have concluded that constructing the Green River NGCC is a cost-effective and reasonable means of ensuring adequate generation capacity in the years to come.

Constructing the Brown Solar Facility will allow the companies to add a renewable resource with relatively minor impact to customer revenue requirements in the coming years, Thompson added. “A number of developments have enabled the Companies, for the first time, to present a feasible proposal to the Commission for a solar generation facility,” he noted in the Jan. 17 application. “The declining price of solar panels, available federal tax credits, and renewable energy certificates have helped create this opportunity. Additionally, the Companies have identified land they already own at Brown (it was acquired to provide a supply of cover soil for landfill purposes) which is suitable for solar panel installation after obtaining the cover soil. These developments, along with the increased likelihood of carbon constraints, have created a reasonable opportunity for the Companies to add a renewable source to their generation portfolio and gain the valuable experience that will result from constructing and operating that source.

The companies’ most-recently completed base load generating unit is the coal-fired Trimble County Unit 2 which was placed in commercial operation in January 2011. In addition, the companies are now constructing the 640-MW NGCC at Cane Run, which is currently slated to begin commercial operation in the spring of 2015.

The Green River station consists of a four-generating-unit, 263-MW coal-fired plant, which began commercial operation in 1950. Green River Units 1 and 2 were retired in January 2002. Green River Units 3 and 4 are expected to be retired by early 2015, and will ultimately be replaced with the Green River NGCC, Thompson noted.

Even with the addition of the new facility at Cane Run, the companies’ load forecast indicates a 2016 reserve margin capacity shortfall of 71 MW and 212 MW at 15% and 17% target reserve margins, respectively. Those shortfalls grow to 367 MW and 514 MW in 2020 at 15% and 17% target reserve margins, respectively, and, by 2035, the shortfalls will be 1,573 MW and 1,741 MW at 15% and 17% target reserve margins, respectively. “Thus, the proposed construction projects are essential for the Companies to provide reliable, low-cost power to their customers over time,” Thompson added.

Companies say RFP process resulted in this self-build option as the best plan

The companies issued a Request for Proposals (RFP) and prepared a Resource Assessment to compare available options for meeting the projected needs of their customers. They received 72 proposals from 29 responding companies after sending out the RFP including new build and power purchase agreements. In addition, the companies developed a number of “self-build” options. “In the final analysis, the Companies determined that the self-build construction proposal at Green River is the least reasonable cost option to enable the Companies to meet their needs for additional capacity and energy,” Thompson wrote.

David Sinclair, Vice President, Energy Supply and Analysis for LG&E and KU, said the Green River NGCC will be a 700-MW 2×1 natural gas combined cycle combustion turbine generating unit. Sinclair noted that by April 2015, the companies will have retired 797 MW of existing coal-fired capacity and, by May 2015, brought on-line Cane Run Unit 7, a 640-MW NGCC. Had the companies acquired the Bluegrass Generation assets, their next need for capacity and energy would have been in 2020.

John Voyles, Jr., Vice President of Transmission and Generation Services for LG&E and KU, said the companies plan on constructing the Cane Run NGCC unit so that it is operational prior to May 1, 2018. To the extent it becomes operational significantly after that date, the companies are concerned that they will not be able to take full advantage of the emission “netting out” opportunities created by the retirements of the coal-fired Green River Units 3 and 4, potentially adding costs to the unit. Thus, once regulatory approvals are obtained, the companies will make every effort to construct and place the Green River NGCC into commercial operation prior to May 1, 2018.

To that end, the companies have already begun work on developing the specifications for the gas turbine, heat recovery steam generator (HRSG), steam turbine and the prime engineer, procure, and construct (EPC) contract. The companies plan to issue a Request for Quotations for the EPC contract in the second quarter of 2014.

As they did for the Cane Run NGCC project, the companies have contracted with the engineering firm HDR to serve as the owner’s engineer (OE). HDR will also assist with design optimization, environmental permitting and procurement efforts. Once the EPC bids are received and analyzed, purchase orders for long lead time equipment can be authorized.

The critical time element for construction of the NGCC is the steam turbine, Voyles noted. After the purchase order for the steam turbine is placed, manufacture requires approximately 20 months, with delivery three months later. Erection of the steam turbine typically requires eleven months. Startup, final testing and commissioning activities generally require two months with the end result being commercial operation. In total, the companies estimate that it will take about 37 months from execution of the EPC contract until commercial operation, not considering time required for permitting and regulatory approvals.

Texas Gas the preferred gas supplier, with ANR Pipeline a possibility

The Green River NGCC project includes an 11-mile gas pipeline from Texas Gas to the Green River site. H-class gas turbine technology provides the basis of an air permit application to be filed early in 2014 with the Kentucky Division for Air Quality (DAQ). This air permitting approach should allow for substitution of smaller F-class gas turbines if they prove to be lower cost.

EN Engineering will perform a route selection study for the gas pipeline to serve the Green River 2×1 NGCC unit. It is anticipated that the selected route will mostly be located along existing electric transmission rights of way. Texas Gas currently has firm transportation available in 2018 and has offered to provide service.

ANR Pipeline Co. is also a potential supplier for the Green River 2×1 NGCC unit. Firm gas transportation is available on the ANR pipeline at about the same cost as Texas Gas. However, ANR’s services are not as “robust,” and the distance between the Green River station and the ANR pipeline results in higher interconnect costs, said a project report included in the Jan. 17 application.

In 2011, LG&E and KY announced plans to retire 797 MW of coal-fired capacity to comply with the U.S. Environmental Protection Agency’s National Ambient Air Quality Standards and Mercury and Air Toxics Standards. In February 2013, the companies retired Tyrone Unit 3 (71 MW). The five Cane Run and Green River coal units (726 MW in total) will be retired in 2015.

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.