Duke Energy (NYSE: DUK) has developed more natural gas generation in recent years in order to reduce its coal footprint, and carbon dioxide emissions, at its regulated operations in North and South Carolina – while non-utility generators are also embracing gas in regions from Texas to PJM.
This was a snapshot of the observations made by a panel of representatives from Duke, NTE Energy and Panda Power Funds Dec. 8 at PennWell’s GenForum conference in Orlando.
“Our fuel mix has drastically changed since 2005, and largely due to our investment in natural gas plants,” Duke Energy Progress General Manager/Power Generation Carolinas Julie Turner. “We increased this part of our fuel mix from 6% to 26%, and reduced generation from coal units from 62% to 42%.”
Duke has invested $9bn in the last decade toward building natural gas generation, Turner said. The combined-cycle plants enabled Duke to make a 20% reduction in CO2, Turner said.
“In short, we can build a natural gas plant safely, quickly and less expensively than other generating sources,” Turner said. Duke is not abandoning coal and will be able to adjust its generation dispatch to take advantage of fluctuations in fuel prices, she added.
“We also have plans to build two new natural gas plants” in the Carolinas, Turner said. In Anderson, S.C., Duke is converting the 170-MW Lee Steam Station Unit 3 from coal to natural gas by April 2015.
“Also in Anderson, we will break ground mid-year 2015 on a new 770-MW natural gas combined cycle plant. We expect it to be fully operational by early 2017,” Turner said.
There are also plans for significantly more natural gas in Florida, she added. After a months-long RFP process, Duke announced in May plans to construct a new, combined-cycle natural gas plant to supply 1,640 MW in Citrus County in 2018. “We also are wrapping up another conversion project in Florida at our Anclote Plant where we converted the plant to burn natural gas instead of oil,” Turner said.
Turner also noted that Duke is a partner in the Atlantic Coast pipeline project with Dominion (NYSE: D) and Piedmont Natural Gas. Dominion, Duke, Piedmont are partners in Atlantic Coal pipeline that should be open in 2018 to meet growing need for gas capacity in Virginia and North Carolina.
Panda, NTE development plants from ERCOT to PJM
Panda Power Funds Senior Vice President and Deputy Head of Finance Anuradha Sen said her company has two combined-cycles and one solar project in operation and four combined-cycles under construction and two others in advanced development.
Dallas-based Panda Funds was formed in 2010 by former senior managers at Panda Energy International, a power development company formed in 1982.
The East Coast projects under development by Panda include Liberty and Patriot in Pennsylvania, which are both listed at 829 MW, and the 18-MW Pilesgrove solar facility in New Jersey. The most recent development project is the 778-MW Stonewall project in Virginia. Panda just announced financing for the Virginia project, which is scheduled to start commercial operation in 2017.
Panda has three big gas projects in Texas. They include the 758-MW Sherman plant and the Temple 1 and 2 facilities, which are both listed at 758 MW.
In the past two-and-half years the company has financed about $5bn worth of investments, Sen said, adding that the company has been able to use some innovative financing methods.
The company is very active in the Electric Reliability Council of Texas (ERCOT) territory. “There was a huge amount of construction that happened in the late 90s,” Sen said, and the state is undergoing another big growth cycle, she said.
As for the PJM Interconnection market, much of its capacity is decades old, so there is a need for clean combined-cycle facilities, Sen said. The PJM region also offers proximity to the Marcellus shale reserves, she said.
Locating plants in sites with easy access to these shale reserves is akin to developing a “mine-mouth coal plant,” Sen said.
NTE Senior Director-Commercial Tom Noelle said NTE is a privately held company founded in 2009. It is headquartered in St. Augustine, Fla.
NTE has partnered with Capital Dynamics and Wattage Finance, LLC, an entity managed by Guggenheim Partners LLC, to provide development and construction equity financing, at the project level.
The financing is helping NTE develop projects in Texas, North Carolina and Ohio. NTE has three natural gas projects under development and could get into more. NTE is also looking “to get out ahead of the curve” on areas like energy storage.
NTE’s King’s Mountain is a 475-MW combined-cycle project in Cleveland County, N.C. The plant is expected to enter commercial operation in January 2018. It will be interconnected to Duke’s 230-kV system. It has a 20-year power purchase agreement with the town of King’s Mountain, N.C.
Middletown is a 475-MW combined-cycle plant in Butler County, Ohio. Its projected commercial operation date is February 2018. It also has a five-year power contract in hand. Like the project in North Carolina, Middletown will connect to a Duke 230-kV transmission line. It will also have a direct link to REX Natural Gas Pipeline and TETCO Natural Gas Pipeline.
The Pecan Creek plant in West Texas is a nominal 240-MW gas-fired peaking plant scheduled for commercial operation in 2017. The simple-cycle facility is located in the Sweetwater area of Nolan County. It has an electric transmission interconnection to CREZ and has direct natural gas interconnection to Atmos and Enterprise supplies. Pecan Creek will play an important role in renewable integration in that area, Noelle said.
Officials say gas plants ready to run as baseload
Gas plants are “definitely ready to run as baseload capacity,” Turner said during the question and answer session. Duke has had good performance from its combined-cycle fleet, she added.
Sen and Noelle agreed that gas plants are up to the challenge posed by baseload performance. The representatives also said they are making arrangements to have adequate access to gas during the next harsh winter.
“There is definitely a need for more capacity,” in gas pipelines. Last winter’s polar vortex has made Duke more mindful of having firm supply lined up, Turner said.
“It’s a big challenge,” Turner said when asked about public opposition to infrastructure projects, like new gas pipelines. State commissions are very sensitive to public opinion, Turner said.
“There’s always pushback” to pipeline projects, Noelle said. Luckily, NTE is focused mostly on areas that already have significant natural gas pipelines, he added.
Neither Noelle nor Sen appeared too worried about liquefied natural gas (LNG) exports or demand for natural gas in transportation or other uses driving up the gas price significantly for generation. There might some price impact in some isolated markets, but it should not be widespread, Sen said.