The latest economic analysis shows that a plan to add capability to belnd Powder River Basin coal with the regular bituminous coal supply at the Elm Road power plant is still viable, said Jeff Knitter, the Manager of Planning in Wisconsin Electric Power‘s Wholesale Energy and Fuels Department.
Testimony from Knitter was filed Jan. 20 at the Public Service Commission of Wisconsin in two companion cases. One is a joint application of Wisconsin Electric Power, Madison Gas and Electric and WPPI Energy for a Certificate of Authority to upgrade various power block equipment at Elm Road to facilitate the use of sub-bituminous (PRB) coals as a fuel source. The other is a application by the same three utilities for Authority to Construct a bulk material handling project at the Oak Creek Power Plant and Elm Road Generating Station, which are both coal-fired plants located next to each other.
“The first part of my direct testimony describes the economic analysis I performed as part of the project application, which concludes that the project results in a benefit of $21 million per year assuming unlimited fuel supply,” Knitter said. “In the second part of my direct testimony, I describe how the fuel supply is limited and how this reduces the net benefit by $9 to $12 million per year but still results in the Fuel Flexibility Project paying for itself in two to three years. Finally, I will also explain the improvements made to thecost estimate of limited coal storage space since the project application was filed.
“The Fuel Flexibility Project involves work to allow the Elm Road Generating Station (ERGS) units to burn a 60% PRB coal blend which lowers the cost of generation by lowering the coal cost compared to the status quo, which is a 20% PRB blend (the ‘do nothing’ alternative). The magnitude of the fuel cost savings was estimated using PROMOD, the production cost model used in Wisconsin Electric’s rate cases before the Commission. Based on July 2013 coal price forecasts, the cost of a 60% PRB blend is $2.78 per ton and the cost of a 20% PRB blend is $3.16 per ton, about 14% higher cost than the 60% PRB blend. These two fuel prices were used in two PROMOD runs to translate this $/ton fuel cost difference into a comparison of annual fuel costs. The result is a $20.6 million per year fuel cost savings burning a 60% PRB blend compared to a 20% PRB blend.
“The Oak Creek Power Plant (OCPP) and ERGS share a relatively small coal storage system used for both sub-bituminous Powder River Basin (PRB) and bituminous (BIT) coal. As ERGS fuel costs decrease with high PRB percentage blends, the ERGS units run more and consume more coal which increases the likelihood of coal inventory shortages.
“Unfortunately, the SBMH coal inventory experienced a severe shortage of both PRB and BIT in the first half of 2014. In late 2013, the SBMH PRB inventory was about 60% full and the BIT inventory was 100% full. As explained in the Direct Testimony of Richard O’Conor, over the next three months, January through March 2014, we had extremely cold weather due to the polar vortex events, high electricity usage, and high natural gas prices, which led to high electricity market prices (LMPs). The OCPP and ERGS units ran more than usual and consumed more coal as a result. At the same time, the cold weather, among many other factors, caused rail delivery problems primarily for the railroads but also for the SBMH rail unloading equipment. As the situation persisted, PRB and BIT fell below ten days of inventory which triggered coal conservation measures.
“In the first quarter of 2014, coal conservation measures resulted in about $15 to $20 million in lost net energy revenue. In other words, with unlimited fuel, net fuel costs for the first quarter of 2014 would have been $15-20 million lower than actual first quarter 2014 net fuel costs.”
Both coal plants expected to run pretty hard for the foreseeable future
Companion Jan. 20 testimony came from Richard E. O’Conor, a Major Projects Manager in the Generation Projects group of Wisconsin Electric Power. He wrote: “The Oak Creek generating site is comprised of two power plants: the Oak Creek Power Plant (OCPP) and the Elm Road Generating Station (ERGS). The plants are served by common fuel handling facilities known as Site Bulk Material Handling (SBMH). The proposed project involves constructing an additional outdoor coal storage area, additional coal handling systems, dust control equipment and support facilities. Site development to support the construction of the proposed facilities includes clearing the area inside the rail loop; excavating and grading the coal pile area; reconfiguring the access roads to the SBMH car dumper facilities and maintenance shed; and construction of other civil work including storm water runoff and a coal pile runoff drainage system.
“The coal will be placed on the new coal pile via either a fixed or radial stacker drawing from the existing coal handling system. Coal will be drawn from the new coal pile via new in-ground reclaim hoppers, a reclaim tunnel and new transfer tower delivering coal to existing conveyors. The new coal handling system will also include a coal pile run-off basin with connection to the site’s existing wastewater treatment system.
“The Midcontinent Independent System Operator (MISO) market is requesting more power from OCPP and ERGS as their delivered fuel costs have decreased. WEPCO expects OCPP to be economically dispatched in virtually all hours, and ERGS to be economically dispatched in a large majority of hours, when unit capacity is available for the foreseeable future, if sufficient coal is available. Thus, having sufficient on-site coal reserves will result in a reduction in net fuel costs.
“To maximize the capabilities of OCPP and ERGS and obtain the greatest value for the Applicants’ customers, eight trains per week on average will need to be delivered and unloaded at the site. Since the beginning of 2014, WEPCO has focused on increasing deliveries beyond the historical delivery pace to meet market demand. A collaborative effort with the rail carrier was put in place and progress has been made. However, in 2014, both fuel delivery inconsistency and systemic unloading challenges have significantly impaired generating unit dispatch. SBMH was originally designed to accept an average of 9 trains per week – considered realistic and achievable given the infrastructure improvements completed for the ERGS project. Until 2014, such throughput from the Union Pacific Railroad (UPRR) and others had not actually been required and the complexities of maintaining such a pace had not been evident.”
O’Conor said the anticipated number of rail deliveries and unloadings has not been achievable due to three material challenges:
- Seasonal weather (e.g., harsh temperatures and flooding), derailments, general shipper congestion, a compromised rail system, and extended periods of limited deliveries have impacted rail delivery. Most plants respond to interruptions or delays in train deliveries by tapping reserve coal in on-site storage piles. Storage facilities at the site are currently not sufficient to allow for this on a reliable basis.
- On-site storage piles provide a buffer to allow trains to continue to be delivered and unloaded during periods of low coal consumption. This buffer facilitates consistent train deliveries and avoids disruption of railroad locomotive and crew scheduling, which can have a “ripple” effect on subsequent deliveries. Storage facilities at the site are currently not sufficient to allow for this on a consistent basis.
- Even when the rail system is operating efficiently and at a higher delivery rate, the SBMH infrastructure is not capable of consistently off-loading trains with unevenly spaced deliveries and returning emptied trains to the railroad in a manner timely enough to maintain the required cycle time and desired delivery rates.
The Oak Creek site. which includes both plants, is the largest coal-fired generating site (2,400 MW) in a geographic region from the Presque Isle Power Plant (340 MW) north on Lake Superior, to the Labadie Plant (2,400 MW) west of St. Louis, and to the Gibson Station (3,400 MW) in southwestern Indiana, O’Conor pointed out.