DTE Energy updates transformation of generation fleet

DTE Energy (NYSE:DTE) Chairman and CEO Gerry Anderson said Feb. 13 that his company is making good progress on moving the company’s power fleet toward less dependence on coal and more utilization of natural gas and renewable energy.

This was among key topics that the DTE CEO addressed during a regular quarterly earnings call.

The DTE Electric utility subsidiary currently gets most of its generation from coal, roughly 20% from nuclear with natural gas and renewables being a small but growing niche.

DTE would still be 20% nuclear and “other” according to the likely 2030 scenario outlined in the company’s slide presentation. Gas and renewables would account for 50% and coal roughly 30%.

“We are clearly at the heart of a heavy capital spending era at the company,” especially in the electric business, Anderson said.

DTE recently closed on the purchase of one natural gas plant and has a request for proposals (RFP) out for another natural gas power plant. In addition, recent completion of a wind project brings the electric utility into compliance with Michigan’s renewable portfolio standard.

The Federal Energy Regulatory Commission (FERC) recently approved the purchase of a 660-MW Renaissance plant in Michigan. Also, the utility has announced an RFP for 350-MW of new gas-fired generating capacity. In September of last year, DTE started commercial operation of the Echo Wind Park in Michigan’s Thumb area.

Like others in power generation, DTE and its Michigan regulators are trying to figure how to comply with Environmental Protection Agency’s (EPA) proposed Clean Power Plan to cut power sector CO2 emissions 30% by 2030.

“There is a lot that needs to happen over the next couple of years,” on this front, Anderson said. Interim reductions called for under the EPA plan would need to be met by 2020. 

“Our hope would be to spread this out over time … so that we could manage customer rate increases in a reasonable way,” Anderson said. “The renewables you can move pretty quickly.” The combined-cycle gas power plants take longer, said the DTE CEO. The “late teens” and early 2020s would represent a timeline for new gas-fired capacity.

DTE leadership feels upbeat about energy policy and regulatory changes underway in Michigan.

The Mid-Continent ISO (MISO) has predicted a 3 GW capacity shortage in Michigan in 2016, Anderson said. This is intertwined with policy on Michigan’s “retail access” customers. It is possible that DTE might be forced to make plans for adding 1,000 MW to serve retail access customers, Anderson said.

Michigan has been looking at revamping key parts of its energy policy and revisions to the state’s “customer choice” rules.

DTE will invest $11bn in capital projects to drive growth through 2019. Most of that ($7.5bn) will be invested in the DTE Electric utility for base infrastructure, new generation and environmental work.

DTE filed its first electric rate case in four years. It reduced average customer rates by 6% in 2014. The company benefitted because $600m in surcharges have “rolled off” in the past couple of years, DTE officials said.

Meanwhile, DTE subsidiaries continue to expand their investment in natural gas pipelines and storage projects.

On the non-utility businesses, DTE is investing heavily in gas storage and pipeline projects. This includes the Millennium pipeline. DTE is also active in the NEXUS pipeline and the Vector pipeline.

On NEXUS, DTE recently made a FERC pre-filing and signed agreements with key shippers. Spectra Energy is a partner in NEXUS, which would provide pipeline infrastructure in the Upper Midwest and eastern Canadian regions to support growing demand for clean-burning natural gas and to help offset the decline in traditional western Canadian supplies available to serve these markets.

DTE also has businesses that concentrate on on-site energy services for industrial customers, wood-fired power plants and landfill gas-to-energy projects and a reduced emission fuel to cut emissions from coal-fired power plants. That emissions fuel business is currently negotiating on relocation of a ninth unit.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.