Wisconsin Power and Light says with ongoing retirements, new capacity needed

Wisconsin Power and Light, in a brief filed Jan. 19 at the Public Service Commission of Wisconsin, argued that planned power generating unit retirements over the next few years create the need for the proposed 650-MW addition to its gas-fired Riverside Energy Center.

In July 2012, WPL announced its intention to retire several older, less efficient coal-fired units, Edgewater Unit 3 and Nelson Dewey Units 1 and 2, by Dec. 31, 2015. By Dec. 31, 2018, WPL also plans to retire Edgewater Unit 4, another older, inefficient coal-fired resource. Together, these generating units provide approximately 470 MW of capacity to WPL.

By mid 2020, WPL also intends to retire the 1950s–1970s vintage combustion turbines (CTs), known as the Rock River Units 3, 4, 5, and 6 and Sheepskin units, which together make up an additional 170 MW of WPL’s current capacity. Thus, by 2020, WPL’s energy portfolio will have diminished by approximately 640 MW owing to the retirement of these older, less efficient coal- and gas-fired resources. In 2013, the annual energy produced by the retiring units totaled approximately 17% of WPL’s energy production.

In addition, WPL has several short-term energy contracts that are expiring that are contributing to the need for a cost-effective, long-term energy resource. Together, the retiring resources and the expiring energy contracts served approximately 30% of WPL’s energy needs in 2014. When combined with WPL’s peak- and annual-energy growth estimates of approximately 0.6% and 0.5% per year, respectively, the math is simple: these retirements will create significant capacity and energy shortfalls for WPL in 2019 and beyond, the utility said.

Mindful of the approaching shortfall, WPL is proposing to expand its existing Riverside Energy Center with a state-of-the-art, 650-MW, natural-gas-fired combined-cycle (NGCC) plant. The Riverside Energy Center Expansion (RECE) consists of two primary components: a state-of-the-art, 650-MW NGCC plant; and an approximately 2 MW photovoltaic (PV) solar array, each of which would be located at the site of the existing Riverside Energy Center.

The NGCC portion of the RECE project will be the most advanced NGCC plant ever built in Wisconsin and will provide substantial operational flexibility, the utility argued.  With its advanced-performing “F-class” combustion turbine generators, RECE’s two-on-one (2×1) configuration will be more efficient and reliable than previous turbine models. The solar portion of the RECE project will integrate into the facility and offset a portion of the plant’s auxiliary power consumption.

The estimated cost for the RECE project is currently about $700 million, exclusive of allowance for funds used during construction (AFUDC) and transmission-network upgrades. WPL is currently targeting a January-2020 commercial-operation date.

Two other utilities signed off on a settlement in this case

On Dec. 16, 2015, WPL, Wisconsin Electric Power Co. (WEPCO), and Wisconsin Public Service Corp. (WPSC) executed a settlement agreement with respect to this proceeding. WEPCO had been offering to sell some of its excess power to WPL in place of the Riverside expansion. One of the provisions in the settlement involved modifying the Midcontinent ISO capacity-market participation date for RECE. Given this new capacity-market participation date, WPL’s preliminary plan is to target a January 2020 commercial operation date for RECE, rather than the February 2019 date stated in its orginal application.

As one of its arguments for the expansion project, WPL noted that the U.S. Environmental Protection Agency (EPA) recently promulgated the final version of the CO2-reducing Clean Power Plan (CPP) for existing power plants. The rule is under legal challenge and may or may not emerge intact. But if it becomes enforceable, RECE could help mitigate the cost of CPP compliance, WPL argued.

“Specifically, RECE can displace generation from coal units in the Wisconsin generation fleet that are subject to the CPP,” the utility explained. “If those units run less, they will generate less CO2 emissions, which means that they will not need as many emission-reduction credits or allowances to cover their emissions under either the ‘rate-based’ or the ‘mass-based’ approach. This, in turn, will reduce compliance costs for those affected units.

“The State of Wisconsin relies heavily on coal-fired generation, and it has been more than a decade since a new NGCC facility was built here. The natural gas that will fuel RECE will help diversify the fuel sources that both WPL and Wisconsin rely upon for their primary power generation needs. Moreover, with the planned retirement of several older facilities, the majority of the State’s generation facilities will be concentrated on the eastern side along Lake Michigan. By contrast, RECE will be located in southern Wisconsin, closer to WPL’s customers. Locating a new NGCC facility in this area will enhance geographic diversity, which creates a more robust and reliable electric system, protects against catastrophic, unforeseen failures, and can help to hedge the price risk associated with transmission congestion.”

In its April 2015 application for this approval, WPL estimated that RECE would have a $750 million capital cost, exclusive of AFUDC and transmission-network upgrades. In the months that followed, WPL solicited design and construction bids from numerous qualified Engineering, Procurement, and Construction (EPC) firms. That process has revealed that the current market to construct NGCC facilities is very competitive, and these favorable market conditions will help produce a Lump Sum Turnkey contract for RECE that transfers a substantial amount of risk associated with project construction to the contractor. WPL has reduced its cost estimate at the preferred (West) site at the Riverside location from $750 million to $700 million.

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.