Commentary: A new power plant, despite overcapacity

Michael Vickerman is program and policy director of RENEW Wisconsin.

Michael Vickerman is program and policy director of RENEW Wisconsin.

Undeterred by the surfeit of generating capacity available to serve Wisconsin electricity customers, Green Bay-based Wisconsin Public Service (WPS) is now seeking permission to build a mid-sized natural gas-fired power station, called Fox 3, and place it in service in 2019. But, if approved, how much generation would that plant actually provide?

If recent history is any guide, the answer is not much, or, more precisely, significantly less than what the utility projects in its application, which was filed in January 2015. This is especially true for power stations with higher fuel costs, such as Madison Gas & Electric’s 150-megawatt (MW) West Campus facility in Madison or We Energies’ 50 MW Rothschild biomass generator near Wausau. Both plants are of recent vintage, and each produces electricity and steam. But, as this month’s fuel reports show, 2014 was a better year for their steam hosts than it was for the electricity customers paying off the construction costs of these generators.

A $269 million station placed in service in late 2013, Rothschild generated sporadically in the first eight months of 2014 and hardly at all after Labor Day. Over the course of the year, electrical output from Rothschild totaled 15 percent of its rated capacity, considerably less than 70 percent projected by the utility in its 2010 application. Certainly, not an auspicious beginning for a baseload power plant’s operating life.

But there’s more to this story. All the electricity consumed by Rothschild in December came from other power plants, resulting in a negative capacity factor. Indeed, the -10.1 percent capacity factor logged at Rothschild that month marks the first time in my 23-year career that I’ve seen a power plant’s capacity factor reach negative double-digit territory. As dubious distinctions go, that one’s a beaut.

While West Campus avoided finishing any month in 2014 on a net negative note, the good news ends there. A combined cycle generator expected to serve daytime loads, West Campus operated at an astonishingly low 7 percent of its rated capacity in 2014, even less than it did in 2013 (14 percent) and 2012 (18 percent). What makes this lack of production in 2014 so curious is that output from MGE’s principal generation sources—both coal-fired—also came in below the utility’s forecasts.

Such low output totals become even more remarkable when taking into consideration that a 550 MW nuclear power plant had been permanently idled the year before. Indeed, the shutdown of the Kewaunee station created not so much as one ripple in the wholesale electricity supply pool. If the owners of West Campus and Rothschild were expecting Kewaunee’s closure to free up market space for their own plants to operate with greater frequency, they were surely disappointed by the results.

Into this crowded generation picture rushes WPS with a proposal to add 400 MW of capacity at its Fox Energy Center south of Green Bay, next to the existing 600 MW station there. In justifying this $520 million project, WPS points to a number of scheduled shutdowns of older coal-fired units in its generation footprint. But a reduction of older generation capacity does not guarantee the economic operation of a new gas-fired generator, especially if local loads remain flat or decline.

WPS projects that the new Fox 3 generator would operate on average at annual capacity factors between 40 to 50 percent. This compares with the 32 percent capacity factor that the existing Fox generator achieved in 2014, indicative of a modest workload. If the existing plant upped its annual output to 50 percent of its rated capacity, by no means an unusually high duty cycle, the incremental increase would equate to the new Fox unit operating at 25 percent.

The risk with Fox 3 is that it may follow in the footsteps of West Campus and Rothschild and see little action if built, leaving WPS ratepayers on the hook to pay off a half billion dollars’ investment in what could turn out to be redundant standby generation.

To ascertain whether this power plant is needed, both WPS and the Public Service Commission of Wisconsin (PSCW) will rely on a decades-old utility system expansion model to analyze different scenarios and select the lowest-cost resource option. The model’s outputs will vary depending on the projected demand, anticipated power plant shutdowns and fuel price forecasts.

But this model was developed in an era when utilities controlled the dispatching of their power plants. Today, the Midcontinent Independent System Operator (MISO), headquartered in Indiana, decides when and where to activate the generators in Wisconsin and surrounding states.

In reality there are dozens of in-state and out-of-state power plants supplying the electricity that Wisconsin businesses and residents tap into. MISO dispatches these generators based on their bid prices, and will always select the lowest-price option regardless of who owns the power station. For example, if supplies of low-cost wind generation are available to serve WPS customers, MISO will select those options over the power station built by WPS, because the latter’s fuel costs will be higher.

The obsolete planning model relied upon by WPS and the PSCW is not the only aspect of this proposal that is disconnected from present-day reality. Nowhere in the application is it mentioned that We Energies (WE), the state’s largest electric provider, is seeking to acquire WPS even though the initial merger documents were filed in August 2014.

This was no mere oversight, because WE has boatloads of generating capacity to spare. In addition to the underperforming Rothschild plant, WE owns and operates three 1,000 MW-plus coal generation campuses within 30 miles of each other. The output from these power stations—Elm Road, Pleasant Prairie and South Oak Creek—ranged from 50 percent to 61 percent in 2014, suggesting an ongoing and significant excess capacity situation.

If the acquisition is approved, as appears likely, it sets up the probability of jointly dispatching the combined generating fleet into the MISO power market. The three WE generators listed above have lower fuel costs than the existing Fox generating plant. Barring a sudden jump in the price of coal, they will be dispatched ahead of a new gas-fired power station. Goosing power production a few percentage points higher at, say, Elm Road, would more than adequately offset the lost production from the older units that WPS plans to retire by 2019.

WPS’s filings also disregard the reality of flat-to-declining electric sales in Wisconsin. Kilowatt-hour sales for most Wisconsin utilities peaked in 2007, dropped by 7 percent in the next two years, and recovered a bit of lost altitude in 2010. Since then, they have hardly budged, a consequence of a lackluster economy statewide and improvements in lighting efficiency.

Yet, in the face of those headwinds, WPS projects increases in both demand peaks and electricity sales. This is wishful thinking, pure and simple, and it has no place in a construction proceeding carrying a $517 million price tag.

The last thing that Wisconsin utility ratepayers need right now are more power plants that, like telephone operators in 1960’s-era commercials, are just standing by.

Michael Vickerman is program and policy director of RENEW Wisconsin, a renewable energy advocacy organization.

RENEW Wisconsin is a member of RE-AMP, which publishes Midwest Energy News.

4 thoughts on “Commentary: A new power plant, despite overcapacity

  1. Hello Michael – Both the onset of cheaper renewables and the true revolution in energy-efficient refrigeration, LED lighting and ‘smart’ electronic electricity controls seems to be unaccounted for in the planning of new power plants. Please do more research on this ‘hidden’ revolution that along with the economic stagnation brought on by Walker the ‘Kocher’ has kept the need for electricity ‘flat’, as you say, for a decade. The loss of the ‘nuke’ had NO EFFECT… and as the German’s are finding – it is energy-efficiency and simple conservation linked to renewables that illuminates the future.
    Good Luck – Walker can’t last forever!

  2. Raising HEMP for Fuel, Food, Raw Materials for Plastic would produce energy with no Carbon. Invest in Solar, Wind also. Invest in carbon free energy.

  3. If built, how does this , I assume, 400 MW CCNG plant affect Wisconsin EPA carbon emission requirements? Of course it will be better than coal but not nearly as good as renewable wind and solar. If Wisconsin is dead set against siting more wind in the state, would purchasing out of state wind most likely from states west of Wisconsin count towards the EPA requirements? Or has out of state power purchase not been decided yet?

  4. Why would a business spend money on a plant that is not needed? Are you assuming these people are plain stupid? More likely this will allow them to increase electric rates and profits. I seem to remember back ages ago when I was still young enough to learn, that electric utilities’ rates were determined by invested capital. Is that still true?