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Released January 21, 2014 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--A 200-megawatt (MW) power purchase agreement (PPA) between CPS Energy (San Antonio, Texas) and the Summit Power Group (Seattle, Washington), the developers of an integrated gasification combined-cycle (IGCC) generator near Odessa, Texas, expired at the end of 2013 after the project failed to reach its contracted milestones. That proposed power plant, the Texas Clean Energy Project, also was scheduled to have a carbon capture and sequestration (CCS) system that would capture an estimated 90% of carbon dioxide emissions for use in an enhanced oil recovery (EOR) project in West Texas.
CPS Energy, one of the largest locally owned electric utilities in the U.S., still supports the IGCC/CCS project. When it signed the PPA for that project in 2011, CPS Energy was in the early phase of aggressively diversifying its generating portfolio. The low-carbon generation from the Texas Clean Energy Project would have fit nicely into CPS Energy's generation strategy. But the energy landscape has changed significantly since then, and CPS Energy has been able to find other sources of low- or no-carbon generation.
"Historically, CPS Energy has relied on coal and nuclear power for the majority of our generation," said Cris Eugster, CPS Energy's executive vice president and chief generation and strategy officer. "In 2010, those fuels provided over 75% of our electricity. But we don't think it's wise to keep all our eggs in one basket. We've been moving to diversify our portfolio, based on market factors and regulatory developments. That's been our top strategic priority."
By 2020, CPS Energy wants to get about 34% of its electricity from coal, 23% from nuclear, 20% from gas, and about 23% from renewables and energy efficiency, Eugster told Industrial Info. "By 2020, we want to get 65% of our electricity from low- or no-carbon generation. We're very close to that today."
"Adding natural gas, renewables and energy-efficiency to our portfolio takes risk off the table and lowers the long-term cost to our customers," Eugster said. "It's better for the economy, better for the environment, better for our customers, and better for the area's water supply." Like other electric utilities around the country, CPS Energy is de-risking its generation portfolio and its business by adding renewables and natural gas generation, as well as a healthy chunk of energy-efficiency programs. For more on this trend, see December 16, 2013, article - Duke's Rogers: New Regulatory Model Needed for Utilities to Succeed in Future.
Industrial Info's experts will be on hand to discuss strategic trends and project spending in the North American Electric Power industry at the upcoming 2014 Industrial Market Outlook executive briefing in Houston on January 29. Registration is complimentary, but an RSVP is required.
Eugster said the generation from the Texas Clean Power Project could still fit into the utility's low-carbon generation strategy, because it is scheduled to capture and sequester about 90% of its carbon emissions. But in a January 6 blog post, the CSP Energy executive wrote: "With abundant supplies of natural gas below our feet and prices for natural gas remaining moderate, the economics of energy produced from coal generation with carbon-capture have changed. The prudent option was to allow our agreement with Summit to end, while we consider the possibility of an updated PPA with the Texas Clean Energy Project in the future."
Late last year, CPS Energy began receiving electricity from the first installment of the 400-MW Alamo solar project. In 2012, the utility spent about $500 million to acquire the Rio Nogales power plant, a 10-year-old, 800-MW, gas-fired generator located about 35 miles east of San Antonio. Eugster said acquiring Rio Nogales cost about the same as it would cost to install scrubbers on the utility's two-unit, coal-fired J.T. Deely Power Station. CPS Energy also has PPAs in place for more than 1,000 MW of wind energy that comes from West Texas and the Texas Gulf Coast.
With installed capacity of about 8,000 MW and demand of about 5,000 MW, Eugster said CPS Energy is "long on generation right now, even when you remove the 870 MW from the Deely plant," which will be retired in 2018.
The utility, which provides electricity to about 741,000 customers in an around San Antonio, won't need any new thermal generation for about a decade, Eugster projected. When the time comes to consider adding thermal generation, the utility likely will choose gas. While CPS Energy owns a 7% share of units 3 and 4 at the stalled South Texas Project, Eugster said, "low natural gas prices hurt the prospects of new nuclear."
Another way CPS Energy is lowering its carbon footprint and overall risk profile is through customer energy-efficiency programs: By 2020, the utility expects those programs to save an estimated 771 MW--about the size of a new baseload plant. Eugster said he was "very excited" about the potential of customer programs to lower electric demand: "Through our customer programs, we're building a virtual power plant at a cost of between 2 cents and 5 cents per kilowatt-hour. That's very competitive with other options, and cheaper than building that next block of generation."
So far, the utility's energy efficiency and conservation programs, bundled under the Save for Tomorrow Energy Plan (STEP) umbrella, have reduced customer electric demand by more than 350 MW--about the size of a medium-size power plant.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
CPS Energy, one of the largest locally owned electric utilities in the U.S., still supports the IGCC/CCS project. When it signed the PPA for that project in 2011, CPS Energy was in the early phase of aggressively diversifying its generating portfolio. The low-carbon generation from the Texas Clean Energy Project would have fit nicely into CPS Energy's generation strategy. But the energy landscape has changed significantly since then, and CPS Energy has been able to find other sources of low- or no-carbon generation.
"Historically, CPS Energy has relied on coal and nuclear power for the majority of our generation," said Cris Eugster, CPS Energy's executive vice president and chief generation and strategy officer. "In 2010, those fuels provided over 75% of our electricity. But we don't think it's wise to keep all our eggs in one basket. We've been moving to diversify our portfolio, based on market factors and regulatory developments. That's been our top strategic priority."
By 2020, CPS Energy wants to get about 34% of its electricity from coal, 23% from nuclear, 20% from gas, and about 23% from renewables and energy efficiency, Eugster told Industrial Info. "By 2020, we want to get 65% of our electricity from low- or no-carbon generation. We're very close to that today."
"Adding natural gas, renewables and energy-efficiency to our portfolio takes risk off the table and lowers the long-term cost to our customers," Eugster said. "It's better for the economy, better for the environment, better for our customers, and better for the area's water supply." Like other electric utilities around the country, CPS Energy is de-risking its generation portfolio and its business by adding renewables and natural gas generation, as well as a healthy chunk of energy-efficiency programs. For more on this trend, see December 16, 2013, article - Duke's Rogers: New Regulatory Model Needed for Utilities to Succeed in Future.
Industrial Info's experts will be on hand to discuss strategic trends and project spending in the North American Electric Power industry at the upcoming 2014 Industrial Market Outlook executive briefing in Houston on January 29. Registration is complimentary, but an RSVP is required.
Eugster said the generation from the Texas Clean Power Project could still fit into the utility's low-carbon generation strategy, because it is scheduled to capture and sequester about 90% of its carbon emissions. But in a January 6 blog post, the CSP Energy executive wrote: "With abundant supplies of natural gas below our feet and prices for natural gas remaining moderate, the economics of energy produced from coal generation with carbon-capture have changed. The prudent option was to allow our agreement with Summit to end, while we consider the possibility of an updated PPA with the Texas Clean Energy Project in the future."
Late last year, CPS Energy began receiving electricity from the first installment of the 400-MW Alamo solar project. In 2012, the utility spent about $500 million to acquire the Rio Nogales power plant, a 10-year-old, 800-MW, gas-fired generator located about 35 miles east of San Antonio. Eugster said acquiring Rio Nogales cost about the same as it would cost to install scrubbers on the utility's two-unit, coal-fired J.T. Deely Power Station. CPS Energy also has PPAs in place for more than 1,000 MW of wind energy that comes from West Texas and the Texas Gulf Coast.
With installed capacity of about 8,000 MW and demand of about 5,000 MW, Eugster said CPS Energy is "long on generation right now, even when you remove the 870 MW from the Deely plant," which will be retired in 2018.
The utility, which provides electricity to about 741,000 customers in an around San Antonio, won't need any new thermal generation for about a decade, Eugster projected. When the time comes to consider adding thermal generation, the utility likely will choose gas. While CPS Energy owns a 7% share of units 3 and 4 at the stalled South Texas Project, Eugster said, "low natural gas prices hurt the prospects of new nuclear."
Another way CPS Energy is lowering its carbon footprint and overall risk profile is through customer energy-efficiency programs: By 2020, the utility expects those programs to save an estimated 771 MW--about the size of a new baseload plant. Eugster said he was "very excited" about the potential of customer programs to lower electric demand: "Through our customer programs, we're building a virtual power plant at a cost of between 2 cents and 5 cents per kilowatt-hour. That's very competitive with other options, and cheaper than building that next block of generation."
So far, the utility's energy efficiency and conservation programs, bundled under the Save for Tomorrow Energy Plan (STEP) umbrella, have reduced customer electric demand by more than 350 MW--about the size of a medium-size power plant.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
