trending Market Intelligence /marketintelligence/en/news-insights/trending/a_BCeeLGj7xBRcp7hlOrGg2 content esgSubNav
In This List

NorthWestern sees gas-fired capacity as biggest resource addition in supply plan

Blog

Insight Weekly: Global stock performance; hydrogen pilot projects; Powell's Fed future unsure

Blog

Insight Weekly Labor market recovery hurdles power market integration nonbank MA hunt

Blog

Q&A: Q2'21 Power Forecast: Overheated Power Markets are Here – Who Wins, Who Loses, and Why?

Blog

ESG & Technology: Impacts and Implications


NorthWestern sees gas-fired capacity as biggest resource addition in supply plan

is callingfor hundreds of megawatts of natural gas-fired generation capacity to meetcustomers' future peak demand needs and respond to soon-to-be imposed nationalreliability standards, despite its major purchase of hydropower assets twoyears ago.

Theresource initiatives and actions developed in the company's identify critical future needs including addressing significant capacityshortages, NorthWestern said in its biennial plan. The utility submitted theplan to the Montana Public Service Commission on March 31.

Theutility, which does business as NorthWestern Energy in Montana, said itseconomic analyses show adding gas-fired generation is the lowest-cost andleast-risk approach, with a preferred "economically optimal portfolio"that includes five internal combustion engines, starting with 55 MW in 2019,two more of 18 MW each in 2021 and 2024 and the addition of a 348-MWcombined-cycle combustion turbine by 2025.

Bythat year, NorthWestern would have a resource capacity mix of 36% gas, 27%hydro, 14% wind, 13% coal and 10% in other resources such as demand-side managementand distributed generation.

On agas and electric infrastructure cost-basis, the Billings, Mont., area would bethe least costly location for new gas generation, NorthWestern said in its plan.

Theplan resulted from an evaluation of resources over a 20-year period. Thepreferred optimal portfolio includes an additional 250 MW with seven combustionturbines in 2028 and 2029.

Inaddition, the utility sees "high priority" opportunities to increaseinstalled generation capacity at its multiple existing dams by about 84 MW, theplan said. Seven rehabilitation projects will not trigger FERC licenseamendments, but two development projects will be required to go through theprocess of obtaining FERC approvals, which can take several years.

NorthWesternbought 442 MW ofhydropower capacity in 2014, 150 MW of gas-fired capacity with the Dave GatesGenerating Station purchase in 2011 and 222 MW of coal-fired capacity atColstrip unit 4 in 2008, according to the plan. In the past decade, the companyhas added 906 MW of generating capacity in Montana. Overall, according to SNLEnergy data, NorthWestern's nameplate generating capacity totals about 1,380MW, with resources in five states.

"Althoughthe supply portfolio has grown through resource acquisitions over the precedingten years, a significant capacity resource deficit persists, resulting inlong-term supply uncertainty associated with the cost and availability ofmarket products and resulting reliability concerns," NorthWestern said inits supply plan.

Furthermore,the Northwest region now faces increasing capacity constraints because ofcontinued load growth, substantial additions of intermittent wind resources,hydrologic flow restrictions, and planned coal plant retirements, the plansaid. About 2,400 MW of coal-fired generation is scheduled to be retired in theregion.

Thatbeing the case, NorthWestern said it is focused on adding its own resources andlowering market exposure. Montana's dominant electric utility has over the pastdecade converted from primarily a distribution utility to a verticallyintegrated utility. The utility once relied primarily on market purchases dueto a failed state experiment with deregulation in the late 1990s and thesell-off of hydro and coal generation by NorthWestern's predecessor, MontanaPower.

Inaddition to perceived regional capacity constraints, NorthWestern said itcontinues to be concerned about a large amount of intermittent wind generationin its portfolio to meet renewable portfolio standards and mandatory purchasesunder the Public Utility Regulatory Policies Act.

"Significantpeak capacity needs remain unfulfilled," NorthWestern said in its plan. "Thelarge 20-year peak load deficit is illustrated by the widening gap betweencapacity delivery capability of the current energy supply portfolio and winterpeak demand."

Montana differs from rest ofNorthwest

Otherutilities in the Northwest are looking more toward energy efficiency, smartgrid planning and renewable energy resources in their futures. The NorthwestPower and Conservation Council in February issued its Seventh Northwest Power Plan, heralding theregion as the nation's cleanest low-carbon leader and the region's strikingincrease in forecasted economic growth can be met without construction of newpower plants.

However,NorthWestern said it has limited ability to take advantage of the NorthwestPower Plan's projected demand-response savings. Residential electric space andwater heating savings potentials are low in Montana compared to the rest of theregion and most industrial customers in Montana do not buy power fromNorthWestern but purchase it directly from non-utility suppliers. NorthWesternacquires about 1% of retail sales or 6 average megawatts of energy efficiencyeach year through its demand-side programs.

Still,NorthWestern said it can maintain its position as a low-carbon utility whileadding more generation capacity.

"Sincethe addition of the hydroelectric dams in November 2014, NorthWestern has beenworking to identify the most cost efficient means of integrating our ownedresource portfolio of hydro, wind, coal and natural gas resources in the mostoptimal way for our customers," the company's vice president of energysupply, John Hines, said in a newsrelease. "The result is an electricity portfolio that is morethan 60% carbon free at prices that are well below the national average."

Theestablishment of a diversified generation fleet under NorthWestern's ownershipand control further solidifies both NorthWestern's and Montana's goal of owninggeneration, creating more vertically integrated utility operations, andtransitioning to capacity-based resource planning while maintaining alow-carbon emission footprint, NorthWestern said in its plan.

"NorthWesternEnergy customers are served by a diverse, hydro-based combination of Montanaresources at prices that are among the lowest in the country," NorthWesternPresident and CEO Bob Rowe said in the news release. "However, we stillhave capacity needs during times of peak use. Along with optimizing operationof the portfolio to best serve our customers, we will be addressing capacity tomeet reliability, regulatory and modest customer growth expectations."

Becauseof the Montana hydro system, the electricity NorthWestern delivers to itscustomers is already lower in carbon than the U.S. EPA's Clean Power Plantarget for Montana in 2030, the utility said in its news release. Under the "economicallyoptimal scenario" in NorthWestern's new supply plan, carbon emissionswould further decline.