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Duke Energy 402-MW advanced gas plant gets OK over staff objections

Duke Energy Carolinas LLC recently received the green light from North Carolina regulators to build a 402-MW addition at its Lincoln Combustion natural gas-fired power plant using Siemens Corp.'s latest gas turbine technology despite staff concerns.

The North Carolina Utilities Commission approved a certificate of public convenience and necessity for the gas plant expansion and associated infrastructure over the objections of public staff, which raised concerns about the timeline of the Lincoln County, N.C., project.

Construction of the simple-cycle combustion turbine will start as early as mid-2018 with the testing phase of the new turbine slated for 2020, but Duke Energy Corp. utility would not take custody and control of the unit until late 2024.

The extended testing period is intended to allow Siemens to determine the best timing and nature of operation of the new turbine technology, Duke Energy said in testimony. The turbine will also be tested in variation configurations over that time. Siemens, Duke said, offered it a "significant discount" versus advanced turbines from other vendors as well as versus less advanced technologies. Further, Duke Energy said it and its customers would receive the output of the plant at only the variable cost of fuel during the approximately four-year period.

The staff, however, warned that economics and other factors could change over that time, making the project unnecessary or less economic than other choices. The typical timeline for construction of a combustion turbine is 18 to 36 months and Duke Energy is seeking a construction certificate for the project "well before [the generation] is needed," the staff wrote.

"Given the time frame associated with the construction of the project, by the time it is completed, other [combustion turbine] technologies as well as [noncombustion turbine]-based technologies, such as utility-scale energy storage, could be available that are more efficient and less expensive to operate," a staff witness argued.

The commission in its Dec. 7 order said the project is "in the public interest."

"In order to continue to reliably meet the growing power supply needs of the state, and to continue to provide electricity at reasonable prices as is critical for the economic development and well-being of our citizens, Duke Energy Carolinas must take steps now to begin to ensure the possibility that the Lincoln CT project is commercially available in 2024," the order states.

Under the commission's order, Duke Energy Carolinas, or DEC, cannot seek cost recovery for the project before Dec. 1, 2024, which is the date the project is expected to be complete and placed into service.

"This trigger date ensures that ratepayers will not begin paying for the facility prior to the date its capacity is needed, even if construction is completed early and DEC takes possession and commences operations," the order states.

The staff recommended that if the project was approved, DEC not be allowed to include capital costs and nonfuel expenses for the project in a general rate case until the later of Dec. 1, 2024, or the date to which the need is deferred in a subsequent integrated resource plan. The second condition staff proposed is that there is a "rebuttable presumption" that costs that exceed current cost estimates for the project are unreasonable and not recoverable.

The commission, however, found these conditions largely "unnecessary" and noted that DEC has "already adequately mitigated" many of these risks through the contract with Siemens and "the unprecedented benefit that DEC customers will receive free capacity and energy during the four-year testing and validation period prior to DEC assuming care, custody and control in 2024." (NCUC docket E-7, Sub 1134)