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Entergy Texas plans 1.2-GW plant to run on methane, hydrogen starting in 2026

Highlights

To benefit customers $1.5 billion

Price volatility may be mitigated

Hydrogen used widely in the area

Entergy Texas' plan to build a 1.2-GW combined-cycle plant running on natural gas and hydrogen, may result in lower wholesale power prices beginning in 2026, although its use of hydrogen may increase its dispatch costs by 15% above pure-methane generation, an analyst said July 30.

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Entergy Texas plans to seek Public Utility Commission of Texas approval for the Orange County Advanced Power Station in Bridge City, Texas, near the Louisiana state line, "within the coming months," a news release said. Upon PUC approval, Entergy plans to start construction in the second quarter of 2023 and have the plant in service by summer 2026.

"Given the incremental supply this project will bring on and with the majority of it being gas, it could potentially further reduce wholesale power prices for MISO South as it will increase competitive pricing to meet existing load in Southeast Texas," said Tyler Jubert, a power market analyst at S&P Global Platts Analytics.

"Although, from the hydrogen side, it's likely hydrogen prices would not be low enough on a regular basis to make electrolytic hydrogen competitive with gray hydrogen, let alone gas," Jubert said in an email July 30.

Gray hydrogen is derived from natural gas without carbon capture and sequestration.

"At 10% gray hydrogen, dispatch costs would be at 15% higher than on 100% methane," Jubert said. "The unit would be attractive relative to steam and gas turbine units, though."

Price volatility at issue

Neal McAndrews, an Austin, Texas-based energy consultant, said he expected the Orange County plant would "lower the volatility of prices over time."

Sallie Rainer, Entergy Texas president and CEO, said, "The addition of this facility will continue our work to provide reliable, low-cost and clean energy in Southeast Texas and will provide more than $1.5 billion in net benefits to customers by reducing reliance on energy markets."

This statement from a July 29 Entergy Texas news release implies that the Midcontinent Independent System Operator market in which Entergy operates would not meet the needs of Entergy Texas customers as efficiently as Entergy's self-supply, but MISO strategic communications adviser Brandon Morris said July 30 that MISO supports the effort.

"This project has been through MISO's Generation Interconnection Queue process and -- once the facility is complete -- it will help support electric reliability in Southeast Texas and the MISO South Region," Morris said.

Hydrogen widely used

Entergy spokeswoman Allie Payne said July 30 that Entergy Texas customers have saved "almost $200 million by virtue of participation in MISO" in the first five years, but she added, "As we saw during the recent winter storm event, these markets can be volatile and subject customers to very high costs during periods where supplies are tight."

"By investing in new generation at opportune times, we can achieve savings and mitigate risk for our customers while continuing to leverage the benefits of participation in MISO's efficient markets," Payne said.

"Orange County Advanced Power Station will be the most efficient dispatchable generator in the market and will produce significant amounts of energy to sell into the MISO market at a higher price than it costs to produce that energy at this modern facility," Payne said. "The margins from these sales flow directly to customers as an offset to their fuel charge."

Hydrogen is widely used among Entergy Texas' large industrial customers, can be stored at its Spindletop storage facility, "and can be deployed alongside natural gas to produce lower emissions energy reliably when needed," Payne said.