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Highlights

743-MW combined-cycle plant proposed

RMI study sees maximum value in flexibility

Houston — Alabama Power's plans to expand its gas-fired combined-cycle capacity by 1.9 GW and build 340 MW of solar capacity run counter to a recent Rocky Mountain Institute study, which concluded that such combined-cycle plants will likely become uneconomic by the mid-2030s.

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On Friday, Alabama Power petitioned the Alabama Public Service Commission for a certificate of convenience and necessity to do the following:

  • Add a 743-MW combined-cycle plant to its 2.4 GW coal- and gas-fired Barry Steam Plant in Bucks, Alabama
  • Acquire the power purchase agreement for 23 years for the 915-MW Central Alabama Generating Station, a gas-fired combined-cycle plant in Autauga County, Alabama
  • Acquire the 17-year PPA rights for the 238-MW CC Hog Bayou Energy Center in Mobile County, Alabama
  • Acquire the 28-year PPA rights for five 68-MW solar PV plants to be located in Calhoun, Chambers, Dallas, Houston and Talladega counties in Alabama

Alabama Power also seeks permission to pursue 200 MW of additional demand-side management and distributed energy resources, adding that all of the filing's resources are "necessary, advantageous, efficient and appropriate ... and are in the public interest."

Mark Dyson, a principal in the Rocky Mountain Institute's electricity practice and co-author of a study titled "The Growing Market for Clean Energy Portfolios," released Monday, said Wednesday he could not address the specific merits of the Alabama petition, partly because he had not time to review the 342-page document.

However, he said, "The situation ... is inconsistent with some of the studies cited in the [RMI] paper," in which power utilities chose to replace retiring baseload coal capacity with a clean energy portfolio of wind, solar, storage and demand-side management.

STUDY ASSUMPTIONS QUESTIONED

The RMI study concluded that much of the $70 billion in gas-fired, combined-cycle capacity to be built in the mid-2020s would be uneconomic in comparison with such clean energy portfolios.

Industry observers reacting to the RMI study offered a variety of criticisms, ranging from questioning assumptions to labeling it as "political fodder." "While there are some appropriate model assumptions such as the lower cost decline for 'CEP,' ... they obscure a great deal of their cherry-picked assumptions by utilizing industry terminology and washing it with academic style writing," said Campbell Faulkner, senior vice president and chief data analyst at OTC Global Holdings, an interdealer commodities broker.

"This is a classic case of finding the outcome you want when you design the experiment around it," Faulkner said Tuesday. "This is purely political fodder to feed those who fancy themselves sophisticates about energy and the future, nothing more."

But Dyson on Wednesday disputed those who questioned the study's assumptions. For example, Faulkner asserted that the study's "assumptions around battery storage are clearly linear and trending to be virtually free."

Dyson countered that the study bases its storage assumptions on Bloomberg New Energy Foundation research "which itself has been too conservative in the past year -- e.g., 35% drop [in costs] 2018-19."

"Further, as we note in the paper, battery costs are the highest cost CEP technology and the CEPs with the least storage are the most cost competitive," Dyson said.

Regarding the "political fodder" label, Dyson said his organization is "apolitical" and "focused on market-based approaches to clean energy."

"We're learning from the industry, where the industry has responded to undeniable market trends," Dyson said. "This is objective research with clearly laid out and transparent methodology and research. Furthermore, don't take our word for it -- look at a growing number of utilities doing exactly what we are proposing here."

FLEXIBLE VS. BASELOAD CAPACITY

Matthew Cordaro, a former Midcontinent Independent System Operator CEO who now resides in New York, questioned the RMI paper's assumptions about the need for baseload capacity from natural gas-fired plants.

"The US has an abundant supply, operators are consistently able to extract it more cost efficiently and the need for this baseload power will remain quite strong, especially with coal and nuclear production contracting," Cordaro said Tuesday.

Dyson said the RMI paper does not advocate for 100% renewable energy, because it shows that gas peakers remain economic through the period.

"We have never in this country needed a resource that meets a 24-7 load profile," Dyson said. "What is critical is not baseload, but flexibility that can accommodate renewables."

Charles Teplin, a manager of RMI's electricity practice, said, "It is sort of indisputable that wind and solar have the lowest dollar cost per megawatt-hour of energy."

That is why the power industry is recognizing that the concept of "baseload electricity" has essentially become erroneous, Teplin said Wednesday, because what is needed is not power that is always on, but is on only when it is needed.

"The new value is in flexibility, the ability to ramp up or down in capacity," Teplin said. "That is where the leading edge is."

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Mark Watson, newsdesk@spglobal.com