Public-private flexible generation seeks to level out market volatility, offers long-term price certainty

 In Industry Trends

OMAHA, Neb. — Bluestem Energy Solutions will build a natural gas plant in Oklahoma in order to assist small- to mid-sized utilities in the Southwest Power Pool. At the same time, the project will address emerging market concerns regarding reliability due to continued rapid growth of renewables within the SPP footprint.

Generators like Bluestem’s planned simple cycle gas turbine can start rapidly to respond to market signals like price spikes and peak demand. Those signals have become more frequently distorted as the SPP has taken on an increasing amount of variable wind and solar generation, which in turn has created an opportunity for the rapid-start capabilities of generators like the planned Bluestem project.

The City of Beatrice, Nebraska, plans to purchase approximately 38 megawatts of the Bluestem plant’s capacity through a customer-centric power supply contract instead of renewing a traditional long-term power supply contract with their incumbent provider. The Beatrice City Council approved a memorandum of understanding with the energy developer in 2016 that paved the way for the plant.

Beatrice City Manager Tobias Tempelmeyer has said the city stands to save 10 percent on annual energy costs through the Bluestem arrangement instead of renewing a long-term contract with Nebraska Public Power District. The outlook for electric rates in Beatrice, which have gone up more than 10 percent in the last six years, calls for no change for 10 years, Tempelmeyer told NET Nebraska.

The plant, which will be built in central Oklahoma, can be expanded up to 120 MW of total capacity as more municipalities, co-ops, and public power districts elect to add ramping capacity amid a period of profound change in the power industry. Bluestem has been working on the project for the last year.

Quick-ramping generation resources like the Oklahoma project can apply a much-needed leveling effect to the variability of renewable energy resources like wind and solar. Electricity output from those resources fluctuates based on weather conditions and time of day or year, and the future of new generation in the SPP is almost exclusively renewables: more than 90 percent of new electricity generation planned in its 14-state footprint as of year-end 2017 was either solar or wind.

Accordingly, a generating asset that can rapidly ramp up output to make up for dips in renewable generation will be increasingly valuable in the SPP marketplace. Meanwhile, power purchasers’ benefits include the potential to reap economic upsides during periods of capacity shortages while avoiding the operational risks of excess supply.

“The quick-start peaking plant helps utilities take advantage of market opportunities,” said Bluestem Vice President Adam Herink. “At the same time, it gives them long-term price certainty and shifts market operations and financial and operational risks to Bluestem.”

The Bluestem project is expected to finalize development activities by year-end 2018.

 

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