Houston , 7 August (Argus) — An affiliate of Quantum Utility Generation has joined Navasota Energy Generation Holdings to help finance construction of three natural gas-fired peaking power plants in Texas scheduled to begin producing power in mid-2017.
Quantum president Sean O’Donnell said the Texas power market needs more gas peakers “to support the integration of large-scale renewable resources as well as to offer customers cost-effective protection from the price volatility that has dramatically impacted this market in the past and is expected to increase in the future.”
Navasota Energy has three peaking plants in development: the Van Alstyne Energy Center located in Grayson county; the Union Valley Energy Center located in Wilson county; and the Clear Springs Energy Center in Guadalupe county. Each plant has a capacity of about 588MW and has either obtained state and federal permits or is in final permitting stages.
The simple-cycle units will supply peak-power needs of electric cooperatives and municipal utilities in high-growth areas of Texas under long-term contracts, allowing the utilities to avoid exposure to real-time power prices that can soar to $9,000/MWh in the Electric Reliability Council of Texas (ERCOT).
The units are expected to run fewer than 1,000 hours a year to meet demand during extreme cold or hot weather when wind generation tends to be low.
Hourly power demand in ERCOT set back-to-back peaks this week, breaking a four-year record surpassing 68.9GW, 600MW above the 2011 peak which occurred during a prolonged statewide heat wave and drought.
The latest peak was nearly 4pc above ERCOT’s highest hourly consumption last year.
Overall power consumption in Texas this year is running 2.1pc ahead of 2014′s record consumption as the state economy continues to grow despite a 50pc drop in oil and gas prices in the past year.
Citing depressed ERCOT forward power prices, some major power plant owners told investors earlier this week that the economics of the current Texas market under which generators are paid only when they produce power does not justify new construction. But rising demand and the potential impact of the federal Clean Power Plan to cut CO² emissions from coal-fired plants should eventually lead to tighter supply, boosting prices.
Navasota Energy has been viewed as a market contrarian in the past, building plants when other companies delayed or canceled projects.
NRG is building a 388MW peaker scheduled to be online in 2016, but few other gas-fired plants are expected before 2017.
Exelon is working to build two 1,000MW combined-cycle gas plants but faces a tight timeline to get the plants into operation by mid-2017.
More than half the new gas generation ERCOT has included in its 10-year plan to be operational in 2018 has yet to secure financing and start construction.
The Navasota peakers are Quantum Utility’s first projects in Texas. Navasota’s chief executive officer Frank Giacalone said the partnership with Quantum gives the company “significant capital and commercial expertise to complete the construction and financing of our fully-permitted sites.”
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