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Why We Made the Decisions We Made and Where We Are in Building New Generation February 17, 2005

Why We Made the Decisions We Made and Where We Are in Building New Generation February 17, 2005 Prepared by Nilaksh Kothari, P.E. General Manager Manitowoc Public Utilities. OVERVIEW OF THE SYSTEM THE PROBLEM/CONCERNS POWER SUPPLY OPTIONS CONSIDERED BENEFITS OF OWNING GENERATION

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Why We Made the Decisions We Made and Where We Are in Building New Generation February 17, 2005

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  1. Why We Made the Decisions We Made and Where We Are in Building New Generation February 17, 2005 Prepared by Nilaksh Kothari, P.E. General Manager Manitowoc Public Utilities

  2. OVERVIEW OF THE SYSTEM THE PROBLEM/CONCERNS POWER SUPPLY OPTIONS CONSIDERED BENEFITS OF OWNING GENERATION PROJECT STATUS QUESTIONS OUTLINE OF PRESENTATION

  3. Facts in Brief-2003

  4. Sources of Capacity • Sources of Capacity -122 MW Total in 2004 • Steam Generating Plant 70.0 MW • Diesel 11.0 MW • Combustion Turbine (Gas) 21.0 MW • Market Purchases 20.0 MW • Age of Facilities / Capacity • Boiler #5 50 Years / 15.0 MW • Boiler #6 46 Years / 17.5 MW • Boiler #7 38 Years / 17.5 MW • Boiler #8 12 Years / 21.0 MW • Diesel 17 Years / 11.0 MW • Combustion Turbine 3 Years (Refurbished) /20.5 MW • Steam Turbine Generator #2 67 Years • Steam Turbine Generator #3 62 Years • Steam Turbine Generator #4 51 Years • Steam Turbine Generator #5 46 Years • Steam Turbine Generator #6 38 Years

  5. Sources of Energy • Sources of Energy – 2003 • MPU Generation 292,133 MWH (55%) • Steam 291,070 • Natural Gas 36 • Diesel 1,027 • Market Purchases 242,392 MWH (45%) • WPPI 91,149 • WPS 148,633 • WE Energies 2,588 • Alliant 22 • Purchased vs. Produced Energy (MWH): Purchased / Generated • 2002 266,573 / 293,477 48/52 • 2001 292,769 / 264,189 53/47 • 2000 286,502 / 294,157 49/51 • 1999 302,768 / 255,168 54/46

  6. THE PROBLEM Historical Projected

  7. Concerns • Age of the existing facilities • Boiler and generators > 50 years as compared to expected life of 40-50 years • Increased down time of equipment for maintenance • Boiler #5 • Environmental concerns- notice of violation from DNR • Requires special fuel, and is relatively expensive to operate • Transmission constraints limit import capability • Regional and Statewide • Interconnect through the Shoto Substation limited to 55 MW (summer) • Wholesale purchased capacity not reasonably available • MPU’s average cost of generation is higher than the cost of purchased power

  8. Energy Production Costs - Existing

  9. Power Supply Options Considered (2000-2002) • Existing Generation Resources 1. MPU Steam Plant Improvements 2. MPU Steam Plant Package Boiler 3. MPU Peakers • Capacity and Energy Proposed to MPU 4. McCartin Group Manitowoc steam plant 5. Dominion Evantage peakers 6. Dynegy 7. Xcel Energy 8. Dairyland Cooperative 9. WE Energies 10. Capacity and Energy Proposals to GLU • Potential Lease Options 11. Edison Mission 12. FPLE/Tenaska 13. Dominion Thermal • Potential Self Build Options 14. 34 MW combustion turbine(CT) 15. 80 MW combustion turbine(CT) 16. 80 MW combined-cycle unit 17. MPU Plant Expansion 18. Other Independent Power Producers

  10. Factors Considered in Evaluation of Options • Demand and energy forecast • Assessment of existing facilities • Management/diversification of power supply portfolio • Capital, operating and maintenance costs • Minimize MPU’s generation costs/competitive electric rates • Maximize use of existing site • Financing feasibility • Account for uncertainties/trends • Retail deregulation • Environmental regulations • Transmission constraints • Role of Regional Transmission Organizations • Wholesale market transition

  11. Projected Energy Cost Saving Average Purchased Power Cost (2003 $) = $38.97 Average cost of generation (2006 $) = $24.73

  12. Benefits of Power Plant Expansion • The 63.3 MW expansion at the existing site results in the lowest rate impact to MPU’s customers of all alternatives • Reduces air emissions per megawatt produced by one-third • Utilizes existing CFB technology (same as Boiler 8): • With Boiler 8, provides all of MPU’s baseload energy requirements at an average variable cost of $15-18 per MWH • Like Boiler 8, burns a wide range of fuels allowing more options to stabilize operating costs • Minimizes reliance on wholesale electricity markets that experience price volatility due to forces outside MPU’s control • Removes reliance on transmission system for power imports • Keeps money from MPU’s ratepayers in Manitowoc • Significantly increases MPU’s payment in lieu of taxes • Maintains jobs in Manitowoc and provides infrastructure for economic development

  13. PROJECT STATUS

  14. Power Plant prior to demolition (Looking South) February 2004

  15. Foundation for Boiler Building in progress April 2004

  16. Steel erection of Boiler Building July 2004

  17. Boiler and Turbine Building (Looking Southeast) January 2005

  18. Boiler Building (Looking Northwest) January 2005

  19. Turbine Building Operating Deck Turbine Foundation Preps January 2005

  20. QUESTIONS

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