Henderson, HMP&L eye future power needs and solar will be a big part

HENDERSON, Ky. - The city's coal-fired Station Two power plant in Sebree is completely idle and will never come back to life. Now the big question is: How will Henderson meet its power needs for the next 20 years in a cost-efficient and reliable manner?

City commissioners met for more than an hour Tuesday evening and learned about the possibilities from Henderson Municipal Power & Light's general manager, who said even he was shocked that an in-depth study by outside experts showed solar power will almost surely play a major part in the mix.

At the first mention of solar power during the presentation, Commissioner Patti Bugg noted that, "We were told at one meeting that solar was just not feasible around here."

"I'm the one who told you that," said Chris Heimgartner, HMP&L's GM.

But "in the last 18 months, the price of solar has dropped dramatically ... I was stunned .... Without giving too much away right up front, that is the right answer. A solar plant ends up being the best part of our mix. I was surprised. That's why you do the studies. Data is an amazing thing."

Heimgartner said multiple companies have already expressed an interest in building solar "farms" somewhere in Henderson County, which could be done in cooperation with HMP&L.

Continuing to lock in blocks of power on the open market in advance at favorable rates and having some sort of natural gas-fired local generation unit are also preferred pieces of the puzzle, according to an extensive "Integrated Resources Plan," or IRP, that has been conducted for HMP&L.

The natural gas-fired unit, or "peaker" unit, would be helpful in a number of ways. For one, it could provide affordable power when demand -- and open market rates -- are high.

It would also give the city an insurance policy if something happens to the overall, or even regional, electrical grid. (An example: If it took days to bring the grid back online, HMP&L could still power the local hospital, emergency facilities and central business areas.)

That gas-fired unit would be located on land HMP&L already owns off U.S. 60-West near Ohio Drive.

'Every hour of every day'

Conducting an IRP isn't an easy undertaking, and it was handled with the help of an outside agency that specializes in these kind of studies.

"In a nutshell, what you are trying to do is you forecast out what your customers are going to need for the next 20 years and then match it to the best fit of whatever kind of sources you can line up to supply it," explained HMP&L GM Chris Heimgartner.

"That's the simplest version of it. In reality you are forecasting every hour of every day for the next 20 years. And you are matching that to all the possible resources mixes you can have for a bunch different weather conditions and gas prices and the whole nine yards, so there's lots and lots of variables in this."

HMP&L didn't just take the results of the IRP at face value though, Heimgartner said.

"We looked, inside the utility, at the same scenarios from a very different perspective and I guess the good news is, we ended up at exactly the same place. So you look at it two different ways and you end up with the same answer, then that's a better indication that you've actually done pretty well."

(You can see the full Powerpoint presentation about the IRP at the bottom of this story online.)

'Nuclear option' and more

HMP&L and the IRP agency literally considered all the options.

"A year ago, our portfolio was really simple. We burned coal down in Sebree (at Station Two). That supplied all of our power. Today, we're doing something really different, we're buying power" -- all of it -- through the market, Heimgartner said.

The answer for the future lies somewhere in between, he said.

Continuing to buy power on the open market is actually a very cost effective answer in the long term. But there's a big drawback: extreme short-term volatility.

He said that while it's easily the cheapest option over 20 years, during a short term period such as three or four months or even longer, "bills could triple. That's the wrong answer for our customers."

Another extreme option considered just to cover all the bases: Actually building a small nuclear power plant. Why not do that?

"It's an extremely high-cost option," he said. There's also permitting to consider as well as public reaction and acceptance. "It's unclear to me if the community would ever accept it."

So the other options are renewables like wind and solar, as well the "peaker" units previously mentioned. There are several varieties of those that run on natural gas, which is relatively cheap and plentiful.

One type is called a RICE, or reciprocating internal combustion engine. "These are 10,000 horese-power engines" basically like a massive car engine, Heimgartner said. "Everybody is installing them and buying them. In public power, in small public power, people are installing these things right and left."

The other type of "peaker" is a CT, or combustion turbine engine. "Basically a jet engine on a stand," he said.

One big advantage of these gas-fired units, he said, is that they can be spun up and operated at peak performance in a matter of moments when power spikes -- unlike coal fired units that would take hours or even days to get running at full power.

Meanwhile, solar is coming on strong all over and the price is falling to install and run it. But wind power in this part of the country, he said, is very inefficient and unreliable.

Scorecard

All these options were graded, Heimgartner said, and combined in different scenarios according to power generation capacity, cost effectiveness and expense, reliability and resiliency, financing, and other factors.

While the process to arrive at the answer was complicated, he said the results are fairly clear cut.

To meet HMP&L's needs for the next two decades, the most effective options -- or combination of options -- according to a scoring system are either:

• Combustion turbine (CT), solar and market purchases or;
• Reciprocating internal combustion engine (RICE), solar and market purchases

The HMP&L staff recommendation portion of the presentation to city officials reads:

"Based on the IRP analysis, input from outside the utility, and the collective wisdom of Staff, we believe a combination of a local generation plant, a solar PPA (power purchase agreement), some block purchases, and some market purchases is the best supply mix for our customers for the next 20 years. We are agnostic on the local generation technology. We think we should have one, and no particular technology at this point is persuasive."

Heimgartner said that as for cost -- depending on the technology purchased -- committing to that kind of resource mix would mean between $25 million and $50 million in expenses for the city to bond and pay for.

But that has to be considered against a minimum of $45 million in upgrades that were going to be required for the Station Two coal-fired power plant that was just closed down.

It also doesn't factor in profits that could be made in selling excess power from solar or "peaker" units on the open market.

Next steps?

According to Heimgartner's presentation, the next steps are:

• Engage a firm to help write and evaluate Request for Proposals (RFPs).
• Issue an RFP for solar early in the third quarter of this year, with our objective to sign a contract before the year is out.
• Issue an RFP for a local generation plant by the end of this year, with our objective to sign a contract early in 2020
• Inform City Commission (Bonding will be required)
• Inform community/customers

More:City of Henderson to close gap on Riverwalk with boardwalk, Sunset Park overlook

More:City of Henderson sells more land for homes along Second Street

If you cannot view the Power Point presentation above, you can access the presentation at: http://bit.do/hmplslides