NP-NLH-001
Purchase of Six 2MW Diesel Generator for Holyrood
Page 1 of 5
1
Q.
Reference: Newfoundland and Labrador Hydro 2013 Amended General Rate
2
Application, Hearing Transcript, October 20, 2015, Page 141, line 6 to Page 142, line
3
23.
4
“Yes, we looked at other alternatives and (a) whether we would execute those now
5
as this is an opportunity that’s there and would need to be taken advantage of now
6
as opposed to leaving it and running the risk of getting into a deficit at a point in the
7
future.”
8
In response to cross-examination by Newfoundland Power counsel, Mr. O’Brien, in
9
relation to Hydro’s intentions regarding the purchase of the black start diesels to
10
offer an additional 10 MWs of support to the system, Mr. Paul Humphries indicated
11
that Hydro had considered other alternatives. Please identify the other alternatives
12
and provide the analysis completed by Hydro that indicated the alternative of
13
purchasing the existing black start diesels at Holyrood was a superior alternative to
14
the other alternatives considered.
15
16
17
A.
As indicated in the testimony of Mr. Humphries, Hydro was initially evaluating the
18
purchase of all eight diesel units to provide 16 MW of additional system generating
19
capacity as it was anticipated that system generation reserves would decline to just
20
246 MW in the 2017/18 timeframe. At that time in addition to the purchase of the
21
eight diesels the following alternatives were considered for providing additional
22
generating capacity.
•
1
NP-NLH-001
Purchase of Six 2MW Diesel Generator for Holyrood
Page 2 of 5
Have the CT connected to the Holyrood Plant for a secondary black start
2
path at a cost of $480,000 1 and to seek to (a) purchase or (b) rent additional
3
generation in a future year, when the forecast indicates the generation
4
planning criteria is clearly violated. This option assumes Hydro would seek
5
additional capacity for a short period due to the small surplus currently
6
forecasted turning into a deficit. The solution would have to be able to be
7
implemented quickly, and so diesel rental, along with the required
8
construction to make the required diesel generation available to the system
9
would likely be the most economically viable option for this magnitude of
10
capacity to be implemented in a short time frame. It is assumed these units
11
would be installed at Holyrood because the civil work is already complete
12
and there are fuel and operators available at the site.
•
13
Have the CT connected to the Holyrood Plant for a secondary black start
14
path at a cost of $480,000 and to source and implement a short term,
15
economic demand management solution to manage the customer load and
16
generation planning criteria violation. The CDM studies Newfoundland and
17
Labrador Conservation and Demand Management Potential Study: 2015 –
18
Commercial Sector Final Report 2 – August 2015 – ICF International,
19
Newfoundland and Labrador Conservation and Demand Management
20
Potential Study: 2015 – Industrial Sector Final Report 3 – June 2015 – ICF
21
International, Newfoundland and Labrador Conservation and Demand
1
An amount of $480,000 was included in the CT project to provide a secondary path directly into the
Holyrood plant. This included a transformer, switchgear and protection upgrades. This work was suspended
in July 2015 until a decision on the purchase of the diesels is made. This was necessary because in order to
implement this, the diesels have to be removed because the secondary CT connection uses much of the
infrastructure put in place for the diesels to black start the Holyrood plant.
2
http://www.pub.nl.ca/applications/IslandInterconnectedSystem/files/reports/NLConservationandDemandM
anagementCDMPotentialStudy-CommercialSectorFinalReport-August2015-09-16.pdf
3
http://www.pub.nl.ca/applications/IslandInterconnectedSystem/files/reports/NLConservationandDemandM
anagementCDMPotentialStudy-IndustrialSectorFinalReport-June2015-09-16.pdf
1
NP-NLH-001
Purchase of Six 2MW Diesel Generator for Holyrood
Page 3 of 5
Management Potential Study: 2015 – Residential Sector Final Report 4 – June
2
2015 – ICF International, commissioned by Newfoundland Power and
3
Hydro, found that there is no one economic solution for demand
4
management, so this alternative is not considered viable for addressing a
5
load and supply capacity issue that must be implemented in a short period.
•
6
Have the CT connected to the Holyrood Plant for a secondary black start
7
path at a cost of $480,000 and seek the utilization of additional Capacity
8
Assistance arrangements. Hydro currently has almost 100 MW of
9
interruptible load arrangements with Industrial Customers, the majority of
10
which is located away from the load center on the Avalon Peninsula. While
11
interruptible load arrangements may offer cost advantages, they do not
12
provide the same level of 24/7 operating flexibility and other benefits
13
provided by a generation source fully under Hydro’s control and located on
14
the Avalon Peninsula where the largest generators with the greatest forced
15
outage potential are located. The potential for additional interruptible
16
capacity is limited and is primarily located off the Avalon Peninsula which
17
reduces its effectiveness because of the increased transmission line losses
18
incurred in delivering the capacity to the Avalon Peninsula. For these
19
reasons, the interruptible load arrangements were not evaluated further
20
because they do not provide benefit comparable to the other alternatives.
•
21
Extend the lease and continue paying the monthly lease payments. With this
22
alternative because of the lease-to-buy option Hydro would eventually end
23
up owning the diesels however, as only 80% of the lease payments are
24
credited to the purchase price, this alternative ends up being more
25
expensive than buying the diesels outright.
4
http://www.pub.nl.ca/applications/IslandInterconnectedSystem/files/reports/NLConservationandDemandM
anagementCDMPotentialStudy-ResidentialSectorFinalReport-June2015-09-16.pdf
1
•
NP-NLH-001
Purchase of Six 2MW Diesel Generator for Holyrood
Page 4 of 5
Have the CT connected to the Holyrood Plant for a secondary black start
2
path at a cost of $480,000 and do nothing. This means that Hydro is
3
accepting the risk of a potential generation planning criteria violation, and
4
appeal to customers for this level of conservation should a shortfall occur,
5
which relies on customer uptake of this option to obtain the same effect.
6
This alternative is also not desirable, as it has the greatest potential for
7
negative impact to customers.
8
9
Finally, generation alternatives other than diesel generation were considered. There
10
are three primary considerations when evaluating short term generation
11
alternatives, such as those that could arise on the IIS prior to the completion of
12
Muskrat Falls: (1) cost and (2) time to complete a project and (3) requirement post
13
infeed connection.
14
15
•
The current demand forecast and the available capacity available post
16
infeed connection does not indicate a requirement. Therefore, any
17
generation requirement is short term in nature. Permanent installations for
18
various sizes of generation capacity are estimated to cost in the range of
19
$1,100 per kW to $1,500 per kW and require significant lead times.
20
Permanent installations would also likely result in stranded capacity and cost
21
leaving mobile diesel generation as the most viable short term generation
22
solution. Therefore permanent generation solutions were not considered an
23
option.
24
25
While Hydro had not fully completed the original alternative analysis, the lease to
26
purchase option did offer an attractive capacity cost compared to the other
27
alternatives.
1
NP-NLH-001
Purchase of Six 2MW Diesel Generator for Holyrood
Page 5 of 5
Further, as Mr. Humphries advised in his testimony on October 20, 2015, Hydro
2
had recently become aware of a potential reduction in both Newfoundland Power’s
3
and Vale’s load forecast and was reassessing the requirement for additional
4
generating capacity and the proposal to purchase the diesels. , Hydro issued a
5
revised peak demand forecast on November 9, 2015 and the drop in peak load
6
forecast has resulted in an increased reserve margin, effectively eliminating any
7
urgency to increase generating capacity. With this change the analysis essentially
8
reverted to a cost-benefit assessment of whether to keep or return the diesels. The
9
assessment has shown that there is a cost benefit to keeping six of the eight units.