Kentucky city of 28,000 selects 50 MW of solar to help lower electric bills

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In western Kentucky, where the city of Henderson overlooks the Ohio River, wholesale energy is usually reasonably priced. But if you run an electric utility, and your customers use about 100 MW of power on a summer day, “that’s exactly when you don’t want to be in the open power market,” when prices are highest, said Chris Heimgartner, general manager for Henderson’s municipal utility, in a pv magazine interview.

To find out the best way to keep costs down, the utility developed an integrated resource plan, which found that 50 MW of solar power was optimal, said Heimgartner. The utility serves a city of about 28,000 people; developing an integrated resource plan is commonplace for a utility 100 times larger, but less so for a small municipal utility.

The utility, Henderson Municipal Power & Light, selected the successful bidder, Community Energy, for a 50 MW solar power purchase agreement, and is now negotiating the contract.

Over the course of a year, the solar installation will produce about 15% of the utility’s electricity, said Heimgartner. That falls between Hawaii’s current 13% of electricity from solar and California’s 20%.

“In western Kentucky we do have a pretty good solar resource, clearly not as good as Arizona but a whole lot better than New York or New Jersey or other places that are doing utility-scale solar,” said Heimgartner, a utility industry veteran with experience in West Coast markets.

The added solar “will have a downward effect on rates,” he said, and the utility will propose “slightly” lower rates, following a three-year period without price increases. “And in public power, that’s the right answer. You watch out for your customers. That’s my whole job.”

The resource plan

Henderson Municipal Power & Light contracted with GDS Associates to prepare the integrated resource plan. Beyond the 50 MW of solar, the least-cost plan includes meeting ramping needs with 20-MW reciprocating engines, plus a suggestion, said Heimgartner, to “get in gear and start moving forward with [energy] conservation.”

The utility will continue to buy the rest of its power on the wholesale market, and to contract for capacity for peak demand periods. Capacity in the utility’s MISO grid region is currently “very, very cheap” at 15 cents per kilowatt-month, he said. The resource planning process showed that this approach would be more cost-effective than upgrading an aging coal plant it owned or repowering it with gas, so the utility retired that coal plant and sold it; it remains idle under the new owner.

The solar procurement

While the Henderson utility routinely issues requests for proposals (RFPs), it had not previously conducted a solar procurement, and so it worked with GDS Associates, as well as the McCarter & English law firm and a local law firm, to develop a solar power purchase RFP, Heimgartner said.

GDS sent a notice of the RFP to about 250 organizations, including news organizations, he estimated, and the American Public Power Association also sent it out widely.

In response the utility received 28 proposals from 21 bidders, of which 21 proposals were for solar and the remaining seven for solar plus storage.

After seeing the solar-plus-storage bids, the utility chose to meet its ramping needs with reciprocating engines. Heimgartner said those engines, also known as RICE units, will be needed for fast ramping “as more and more renewables come online.”

Cooperation

The Henderson utility has been learning from the Kentucky Municipal Energy Agency, which serves ten municipal utilities across the state and is building an 86 MW solar plant. “They’re talking lead times and logistics and all the things that we’re just starting to go through,” Heimgartner said.

In turn, he said, “we have talked to a lot of people who are interested” in Henderson’s work, including its reciprocal engine installations.

“We’re at least seven to ten years away from having duck curve issues like California,” Heimgartner said. “Until then, anybody who’s got a summer peaking resource has gold. It would be worth far more on the open market than what you pay for it.”

Municipal utilities and rural co-ops serve about 50 million people in the U.S., according to the American Public Power Association.