GHBLP Power Supply Plan
BLP Power Supply Plans
The Board of Light of Light and Power (the BLP) is a municipally-owned electric utility of the City of Grand Haven. The system was established in 1896, 125 years ago, and has evolved over the years to meet the electrical needs and expectations of the City of Grand Haven, and portions of the City of Ferrysburg, Grand Haven, Robinson, and Spring Lake townships. The BLP now serves approximately 14,700 customers in the tri-cities area (about 12,900 residential customers and 1,800 commercial, industrial, and municipal customers).
Throughout its history, the BLP has locally generated most of the electricity it has distributed to its customers. Since 1961, this power has come largely from the Sims Power Plant on Harbor Island – first from Units I and II, and since 1983, primarily from Unit III. Units I and II were retired in 1986. Unit III last generated power on February 13, 2020, and the plant was retired and demolished thereafter.
The Deisel Plant, which was originally constructed in 1929, contained one operable engine which was officially retired June 1, 2020. This last remaining engine had operated sparingly in the years leading to its retirement and was normally placed in a stand-by condition, only called upon during peak times when demand for electricity was at its highest or during emergencies when supply was limited. The Diesel Plant property is now being sold by the City for redevelopment.
The graph and chart above provide historical information on the BLP’s local generation output and wholesale power transactions in the twenty-fiscal year (July 1 through June 30) period from FY 2001-2020 and projects forward five years the estimated system power supply for FY 2021-2025.
Total annual retail sales (including street lighting) over this period peaked in the fiscal year 2006 at about 313,200 MWh, and then subsequently dropped over the ensuing four consecutive years to 262,400 in the fiscal year 2010 (an average 4.33% annual reduction over this four-year time frame). In the nine years from the fiscal year 2010 to 2019, the BLP experienced a modest annual growth rate in retail sales of approximately 1.55% per year to 301,300 MWh, and then retail sales (MWhs) decreased over 7.5% to 278,600 in the fiscal year 2020 because of the COVID-19 pandemic. An annual growth of 3.8% was forecasted in the fiscal year 2021, restoring a portion of the lost load from the fiscal year 2020. Required BLP system input (power supplied to the distribution system) exceeds retail sales by an average of 3.2% over this 20-year period (to account for distribution system losses).
As displayed on this graph, prior to the fiscal year 2010, the BLP system and its local generation supplied more power to the wholesale marketplace (the regional power grid) than the BLP purchased from it. During this time, “net” wholesale power sales to the regional network peaked in the fiscal year 2005 and 2006 at 122,600 MWh and 109,700 MWh, respectively. Net BLP generation during these two years peaked at 428,200 MWh and 434,900 MWh, burning 206,500 and 209,800 tons of coal at Sims in these two fiscal years.
While Sims continued to produce and meet substantial portions of the BLP’s system needs until its retirement, in each fiscal year since 2010, the BLP was a “net” purchaser of power (buying more electrical energy from the regional wholesale marketplace than it sold) for two reasons. The first being, the State of Michigan began requiring all utilities in the state to buy increasing volumes of Renewable Energy. For the BLP, these renewable purchases are represented by 1.4% of the required system energy needs in the fiscal year 2011 rising each year to 12.6% of the system total needs in the fiscal year 2020. The second reason was that wholesale power prices from other sources, primarily natural gas-fired generation units in the region, become less expensive to operate during most periods of the year(s) as compared to “baseload” operations of Sims Unit III. Sargent & Lundy noted this in their April 2012 Integrated Resource Plan Prepared for the GHBLP, which stated in the findings and conclusions, “based on our fuel and market price forecasts, the cost of market purchases is lower than (to continue) operating the Sims plant.” This was primarily brought about by the reduced cost of natural gas extraction through fracking. While a change in the dispatch and operating schedule in fiscal years 2016-2018 allowed for the temporary increased competitiveness of Sims Unit III in this wholesale marketplace, mounting repair, environmental compliance, and major overhaul costs at the plant, primarily because of the unit’s age, ultimately led to the Unit’s retirement in the fiscal year 2020. Fiscal year 2021 then became the first year in the BLP’s 125-year history where 100% of the system’s capacity and energy needs were purchased from remote generating resources located outside of the BLP’s distribution system.
While the BLP had been interconnected to the regional transmission network since the early 1960s, these interconnections and the BLP’s own local 69-kV sub-transmission lines had become insufficient to reliably import adequate power to meet the BLP’s peak summer demands without running local generation. In other words, the Sims power plant was never operated “isolated” or “islanded” from other regional network resources, it was operated in parallel, or “in-synchronization” with them, and the Sims power plant, together with the regional grid, reliably met the energy and capacity requirements of the system. Neither alone could do so adequately as the Sims plant approached its end-of-life. Additionally, the BLP did not procure from the regional network operator “firm” transmission service prior to Sims’ retirement. The BLP essentially only purchased “back-up transmission” to its local resources on an interruptible basis prior to 2020. For reliability purposes, very few utilities in the country operate in a non-firm status with their respective regional transmission system. This is why, in the three years prior to the Sims closure, the BLP spent over $6 million dollars reconstructing these network interconnections and local 69 kV lines in preparation. Wolverine Power Supply Cooperative and ITC, the owners/operators of the transmission network around Grand Haven, also invested millions of dollars to increase the capacity and reliability of the system supplying us power in the absence of local generation. The BLP subsequently filed and received “Network Integration Transmission Service,” or NITS, from the Midcontinent Independent System Operator (MISO) beginning June 1, 2020, guaranteeing a firm supply of power to meet our system needs without operating any local generation, allowing for the retirement of both the Diesel Plant and Sims. This change in network status dramatically increased the electrical reliability to the BLP’s service territory.
Although the BLP has been interconnected to “the grid” for nearly 60 years, it never operated as an independent entity within the broader wholesale power marketplace. The BLP has always chosen to “pool” its loads and generating resources with other smaller market participants to gain the economies of scale and scope necessary in the broader regional network, first within the Municipal and Cooperative Pool (MCP), then the Michigan Public Power Agency (MPPA) Power Pool, and most recently MPPA’s Energy Services Project operating within the MISO regional marketplace. MPPA operates as the “market participant” in MISO on behalf of its municipal electric utility members, including the BLP. Despite what many locally believe, the BLP does not, and never has, transacted individually to purchase, or sell, power to “the grid.” For more than 25 years, MPPA has provided these services to GHBLP under contract, acting as our agent in these complex power supply transactions. Upon the closure and retirement of Sims, MPPA has simply provided “more of the same,” under our Energy Services Agreement, approved between MPPA and the BLP in 2009 and amended in 2011. MPPA now provides 100% of the BLP system’s capacity and energy, as well as pooled network transmission service, as it does for many of its 22 member systems.
In December 2018, Burns & McDonnell completed their Power Supply Plan Prepared for GHBLP, in which their primary conclusion was, “The Sims plant should be retired on an economic basis. Based on recent historical and projected market conditions, the most economically advantageous configuration would be reliance on wholesale market supply (through MPPA). With the transmission improvements currently underway, the MISO network should be able to support this quantity of supply import and recent system operations concur with this conclusion. There is a case to maintain (some) local generation to diversify the energy portfolio (risk mitigation) and provide a contingency supply.” Furthermore, Burns & McDonnell concluded, “local generation serves as a hedge against potentially unfavorable market conditions, mitigating some of the risks of 100 percent network supply.” The findings of this study was consistent with past analysis conducted by other engineering firms the Board has hired such as Sargent & Lundy and Black & Veatch. Accordingly, then Burns & McDonnell recommended the BLP evaluate the installation of Reciprocating Internal Combustion Engines (RICE) on the Sims site upon the Sims Plant’s demolition as this equipment is “flexible across a wide range of load profiles, has responsive and prompt ramp rates, takes advantage of low natural gas prices,” and supplements and complements purchases from elsewhere in a diversified power supply portfolio; and, “should the community decide to pursue a local generating (RICE) facility, combined heat and power functionality could be evaluated for snowmelt purposes.”
The BLP and City Council unanimously approved the following resolution to approve the closure of Sims, also in late 2018, upon the release of the Burns & McDonnell Power Supply Plan:
The decommissioning of the Sims Power Plant is authorized effective June 2020, conditioned on the commitment by the BLP (that was later resolved by the Board) that by June of 2023, Grand Haven will have the capacity to generate a majority of the local electricity within the service area and that future facilities will include capacity to partner in the support of the snowmelt system.
Following Burns & McDonnell’s initial assessment of a 36 MW (enough capacity to generate a majority of the electric energy required of the system) RICE project on the Sims site, they concluded the proposed “Project” as defined in their report dated October 2019 “is cost-prohibitive;” however, they additionally recommended the BLP should “consider generation capacities below 27 MW in order to avoid natural gas infrastructure upgrade requirements and costs above this threshold.” The report also found the BLP should then “evaluate needs for power supply capacity, administrative, and operations at the Harbor Island facility, and consider what scope can be scaled back to meet budget requirements” and to “evaluate smaller, modular reciprocating engines to reduce capital costs.” They also recommended proceeding with Sims plant demolition, island substation reconstruction, initial site environmental remediation activities, temporary snowmelt equipment installation, and to begin instituting long and short term market purchases through MPPA (beginning to develop the diversified power supply portfolio Burns & McDonell called for in their Power Supply Plan – its primary recommendation) all as more detailed analysis of a smaller, flexible, combined heat and power RICE project and necessary Sims site Master Planning is being further conducted during the calendar year 2020.
The BLP then hired ProgressiveAE and Power Engineers Collaborative (PEC) to review and “right-size” a smaller combined heat and power (CHP) plant (to meet the snowmelt criteria both the BLP and City Council desired), design a proposed Operations and Technical Center to meet the BLP changing operational needs, and develop a Master Plan to redevelop the Sims site on Harbor Island for utility and non-utility uses within its established budgetary constraints and five-year capital funding plan. The newly proposed CHP was designed to supplement and complement the broader diversified power supply portfolio being assembled by the BLP through MPPA. As more resources in the power supply portfolio became known, the analysis of the CHP was updated and refined throughout this planning process. During 2020 and 2021, Bierlein Companies Inc. was contracted to demolish the Sims plant and Golder Associates Inc. was hired to assist the BLP in initial CCR closure activities, and to gain necessary concurrence and permits from the Department of Environment, Great Lakes & Energy (EGLE) and the Environmental Protection Agency (EPA) while also assisting with the development of longer-term budgets for expected environmental remediation costs.
Upon the closure of Sims, the BLP, through MPPA implemented a “Stable” power supply purchasing Plan, with a 60-month hedging horizon, as contained in the MPPA/GHBLP approved Hedge Policy and Energy Risk Management (ERM) Policy. The financial “bi-lateral” energy and capacity hedges are supplemented through balancing day-ahead and real-time energy at the hourly Locational Marginal Price (LMP) by MPPA and are then being blended with longer-term structured renewable energy transactions (wind and solar) at higher and higher levels as these transactions become more and more competitive in the regional marketplace (as evaluated by MPPA and its members collectively). As the power supply chart depicts, by the fiscal year 2025, the BLP is projecting about 28.7% of its diversified power supply portfolio will come from renewable resources (solar 13.0%, wind 7.9%, and landfill gas 7.8%). By the end of the fiscal year 2028, approximately 2/3 of the MPPA’s landfill gas renewable contracts will expire (impacting the BLP purchases from MPPA accordingly), and the BLP is now exploring with MPPA replacing this loss with additional solar purchases to continue expanding this portion of the BLP’s renewable portfolio with the goal of reaching 35% renewable by 2030. As these purchases of landfill gas renewable energy represent the highest cost component in the BLP power supply portfolio, this increased level of future replacement renewable energy should come with substantially reduced costs.
The solar and wind renewable contracts entered into are primarily energy contracts. They come with only a fraction of the installed rated capacity. As increased amounts of intermittent generation are added to the power supply portfolio, the need for “quick start-dispatchable at command generation” becomes greater. However, it should be noted that the proposed 12.5 MW CHP Plant will only operate and generate energy for the system, beginning in the fiscal year 2024, when there are cost savings associated with snowmelt operations or during high demand periods when LMPs exceed the fuel and operating costs of the CHP plant (most often when intermittent renewable energy sources from wind and solar assets are not producing adequate supply to meet the regional system load demands). It is important to note here that energy from this proposed CHP/peaking plant will not displace any energy the BLP is receiving from its renewable contracted sources, and the total annual energy produced by the CHP is projected to be about 10% of the renewable energy the BLP is expected to purchase in the fiscal year 2025 and only about 3% of the annual required energy needs of the BLP system during that year.
Within the BLP’s FY 2022-2026 Strategic Plan, the BLP sets the following “Strategic Objective” within the Power Supply “Strategic Priority” area:
“GHBLP will maintain a sustainable, economical, and diversified power supply portfolio, consistent with proven energy risk management practices.”
Additionally, the Plan specifically identifies the following three goals within this area of focus (i.e. Power Supply):
- Evaluate potential projects, emerging technologies, and longer-term purchased power alternatives that will provide a sustainable, economical, and diversified power supply portfolio
- Quarterly review and modify an ongoing 5-year energy and capacity plan developed by MPPA consistent with established energy risk management practices
- Upon approval by the Board and City Council, complete design and construct an operations and technology center and local generation by June 2023 to supplement and complement a longer-term diversified power supply portfolio
The BLP’s strategic power supply objective and goals are based on our understanding of the community’s expectations for “reliable, affordable and sustainable” electric services, consistent with our mission statement to:
Meet our community’s expectations for reliable electric service that returns value to our customers and ensures the economic and environmental sustainability of the utility.