NRG Makes Double Play on Coastal California Plants

Power Market Today, Intelligence Press
09/13/2007

Two strategically located ocean-view natural gas-fired generation plants straddling the Southern California coast have the undivided attention of their owner, Princeton, NJ-based NRG Energy Inc., the independent electric generation plant developer/operator that wants to make repowering its response to global climate change. NRG's 1,000 MW Encina and 670 MW El Segundo plants, located about 90 miles apart, could become models for that and much more.

With its plants sitting on 135 acres of prime beachfront real estate, NRG is pursuing a strategy to downsize each one's footprint, greatly increase their efficiency and quick-start capability, and make the majority of the sites' land available for commercial development. The repowering plans for both plants have been before the California Energy Commission (CEC) for several years, but have been reworked several times.

NRG earlier this year filed an amendment to the El Segundo repowering permit and the company expects to have that resolved by the first quarter of next year, according to Steve Hoffmann, senior vice president and head of NRG's western operations, who spoke with Power Market Today Tuesday. Future supply contracts for this facility and Encina are being reviewed by Southern California Edison Co. and Sempra Energy's San Diego Gas and Electric Co. ( SDG&E), respectively.

The Encina amended filing with the CEC is expected to be submitted by Friday (Sept. 14), Hoffmann said. "We currently have a permit for the repowering allowing us to use ocean water cooling," he said. "Now it will be air-cooled, which further helps reduce the size of the acreage needed for the plant. This will replace the existing mothballed unit and the air-cooling technology is a little different, so we need to amend the permit."

The plants' location within the load centers of two major utilities sharply narrows the market for the plants' output, Hoffmann said. "There really isn't much of a market for capacity for the length of time that we would need to lock in financing," he said.

Encina is targeted to complete its repowering in 2010, and El Segundo's repowering is anticipated just a year later, 2011. The buyers of the power -- Edison and SDG&E -- presumably will supply the natural gas for each plant. "Typically we just buy from the market, we don't buy from a specific source," Hoffmann said.

Citing confidentiality agreements, Hoffmann shied away from saying much specifically about ongoing talks with SDG&E and Edison regarding the prospective repowered plants. "We're certain, however, we should have some announcements to make within the next six months," he said.

NRG during the amendments and other refinements to its plans for the two plants has decided to make them large peaking or intermediate load plants, something that was not originally contemplated, just like dry cooling was not an option originally. "The current Encina plant operates at something below a 14% capacity, so that is an intermediate resource at best," Hoffmann said. "The technology we have chosen to bid into the utilities has attributes comparable to a combined-cycle plant and is a variable heat-rate unit, yet it can get half the plant's megawatts on line in 10 minutes. They'll be dispatched as a peaking or intermediate unit."

The current 1,000 MW gas-fired plant at Encina is anticipated to become commercially obsolete in the 2014 time frame, and the replacement units will be "a lot more space efficient" because of air-cooling and transforming to intermediate and peaking use. Only about 20% or 20 acres in the current 100-acre Encina site will be needed for power plant operations.

"We'll have a dramatic reduction in the amount of that site dedicated to power production," Hoffmann said. "In El Segundo, we are looking at using possibly seven acres of a 35-acre site. They both sit right on the beach."

In response to questions, Hoffmann offered few details about the eventual commercial development of parts of the power plant sites, other than to confirm that it won't begin until after the repowering is completed and that who will do the development and how that will be done are still undetermined. Hoffmann did add, however, that he gets more calls from real estate developers these days than electricity providers wanting purchased power deals.