SRP Warns Arizona Regulator Reliability at Risk by 2024 Without Gas Plant Expansion

Salt River Project Agricultural Improvement and Power District (SRP) is seeking a rehearing and reconsideration of the Arizona Corporation Commission’s (ACC’s) denial of a major gas power plant expansion, which the public power utility has stressed will be crucial for near-term system reliability and long-term renewable integration. 

In a filing on May 16, SRP urged the ACC to reconsider its April 28 decision denying a Certificate of Environmental Compatibility (CEC) for the utility’s urgent plans to expand the 575-MW gas-fired Coolidge Generating Station, which is located just outside metropolitan Phoenix, with 820 MW of fast-start capacity by 2025.

The ACC denied the environmental permit in a 4–1 vote on April 12, detailing its reasons for the denial in an April 28 order. The commission cited concerns about SRP’s application, evidence on the record, and its process to garner enough public participation from residents in the nearby historically Black community of Randolph. The “evidence in the record was not sufficient to weigh the balancing of the public interest in favor of granting the CEC,” the order concludes.

SRP: Aeroderivative Gas-Fired Expansion Is the Only Reliable Option

SRP, which unveiled its “fast-track” plans to expand the Coolidge Station in August 2021, has proposed adding 16 51.25-MW GE Sprint PC-NXGEN LM6000s—fast-ramping single-cycle aeroderivative turbines—to the 2011-completed plant’s 12 LM6000 single-cycle turbine units.

The expansion, which envisions adding at least 400 MW of firm and flexible capacity by summer 2024 and an additional 400 MW in 2025, is necessary to reliably support soaring regional demand, including from large industry, residential, and commercial consumers in the Phoenix metropolitan area, it said. Filings with the ACC suggest the project will also include associated interconnection facilities, including new 500-kV transmission lines and a new 500-kV switchyard.

SRP, which is the largest provider of power and water in the greater Phoenix metropolitan area, on Monday said that unless reconsidered and reversed, the ACC’s order “will impair the reliability of the SRP system, creating a serious risk that there will be insufficient resources necessary to serve anticipated customer electrical demand beginning in 2024 and also will hamper SRP’s ability to integrate additional renewable resources into its system as SRP will lack critical quick start flexible generation.”

The expansion, pivotally, presents the least-cost option to support its carbon reduction goals with urgency, in the face of what it deems “extraordinary load growth,” the utility argued. That’s why, unless reversed, the commission’s order will dramatically increase costs to SRP customers, it suggested.

“SRP must now seek to replace the reliable, flexible, least-cost generation option of the Coolidge Expansion Project with dramatically more expensive and uncertain options, which at this time SRP projects to be substantially greater than the costs of the project,” it said. Affordability is a significant concern because “SRP is a not-for-profit public power provider, there are no shareholders to bear the consequences of the commission’s order, only customers,” it noted.

SRP Says Solar and Battery Projects Facing Serious Supply Chain Risks, Delays

In its request for rehearing and reconsideration, SRP argued that the ACC’s order contained several legal and factual errors, which require scrutiny and reversal. SRP said its CEC application complied with all statutory and regulatory requirements. It also pushed back on the ACC’s legal conclusions for the denial on the basis that SRP did not conduct an additional “All Source Request for Proposals (RFP),” that the SRP board project review process was “rushed,” and that the board did not review analysis by consulting group E3 to determine how much solar and battery storage would be needed to provide the equivalent reliability of the Coolidge expansion.

“None of the projects and resources that bid into SRP’s ongoing ‘All Source’ RFP is capable of providing the dependable flexibility and capacity of the [Coolidge expansion],” SRP said on Monday. “In addition, given the recent well-known and increasing solar panel and battery supply chain challenges, there is no certainty of deliverability for alternative resources to meet demand in the summer of 2024. The additional costs, and any societal, economic, and health ramifications due to insufficient and unreliable power in the summer of 2024, will be borne by SRP’s customers and the state,” it argued.

A U.S. Commerce Department investigation announced on March 28 has significantly disrupted solar panel supply chains, and  all solar projects that SRP had under contract to begin operation in 2023 and 2024 are “at risk of significant delays and cost increases,” SRP noted.

The impact, which intervenors like the Sierra Club has acknowledged, is widespread, it suggested. “As a result of the investigation, California faces a delay of at least 4,350 MW of solar plus storage projects that the state needs to come online between 2022 and 2024.5 Intervenor Sierra Club, who hailed the Commission’s denial of the Project in April, warned of the consequences of the investigation in March,” it said.

Battery storage projects are also facing significant delays due to global supply chain challenges and increasing costs. “Demand for raw materials used in lithium-ion batteries exceeds supply and rising raw materials costs have reached a ‘crisis point’, with lithium carbonate prices having ‘quintupled since last August’,” the utility said. “Also of great concern are the operational challenges as evidenced by the recent fires at the Dorman Battery Storage Facility and the 400-MW Moss Landing storage facility in California,” it added. While SRP has a combined 1,350 MW of solar and battery storage projects contracted to be online by summer 2024, these delays make the Coolidge expansion “even more critical” than it was when the ACC denied the CEC in April, it noted.

ACC Denied Expansion Despite Recommendation by Line Siting Committee

SRP also suggested the commission’s denial is arbitrary, given that approval for the expansion had been recommended in February by the commission’s Arizona Power Plant and Line Siting Committee following an eight-day evidentiary hearing with 23 witnesses. ACC’s power plant and line siting committee, which is a legislature-established independent forum that evaluates applications to build power plants of more than 100 MW or large transmission projects in the state, voted 7–2 in support of the fast-track Coolidge expansion.

“The nine members of the Line Siting Committee fully considered the testimony, including testimony about past injustices to the Randolph community. They also considered the uncontroverted evidence that the Project was urgently needed and the evidence that the Project would be environmentally compatible, meet all applicable environmental requirements, and have minimal environmental effects,” SRP said. “They listened to the testimony that an alternative portfolio that included battery storage would cost customers an additional $637 million for no material decrease in carbon emissions.” 

The commission’s order effectively rejected the “Line Siting Committee’s thoughtful, comprehensive, factually accurate, and legally appropriate CEC and instead substituted an alternative order containing factual and legal errors that did not reflect the evidentiary record developed by the Line Siting Committee,” it added.

If left to stand, the order’s implications would be detrimental on a much larger scale, SRP added. “Many of these errors, if uncorrected, will increase uncertainty and costs for all future utility infrastructure projects—regardless of type—at precisely the worst possible time to do so—a time of rapidly growing loads, surging inflation, and supply chain disruptions. This will hurt customers and impair Arizona’s continued economic growth.”

SRP, however, acknowledged the project’s impact on the neighboring city of Randolph, a community founded in the 1920s, which had opposed the expansion owing to noise and light nuisances. “SRP is committed to providing long-term mitigation and support to the Randolph community,” the utility said. “SRP proposed, and the Line Siting Committee approved, millions in mitigation support projects as part of the initial CEC approval, including road paving in and around the community, scholarships and job training, and landscaping to screen the expansion and beautify the area,” it added.

“With the appeal, in the event of an approval of the CEC, SRP is proposing additional measures, including additional road paving, home repairs and energy efficiency improvements, and a community center. Combined, these measures total approximately $18 million in community support,” it said.

—Sonal Patel is a POWER senior associate editor (@sonalcpatel, @POWERmagazine).