PUBLIC (REDACTED) VERSION May 14, 2007 1 TABLE of CONTENTS 2 3 I
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RC Exhibit C (RMF) STATE OF INDIANA INDIANA UTILITY REGULATORY COMMISSION JOINT PETITION AND APPLICATION OF PSI ENERGY, INC. , D/B/A ) DUKE ENERGY INDIANA, INC., AND SOUTHERN INDIANA GAS ) AND ELECTRIC COMPANY, D/B/A VECTREN ENERGY DELIVERY ) OF INDIANA, INC., PURSUANT TO INDIANA CODE CHAPTERS 8-1- ) 8.5, 8-1-8.7, 8-1-8.8, AND SECTIONS 8-1-2-6.8, 8-1-2-6.7, 8-1-2-42 (A) ) REQUESTING THAT THE COMMISSION: (1) ISSUE APPICABLE ) CERTIFICATES OF PUBLIC CONVENIENCE AND NECESSITY AND ) APPLICABLE CERTIFICATES OF CLEA COAL TECHNOLOGY TO ) EACH JOINT PETITIONER FOR THE CONSTRUCTION OF AN ) INTEGRATED GASIFICATION COMBINED CYCLE GENERATING ) FACILITY (“IGCC PROJECT”) TO BE USED IN THE PROVISION OF ) ELECTRIC UTILITY SERVICE TO THE PUBLIC; (2) APPROVE THE ) ESTIMATED COSTS AND SCHEDULE OF THE IGCC PROJECT; (3) ) CAUSE NO. 43114 AUTHORIZE EACH JOINT PETITIONER TO RECOVER ITS ) CONSTRUCTION AND OPERATING COSTS ASSOCIATED WITH ) THE IGCC PROJECT ON A TIMELY BASIS VIA APPLICABLE RATE ) ADJUSTMENT MECHANISMS; (4) AUTHORIZE EACH JOINT ) PETITIONER TO USE ACCELERATED DEPRECIATION FOR THE ) IGCC PROJECT; (5) APPROVE CERTAIN OTHER FINANCIAL ) INCENTIVES FOR EACH JOINT PETITIONER ASSOCIATED WITH ) THE IGCC PROJECT; (6) GRANT EACH JOINT PETITIONER THE ) AUTHORITY TO DEFER ITS PROPERTY TAX EXPENSE, POST-IN- ) SERVICE CARRYING COSTS, DEPRECIATION COSTS, AND ) OPERATION AND MAINTENANCE COSTS ASSOCIATED WITH THE ) IGCC PROJECT ON AN INTERIM BASIS UNTIL THE APPLICABLE ) COSTS ARE REFLECTED IN EACH JOINT PETITIONER’S ) RESPECTIVE RETAIL ELECTRIC RATES; (7) AUTHORIZE EACH ) JOINT PETITIONER TO RECOVER ITS OTHER RELATED COSTS ) ASSOCIATED WITH THE IGCC PROJECT; AND (8) CONDUCT AN ) ONGOING REVIEW OF THE CONSTRUCTION OF THE IGCC ) PROJECT ) VERIFIED PETITION OF DUKE ENERGY INDIANA, INC. FOR ) AUTHORITY PURSUANT TO AN ALTERNATIVE REGULATORY ) PLAN AUTHORIZED UNDER I.C. 8-1-2.5 ET SEQ. AND I.C. 8-1-6.1,8-1- ) 8.7, AND 8-1-8.8 TO DEFER AND SUBSEQUENTLY RECOVER ) CAUSE NO. 43114 S1 ENGINEERING AND PRECONSTRUCTION COSTS ASSOCIATED ) WITH THE CONTINUED INVESTIGATION AND ANALYSIS OF ) CONSTRUCTING AN INTEGRATED COAL GASIFICATION ) COMBINED CYCLE ELECTRIC GENERATING FACILITY ) DIRECT TESTIMONY OF ROBERT M. FAGAN ON BEHALF OF THE CITIZENS ACTION COALITION OF INDIANA SAVE THE VALLEY VALLEY WATCH SIERRA CLUB PUBLIC (REDACTED) VERSION May 14, 2007 1 TABLE OF CONTENTS 2 3 I. Introduction................................................................................................................. 1 4 II. Summary of Testimony........................................................................................... 2 5 III. Wind........................................................................................................................ 5 6 A. Utility-Scale Wind Turbine Generator Technologies............................................. 5 7 B. Wind Potential –Indiana ......................................................................................... 6 8 C. Cost of Indiana Wind Energy ............................................................................... 13 9 D. Integrating Wind Energy to Serve Indiana Native Load ...................................... 19 10 E. Applicants’ Representation of Wind Resources in Modeling............................... 23 11 F. Duke Energy Indiana’s Acknowledgement of the Viability of Wind Energy 12 Resources ...................................................................................................................... 27 13 IV. Combined Heat and Power ................................................................................... 29 14 A. In-State Combined Heat and Power – Potential and Economics.......................... 29 15 16 17 18 EXHIBITS 19 20 Exhibit RMF-1 Resume of Robert M. Fagan 21 Exhibit RMF-2 Evolution of US Commercial Wind Technology 22 Exhibit RMF-3 Installed Capacity and Cost Trends 1980-2005 - US Wind Power 23 Exhibit RMF-4 US Department of Energy / National Renewable Energy 24 Laboratory (US DOE/NREL) - Wind Map of Indiana - 50 Meters 25 Exhibit RMF-5 US DOE/NREL Report on Wind Energy Resource Maps of 26 Indiana 27 Exhibit RMF-6 US DOE/NREL Wind Maps of Indiana – 50, 70, and 100 Meters 28 Exhibit RMF-7 Indiana Tall Tower Locations and Average Wind Speed Data 29 Exhibit RMF-8 NREL Presentation on Indiana Wind Resources from the Wind 30 Powering American Summit Meeting of June, 2006 31 Exhibit RMF-10 Minnesota Department of Commerce Wind Integration Study 32 Exhibit RMF-11 Summary of Wind Penetration Levels in Some European Power 33 Systems 34 35 CONFIDENTIAL EXHIBITS 36 37 Exhibit RMF-9 Levelized Costs of Indiana Wind Energy 38 Exhibit RMF-12 Strategist Modeling Input Summary Pages – Cumulative 39 Maximum Amount of Wind Additions 2006-2028 Period 40 Direct Testimony of Robert M. Fagan – Synapse Energy Economics i 1 I. INTRODUCTION 2 Q. PLEASE STATE YOUR NAME, OCCUPATION, AND BUSINESS 3 ADDRESS. 4 A. My name is Robert M. Fagan. I am a Senior Associate at Synapse Energy 5 Economics, Inc., 22 Pearl Street, Cambridge, Massachusetts, 02139. 6 Q. PLEASE SUMMARIZE YOUR PROFESSIONAL EXPERIENCE AND 7 EDUCATIONAL BACKGROUND. 8 A. I am an energy economics analyst and mechanical engineer with over 20 years of 9 experience in the energy industry. My work has focused primarily on electric 10 power industry issues, especially: economic and technical analysis of wholesale 11 and retail electricity markets; analysis of electric power transmission pricing 12 structures; assessment and implementation of demand-side resource alternatives; 13 and review and examination of renewable energy technologies and policies 14 including the increased market penetration and technical potential of utility-scale 15 wind power. I hold an M.A. from Boston University in Energy and 16 Environmental Studies and a B.S. from Clarkson University in Mechanical 17 Engineering. My resume is included as Exhibit RMF-1. 18 Q. ON WHOSE BEHALF ARE YOU TESTIFYING? 19 A. I am testifying on behalf of the Citizens Action Coalition of Indiana (“CAC”), 20 Save the Valley, Valley Watch and the Sierra Club – Hoosier Chapter. 21 Direct Testimony of Robert M. Fagan – Synapse Energy Economics 1 1 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY? 2 3 A. The purpose of my testimony is to demonstrate the existence of significant 4 quantities of certain cost-effective supply-side alternatives that are less expensive 5 and less risky (to consumers) than the proposed IGCC coal plant. I examine the 6 technology, potential and cost of these supply-side resource alternatives to Duke 7 and Vectren’s proposed IGCC plant. In particular, I describe certain technologies 8 that are available to meet incremental supply-side requirements Duke Energy 9 Indiana and Vectren may have, and I discuss the quantity available in or around 10 the state of Indiana. I examine the likely costs of such alternatives. My focus is 11 on wind power and efficient combined heat and power “distributed” generation 12 options. 13 II. SUMMARY OF TESTIMONY 14 Q. PLEASE SUMMARIZE YOUR TESTIMONY. 15 A. Assessment of wind energy potential in the state of Indiana by the US Department 16 of Energy indicates a technical potential of up to 198,000 MW of installed 17 capacity at NREL (National Renewable Energy Lab, part of the US Department 18 of Energy) class 4 and class 5 wind sites at 100-meter turbine hub heights. This 19 potential is estimated at 42,000 MW at class 4 sites at lower hub heights of 70 20 meters. The existing generation interconnection queue of the Midwest 21 Independent System Operator (MISO) indicates a current commercial potential 22 for wind power of over 3,000 MW in Indiana. The same queue shows over 23 45,000 MW of potential wind power projects in ten other states within or within 24 reach of the MISO region, including over 12,000 MW in adjacent states. Direct Testimony of Robert M. Fagan – Synapse Energy Economics 2 1 Tapping into even just a small fraction of this potential can provide more 2 annual energy than the proposed IGCC coal plant at lower costs; and intelligent 3 site selection should allow for the best wind sites – i.e., those with the best 4 combination of high annual capacity factor, low installation cost, and proximity to 5 the transmission grid – to be secured first. 6 It is not surprising that wind power holds such commercial promise for 7 Indiana and other Midwestern states. Wind is a technologically and commercially 8 mature technology, and is rapidly increasing its penetration into electricity 9 markets nationwide. Wind power installations have already increased 10 significantly in the MISO states. Wind turbine generation technology has 11 improved dramatically over the past 20 years, bringing increased equipment 12 reliability and a continuing decline in unit costs. Coupled with relatively high 13 fossil fuel prices, increasing environmental and regulatory stringency, coordinated 14 power system operation across broad regions, improvements to transmission tariff 15 protocols and the existence of a federal production tax credit, it is only logical that 16 wind power’s commercialization has increased exponentially. 17 Using Duke Energy Indiana’s assumptions for key cost drivers for wind 18 power, Indiana and Midwest region wind is a considerably less expensive energy 19 resource than IGCC coal. The mid-range of reasonable costs for Indiana wind 20 power is approximately $**/MWh (levelized, $2005), which is significantly 21 ***** than the levelized cost for IGCC coal energy. Capturing the best wind 22 resources first would likely result in even lower