Calpine, Texas co-op to build 418MW peaker

OREANDA-NEWS. Independent power producer Calpine and a Texas power cooperative plan to build a 418MW, natural gas-fired peaking plant in Texas when market conditions warrant.

Calpine and the Guadalupe Valley Electric Cooperative will jointly own the new simple-cycle plant which Calpine will build adjacent to its Guadalupe Energy Center near San Antonio.

"We have a customer with a low cost of capital that wants direct access to peaking capacity," Calpine chief executive Thad Hill told investors on a call.

While Exelon is pursuing plans to build two 1,000MW gas plants in the Electric Reliability Council of Texas (ERCOT) by 2017, Calpine, NRG, Tenaska and other developers have taken a cautious stance toward adding generation as they wait for signs that wholesale prices will climb to a level to justify construction or for long periods of scarcity prices.

Calpine said it has the option to build the Guadalupe plant as early as 2017 or as late as 2019, depending on market conditions.

Mild summer weather and completion of a few new power plants have served to mask potential supply risks in the state where power use rose by 2.5pc in 2014, Calpine and other generators have said. Any unforeseen event could push the market into scarcity, sending wholesale prices as high as \$9,000/MWh this summer.

The Texas power supply is tighter today than it was in 2011 when extreme heat and a statewide drought pushed power prices higher, and a hot-than-normal summer could send prices significantly higher than in 2011, Calpine senior vice president for commercial operations Andrew Novotny said. ?Houston-based Calpine purchased the 1,050MW combined-cycle Guadalupe plant in 2014 from closely held Wayzata Investment Partners for \$625mn. It also bought rights to build a peaking unit at the site, but said it would not pursue construction at that time due to low wholesale prices.

The plant is in Guadalupe County, about 30 miles (48km) east of San Antonio, in the busy Eagle Ford shale formation where a drilling boom has spurred a sharp increase in electric demand since 2008, transforming the formerly rural area.

Peak assessments at ERCOT South hub average \$41/MWh for calendar-2019, up by about 10pc from the 2016 strip.