CPS Energy Reconsiders Plan to Purchase Power from Texas IGCC Project

By Sonal Patel
Power Magazine

October 8, 2014 – San Antonio’s CPS Energy on Monday announced a new agreement to buy power from Summit Power’s proposed integrated combined cycle coal gasification (IGCC) plant that will include carbon capture, utilization, and storage.

The municipally owned utility will buy 200 MW of power from the the Texas Clean Energy Project (TCEP), which is about half the capacity of the $2.5 billion polygeneration plant that has been proposed to be built in West Texas by 2019.

CPS Energy last year let a key power purchase agreement with Summit Power to expire, blaming repeated delays in getting TCEP built and citing a vast supply of inexpensive natural gas to fuel its power plants.

“The parties have been in negotiations since,” said CPS Energy, though it did not disclose any financial details. “The new agreement is more favorable to CPS Energy customers, as power prices in the [Electric Reliability Council of Texas] market have dropped while the project has been in development.”

TCEP has been in development for four years, during which the price tag for the project soared from the originally estimated $2.2 billion to $3.5 billion, owing to increased labor (which is scarce due to the oil boom) and material costs. But this year, Summit reached a financing pledge from China Huanqiu Contracting and Engineering Corp. (HQC), which will lead the project’s third front-end engineering and design study and has reportedly agreed to keep costs in the $2.5 billion range.

TCEP has meanwhile secured $450 million in federal funding from the Department of Energy’s Clean Coal Power Initiative and $600 million in federal tax credits. Summit has also reached a deal to share information with the China Huaneng Group’s GreenGen IGCC and CCS project under construction in Tianjin province.

Summit Power CEO Jason Crew, who was newly appointed on Oct. 2, wants to close financing for the TCEP by April 2015 and begin construction soon after that.

For CPS Energy, which says it was “hopeful the project would be built,” power from the clean coal plant will help the utility diversify its power portfolio and reduce its carbon intensity, said CPS Energy CEO Doyle Beneby.

—Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)