Muscatine Power and Water’s Powering the Future initiative reached a milestone at June’s Board of Trustees meeting. In a decisive move to enhance the community’s long-term electric power needs, the Board of Trustees approved the purchase and installation of a state-of-the-art combined heat and power (CHP) unit. The Trustees unanimously voted in favor of integrating the CHP unit, referred to as “Unit 10” or the “Project,” into the Utility’s power generating resources. The Project, approved at an estimated net investment of $85M, compares to $240M invested in the early 1980’s for the construction of Unit 9.
This critical decision underscores MPW’s commitment to delivering reliable and affordable electricity. Unit 10 will serve as another piece of MPW’s Powering the Future initiative, which also includes the development of a 250-acre solar farm scheduled for completion in 2026. By simultaneously generating electricity and thermal energy, the CHP unit is not only efficient, but highly effective in reducing operational costs and emissions. In addition, combined heat and power projects are encouraged by the EPA, the Department of Energy and the Iowa Economic Development Authority due to their efficient use of energy.
Specific benefits of the CHP Project include:
Reliable
- The Project will supply another local source of energy for the Muscatine community.
- The Project provides reliable capacity, which helps support renewable energy sources and power purchase agreements.
- The Project will provide MPW with the capability to supply reliable electricity around the clock and the flexibility to accommodate future technologies.
Affordable
- The Federal government’s stringent environmental regulations for coal power plants will require additional investment and ongoing expenses for existing units to keep them working as coal-burning generators. A new CHP unit will not have the same costs.
- The Project maintains MPW’s diversified supply of electricity, by both generating electricity at its power plants and buying electricity via the open market.
Flexible
- The small generating capacity of the CHP unit keeps options for other types of generation to be added to MPW’s portfolio as its coal plants are retired.
- The Project supports MPW’s solar power purchase agreement to use renewable energy alongside cleaner energy from a natural gas generated baseload.
Sustainable
- Natural gas power plants produce lower emissions and greenhouse gases than coalburning generating stations, making them a cleaner source of electricity than coal.
- Unit 10 will include the latest safety technologies and meet all the latest emission standards for a power plant.
- A continued decline in MPW carbon dioxide emissions is expected following the future cessation of coal burning at Unit 7 and 8 generating stations.
MPW began researching alternate energy sources for power production in 2020 with the completion of a power supply study. Leidos Engineering, industry experts for energy programs and projects, conducted the study of future power supply scenarios. Twenty different portfolio scenarios were evaluated over multiple market cases, resulting in nearly 4,000 iterations of potential outcomes.
A scenario from the study that provided the best overall results included the development of a CHP unit as part of a strategy to phase down the use of coal, diversify MPW’s power generation portfolio, and maintain its award-winning reliability. Over the past few years, MPW staff have completed additional analysis on a CHP unit and refined the size and scope of the project to best fit Muscatine’s needs.
MPW also plans to take advantage of direct pay tax credits for this highly efficient project that became available through the Inflation Reduction Act of 2022 (IRA). Though MPW is a taxexempt entity, the IRA allows for direct reimbursement of a portion of the project costs as a way to encourage and facilitate the expanded use of CHP technology. This credit is estimated to be worth $10 to 13 million, saving MPW’s customers millions of dollars on the project.
Recent customer survey results emphasized the community’s strong preference for reliable and affordable energy over prioritizing renewable energy resources. Conducted in late 2023, the survey revealed that while many are in favor of incorporating renewable energy, a significant majority of respondents expressed concerns paying higher rates that would accompany a wider adoption of renewable sources.
“These findings reflect the community’s need for thoughtful and creative energy solutions that don’t overburden our customers unnecessarily,” continued Huston. “MPW’s decision to integrate a CHP unit into our Powering the Future project will address these key customer priorities by ensuring a diverse power supply portfolio while holding down the rates they pay.”
The addition of the CHP project to MPW’s portfolio is expected to have a small impact on customer rates. The project is expected to increase an average residential customer’s bill by less than a dollar per month. However, increased regulations on other resources are likely to have larger impacts on customers’ bills in the coming years.
“We are excited to move forward now that the Board has approved the CHP unit and authorized MPW to finalize negotiations and execute a new steam sales agreement with Grain Processing Corporation (GPC),” shared MPW’s General Manager, Gage Huston.
MPW reported that, similar to prior steam sales agreements, this will provide mutual benefit to both GPC and all MPW electric customers.
“Throughout the negotiations, I was truly impressed by GPC’s focus on ensuring this project was the right solution for all MPW customers.” Huston added, “GPC has a focus on seeking winwin solutions with their partners and you could definitely see that philosophy come through during this negotiation.”
The sale of steam from the new unit will provide margins that go into covering MPW’s operating costs. This Project achieves MPW’s reliability needs at a lower net cost than any alternative.
“In keeping with our core value of embracing sustainability, while seeking a balanced blend of technologies to meet system needs, the addition of solar into MPW’s energy portfolio makes sense,” shared Huston. “Decreasing our carbon footprint will have a positive, lasting impact on the environment. Significant interest from industrial and large commercial customers enabled MPW to add solar without passing incremental costs to residential customers and small
businesses.”
In November 2022, MPW announced its first utility-scale renewable project in Muscatine and entered into a Power Purchase Agreement (PPA) with Nokomis Energy for the Muscatine Solar 1 project. Solar 1 also supports MPW’s ambitious sustainability goal of reducing carbon emissions by 65% by 2030.
Since 2017, MPW’s wind portfolio has provided about 5.5% of local customer electric energy needs. Solar 1 would more than double the renewable energy in MPW’s portfolio to an estimated 11-12% once the project goes into service.
Construction on the 24,000-kilowatt solar installation at MPW’s Grandview Avenue Wellfield is anticipated to begin in fourth quarter of 2024, with an operational target of 2026. MPW had planned to have the project in-service sooner, but delays by the regional electric grid operator have pushed that project out.
MPW customers are encouraged to submit questions about the Powering the Future project via email at powerthefuture@mpw.org.
In other Board business, the Trustees:
- Approved the project summary form for Isett Substation Expansion Project at the amount of $252,500.
- Approved the revised/updated Customer Service Rules for Water, Electric and Communications Utilities.
- Approved a resolution recognizing Tracy McGinnis for years of service as the Board of Trustee of the Board of Water, Electric and Communications of the City of Muscatine, Iowa.
- Approved the recommendation to elect 2024/2025 Board Officers and approve 2024/2025 Board Committee appointments.
- Reviewed May financial results, which were stronger than expected with MPW net income of $123,000 versus a budgeted loss of $1.3 million.