NorthWestern Energy enters contracts for 325 megawatts of dispatchable capacity resources to serve Montana customers

Rhea-AI Summary

NorthWestern Energy has finalized contracts to acquire 325 megawatts of dispatchable capacity resources, addressing its capacity deficit in Montana. This includes a new 175 megawatt natural gas plant, a pending 50 megawatt battery storage project, and a 100 megawatt hydroelectric power purchase agreement. The Laurel Generating Station, expected to be operational by January 2024, will provide reliable energy during high demand periods. These initiatives aim to enhance energy reliability and support the company's goal of reducing carbon intensity by 90% by 2045.

Positive

• Contracts for 325 megawatts of dispatchable capacity resources will significantly reduce capacity deficit.
• 175 megawatt natural gas plant expected to be operational by January 2024.
• Addition of a 50 megawatt battery storage project to enhance energy storage capabilities.
• 100 megawatt hydroelectric power purchase agreement to diversify energy sources.
• Efforts align with a long-term goal of a 90% reduction in carbon intensity by 2045.

Negative

• Reliance on natural gas may be viewed negatively by environmentally-conscious investors.
• Pending regulatory approval for new projects introduces uncertainty and potential delays.

BUTTE, Mont., April 20, 2021 (GLOBE NEWSWIRE) -- NorthWestern Energy has entered into multiple contracts for projects to acquire 325 megawatts of dispatchable capacity resources: procurement and construction agreements for a 175 megawatt natural gas plant; a pending agreement to purchase capacity from a 50 megawatt battery storage project; and a power purchase agreement for 100 megawatts of predominantly hydroelectric resources.

The contracts were entered into after NorthWestern Energy completed its competitive solicitation process for long-term capacity resources issued in January 2020.

This will reduce NorthWestern Energy’s capacity deficit, decrease risk associated with market volatility and potential lack of availability, and provide increased reliability for our Montana customers. The additional capacity to produce energy will address more than half of NorthWestern Energy’s deficit in its supply portfolio serving Montana. The deficit is becoming more critical as some regional coal plants and other capacity resources are being shut down, compromising reliability during extreme weather conditions, including multi-day events, when energy demand is high.

NorthWestern Energy’s independent, third-party request for proposals evaluator, Aion Energy, received 180 proposals representing a wide variety of technologies from 21 bidders. NorthWestern Energy has selected three resources from the proposals submitted in response to the company’s request for proposals:

• NorthWestern Energy’s Laurel Generating Station will be a new 175 megawatt, reciprocating internal combustion engine (RICE units), natural gas plant in Laurel, Montana.
• Powerex Corp., a subsidiary of BC Hydro, has entered into a five-year power purchase agreement with NorthWestern Energy for 100 megawatts of capacity and energy products originating predominately from hydroelectric resources.
• Contract pending on an Energy Storage Project that will be a 50 megawatt battery storage system utilizing lithium-ion technology.
  

“This selection of diverse projects will provide critically needed flexible capacity from a combination of thermal and renewable resources,” said NorthWestern Energy Vice President Supply and Montana Government Relations John Hines.

The selected resources provide diversity in ownership and technology, including owned and market-based resources and the largest battery-storage project within Montana.

“This resource portfolio addresses a key portion of our immediate need for generation capacity while also allowing us to make progress toward our goal of an energy supply portfolio in Montana that reduces the carbon intensity of our electric generation by 90% by 2045,” said NorthWestern Energy Chief Executive Officer Bob Rowe.

NorthWestern Energy expects to submit an application for approval of the Laurel Generating Station and the 20-year contract for the pending Energy Storage Project to the Montana Public Service Commission on or about May 14, 2021. We anticipate the regulatory process to take approximately 9 months.

The $250 million Laurel Generating Station is expected to be available to serve customers by Jan. 3, 2024.

For the 175 megawatt natural gas-fired RICE plant near Laurel, Caterpillar Power Generation Systems, LLC, a subsidiary of Caterpillar, Inc. will supply the RICE units and Burns & McDonnell Engineering Company, Inc. was selected as the Engineering, Procurement, and Construction (EPC) contractor. Burns & McDonnell has a solid reputation as a superior EPC contractor, particularly for RICE facilities.

The Caterpillar RICE units are highly reliable and efficient with low emissions. The selected engines are capable of rapid ramping and multiple daily starts and stops. These units have the flexibility to provide power on-demand, baseload power, flexible capacity, and regulation services. These characteristics will facilitate the integration of existing and new intermittent renewable energy resources into our portfolio.

The 50 megawatt battery energy storage system, is expected to be available to serve NorthWestern Energy’s Montana customers by the end of 2023.

“The energy storage project will provide the opportunity to store some excess energy from the grid to use when customer demand is high,” NorthWestern Energy Director Long-Term Resources Bleau LaFave said. “Today, NorthWestern Energy most frequently has excess energy on the grid from wind resources. Now we will have the opportunity to store a portion of that excess energy to improve matching the generation with customer demand and higher market pricing.”

“The five-year 100 megawatt power purchase agreement with Powerex, the marketing entity for BC Hydro, will provide our customers with capacity mainly from the BC Hydro system starting in Jan. 1, 2023” said LaFave. “Our Montana customers require this capacity as soon as it is available. This market product can be delivered on our existing transmission assets.”

NorthWestern Energy is still short of the capacity resources needed to produce energy reliably at the times when our Montana customers require it the most.

“The 2020 RFP process provided an opportunity to see what projects and technology are available,” said NorthWestern Energy President and Chief Operating Officer Brian Bird. “NorthWestern Energy’s new Laurel Generating Station will be able to provide on-demand capacity for long durations. With that asset added to our Montana portfolio, NorthWestern Energy can consider other, shorter duration capacity projects in future RFPs.”

“Developing a diverse portfolio of resources capable of producing the energy our Montana customers need any time they need it is the responsible path forward as we all work together toward an affordable, reliable and cleaner energy future,” said Rowe.

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About NorthWestern Energy (Nasdaq: NWE)
NorthWestern provides electricity and / or natural gas to approximately 743,000 customers in Montana, South Dakota, and Nebraska. We have generated and distributed electricity in South Dakota and distributed natural gas in South Dakota and Nebraska since 1923 and have generated and distributed electricity and distributed natural gas in Montana since 2002. More information on NorthWestern is available on the company’s website at www.northwesternenergy.com.

Investor Relations Contact: Travis Meyer (605) 978-2967 travis.meyer@northwestern.com

Media Contact: Jo Dee Black (866) 622-8081 jodee.black@northwestern.com

FAQ

What is NorthWestern Energy's new capacity acquisition strategy for 2021?

NorthWestern Energy has entered into contracts for 325 megawatts of dispatchable capacity resources to address its capacity deficit.

How much capacity will the new Laurel Generating Station provide?

The Laurel Generating Station will provide 175 megawatts of natural gas-fired capacity.

When is the expected operational date for the Laurel Generating Station?

The Laurel Generating Station is expected to be operational by January 3, 2024.

What types of energy sources are included in the 325 megawatts of capacity?

The capacity includes a natural gas plant, a battery storage project, and hydroelectric resources.

What is the goal for NorthWestern Energy's carbon reduction by 2045?

NorthWestern Energy aims for a 90% reduction in the carbon intensity of its electric generation by 2045.