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File #: 200029.    Version: Name:
Type: Staff Recommendation Status: Passed
File created: 6/4/2020 In control: Utility Advisory Board
On agenda: 6/11/2020 Final action: 6/18/2020
Title: Approval of Deerhaven Unit 2 Dual Fuel Project (B) **This item was presented to the UAB on June 11, 2020.**
Attachments: 1. 200029_DH2Gas_Project_CCom_Presentation_20200618
Title
Approval of Deerhaven Unit 2 Dual Fuel Project (B)

**This item was presented to the UAB on June 11, 2020.**

Explanation
Deerhaven Unit 2 (DH2) is GRU’s largest power generator and is fueled primarily by coal, with limited supplemental natural gas firing capacity. Currently, natural gas usage is limited to approximately 30MW of the total 235MW rating of DH2. Based on staff’s observations of potential cost savings due to the current and anticipated future cost forecasts for coal and natural gas, GRU management initiated studies to determine the feasibility of adding dual fuel capability to DH2 to permit fueling the unit with up to 100% natural gas. In addition to cost savings, staff has identified significant potential to reduce carbon emissions and other air emissions from converting from coal to natural gas.

It has been determined that this capital project, which is named the DH2 Dual Fuel Project, required feasibility studies in the following areas: technical and operational, financial, and environmental.

The technical and operational feasibility studies indicated conversion of the DH2 facility to fire on natural gas would have no adverse impact on unit longevity, performance or operational flexibility.

The potential of favorable financial results are largely dependent on maintaining the current cost differential between coal and natural gas. As a reference, currently the cost of Coal is approximately 50% more expensive than natural gas, a situation which is not anticipated to reverse in the near term. The reason: GRU no longer has a low-priced transportation contract, which is a significant portion of its all-in coal costs; natural gas supplies are plentiful and the futures pricing is significantly below that of coal.

Environmental studies indicated that emissions of SO2, Mercury, Particulate Matter, CO2, and Nitrogen Oxides would all decrease, and that the project would be permittable by regulatory agencies. It is estimated that the a...

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