In my earlier post about the Merrimack Station scrubber project, I mentioned that PSNH generally runs Merrimack at full capacity, since at any given time it can usually produce power for less cost than the other options.
I meant to include a neat graphic from PSNH's 2007 Least Cost Integrated Resources Plan that drives home the economics of electricity production, especially for PSNH, and helps explain why PSNH feels that Merrimack Station is too important to shut down.
The graphic above shows how PSNH satisfies demand for electricity during a typical summer day. MK1 and MK2 are the two coal units at Merrimack Station. You can learn more about Newington and Schiller from this earlier post. Next, VTY stands for the Vermont Yankee Nuclear plant, which PSNH has a 3.3% stake in. Finally, IPP stands for Independent Power Producers and represents long term contracts that guarantee power delivery to PSNH at fixed rates.
The graph clearly shows the roles that various electricity sources play in providing the power needed on a hot summer day. Hydro, nuclear, coal, and wood plants provide the baseload generating capability. Then, as demand increases during the day, plants with more expensive fuel sources, like Newington Station, kick in.
For the next 200MW of peak demand, PSNH turns to independent power producers, like Granite Ridge, LLC or Newington Energy. Generally, it will already have contracts in place to make these purchases at pre-negotiated rates. Finally, if demand increases beyond those contractual arrangements, PSNH may be forced to buy power on the spot electricity market and pay whatever the market rates happen to be at the time.
So, if you're a utility like PSNH, it's best to know ahead of time how you're going to get the power to satisfy your customers' electricity demand. Opponents of the scrubber project suggest that PSNH could just enter into more long-term contracts with Independent Power Producers to make up the difference, while PSNH believes that doing so would result in higher electricity rates.