Logan City and Power Decisions
It is interesting to consider the reasons behind the recent decision by Logan City Council to not buy into IPP3 power plant in Delta Utah. More than anything this policy decision seems to be driven by a relatively small group of very vocal citizens who were able to dominate the agenda and who rather than providing actual facts hopped on the recent Global Warming band wagon. The power from IPP3 is going to be produced and used, we've found the power from earlier phases of the project to be both reliable and cheap.
The alternatives presented are expensive and not fully developed yet, the geothermal proposal is still just that a proposal and there seems to be some hope that it will be viable but that is far off in the future.
It appears that policy is being made on emotion in this case and not on objective facts.
This letter is from Logan City Power and Light.
To: Logan City Light and Power CustomersFrom: Jay Larsen, Light and Power DirectorDate: March 23, 2007Re: Council Decision to Reject IPP 3
In the Council Meeting on March 20, 2007 the Logan City Council voted 3-2 to reject our participation in the future IPP Unit 3 Project. The Council Chambers was filled with advocates of the Sierra Club and other environmental groups. There were very few attendees that spoke in support of the project.
When the motion to reject IPP 3 came up, Council Woman Tami Pyfer, suggested a 10 MW participation level as a compromise position. Steve Thompson supported that idea but they were out-voted by the other 3 Council Members. Steven Taylor, Joseph Needham and Laraine Swenson all voted to reject IPP 3 in favor of yet to be proven options.Logan has been studying this power supply option for several years. Logan and the other participants have invested several million dollars and several years performing air quality studies, and complicated contract negotiations with the owners of The Intermountain Power Project Units 1 & 2 (IPP 1&2). It is anticipated to take 5-6 years to complete the construction and bring the unit on line.
The Intermountain Power Agency (IPA) received its approval order from The Utah Division of Air Quality (UDAQ) in October 2004 to proceed with the construction of the project. This project meets the EPA and Utah Division of Air Quality (UDAQ) rules. The Sierra Club and Western Resource Advocates appealed the decision of UDAQ to issue the Approval Order soon after it was issued. We must now go back and reiterate the issues brought to the UDAQ by the environmentalists. We do not expect the UDAQ decision to change. We have substantial data generated by reputable engineers. It will add additional cost and time to reiterate our position.
The IPP Unit 3 Project was originally designed to be a sub-critical boiler design with Selective Catalytic Reduction and Ultra Low NOx burners. This design was changed during the study phase to include a super-critical boiler design that is even more efficient and will produce fewer emissions than the original design. This project will be one of the cleanest coal plants ever built.
We have a contract to purchase 10 MW of power from the Bonanza Power Plant near Vernal, Utah that expires in 2015. 10 MW of IPP 3 would only replace that power and still leave us with room for other options, if they become available. Reducing our participation is a compromise position.
Logan’s current portfolio contains hydroelectric, wind, natural gas, firm contracts and coal power. It was the hydroelectric and coal power that sustained the recent power crisis without sharp price increases. All of the other power supply options were affected radically by insane market conditions.
I believe the recent political movement to reduce greenhouse gasses and switch to “green-power”, that was very effectively conveyed by the Sierra Club advocates, was a major influence on the recent Council decision. While I believe we need to move in that direction, I do not believe it is wise to totally abandon a proven, reliable option at this time.
The latest cost estimates I have of alternative power supply options are all higher than the proposed Unit 3 project. Wind power is currently priced at about $65 / MWH. Solar power costs in excess of $100 / MWH. Geothermal power could be produced for as little as $75 / MWH, with pressure from political market conditions driving prices higher. Our latest proforma of the IPP 3 costs are $49 / MWH in 2013, when the plant could be on line.If we purchased 10 MW of Geothermal at $75 / MWH instead of IPP 3 at $49 / MWH it would increase our overall power supply costs by about $1.5 million or 6.2% of our annual power supply costs. If we purchased 20 MW of Geothermal it would increase our overall costs by about $3.5 million or 14%. I think this is too high a price to pay for a small utility.
During the 2000-2001 California Power Crisis we lost our system reserves. We had about $10 million in reserve and ended up $3.5 million in the red. We had total losses of about $13.5 million due to extreme market conditions. Firm power supply is a hedge against these types of problems.
Logan is also in the process of upgrading our local transmission system. We need to upgrade our existing 46 kV transmission system to a 138 kV system to meet our growing demand. Our current plans are to bond for the first phase of the conversion at a cost of about $6,000,000. This first phase would build the first phase of new 138 kV power lines and convert the first two substations to 138 kV. This would get us past a critical phase and we could then convert the other fours substations over time without additional bonding, if we have the funds available. Without this upgrade our system cannot meet our growing demand. If we spend all of our available funds pursuing green power we may need to bond for as much as $12,000,000 or more to complete the upgrade. This will add additional debt load that may not have been necessary.
Our current upgrade plan would allow us to continue to provide reliable system capacity while incurring affordable debt. The annual cost of opting for 10 MW of Geothermal versus IPP 3 is about the cost to convert one substation to 138 kV. I think it makes a lot more sense to move into renewable power options in smaller affordable increments.
We are a member of the Utah Association of Municipal Power Systems (UAMPS). UAMPS has 49 other public utility members in the region. UAMPS is buying 450 MW of the 900 MW IPP 3 project. Members sign up for the amount that meets their individual needs without taking on the entire risk. This provides economy of scale while allowing members to meet their individual needs. We are currently buying 2 MW of wind power with this type of arrangement. Early discussion with UAMPS about the proposed geothermal option indicates that UAMPS could take up to all of the output of the proposed geothermal project, depending on the other members desire and the viability of the project as it emerges. This approach reduces our risk of a yet to be determined project.
In my opinion 10 MW of IPP 3 balances the environmental issues with long term price stability, while 0 MW of IPP 3 leaves us too vulnerable to future market pricing conditions. With no additional base load power our current forecast shows that we will begin to have a shortfall of base load power supply beginning in about 2018 to 2019. This base load deficit will increase with time.
Although the council voted down our participation in IPP3 at last week’s meeting, we could still participate if that decision is changed. If you feel strongly about this issue, I urge you to contact council members Laraine Swenson, Joe Needham and Steven Taylor and ask them to place this resolution back on the council agenda at one of the two April meetings, and urge them to support the compromise position of a 10 MW participation level. Please let them know how increased power costs will impact your businesses. I don’t believe the council members received any input from our large power customers before this vote, and so perhaps your contact can make a difference.
The alternatives presented are expensive and not fully developed yet, the geothermal proposal is still just that a proposal and there seems to be some hope that it will be viable but that is far off in the future.
It appears that policy is being made on emotion in this case and not on objective facts.
This letter is from Logan City Power and Light.
To: Logan City Light and Power CustomersFrom: Jay Larsen, Light and Power DirectorDate: March 23, 2007Re: Council Decision to Reject IPP 3
In the Council Meeting on March 20, 2007 the Logan City Council voted 3-2 to reject our participation in the future IPP Unit 3 Project. The Council Chambers was filled with advocates of the Sierra Club and other environmental groups. There were very few attendees that spoke in support of the project.
When the motion to reject IPP 3 came up, Council Woman Tami Pyfer, suggested a 10 MW participation level as a compromise position. Steve Thompson supported that idea but they were out-voted by the other 3 Council Members. Steven Taylor, Joseph Needham and Laraine Swenson all voted to reject IPP 3 in favor of yet to be proven options.Logan has been studying this power supply option for several years. Logan and the other participants have invested several million dollars and several years performing air quality studies, and complicated contract negotiations with the owners of The Intermountain Power Project Units 1 & 2 (IPP 1&2). It is anticipated to take 5-6 years to complete the construction and bring the unit on line.
The Intermountain Power Agency (IPA) received its approval order from The Utah Division of Air Quality (UDAQ) in October 2004 to proceed with the construction of the project. This project meets the EPA and Utah Division of Air Quality (UDAQ) rules. The Sierra Club and Western Resource Advocates appealed the decision of UDAQ to issue the Approval Order soon after it was issued. We must now go back and reiterate the issues brought to the UDAQ by the environmentalists. We do not expect the UDAQ decision to change. We have substantial data generated by reputable engineers. It will add additional cost and time to reiterate our position.
The IPP Unit 3 Project was originally designed to be a sub-critical boiler design with Selective Catalytic Reduction and Ultra Low NOx burners. This design was changed during the study phase to include a super-critical boiler design that is even more efficient and will produce fewer emissions than the original design. This project will be one of the cleanest coal plants ever built.
We have a contract to purchase 10 MW of power from the Bonanza Power Plant near Vernal, Utah that expires in 2015. 10 MW of IPP 3 would only replace that power and still leave us with room for other options, if they become available. Reducing our participation is a compromise position.
Logan’s current portfolio contains hydroelectric, wind, natural gas, firm contracts and coal power. It was the hydroelectric and coal power that sustained the recent power crisis without sharp price increases. All of the other power supply options were affected radically by insane market conditions.
I believe the recent political movement to reduce greenhouse gasses and switch to “green-power”, that was very effectively conveyed by the Sierra Club advocates, was a major influence on the recent Council decision. While I believe we need to move in that direction, I do not believe it is wise to totally abandon a proven, reliable option at this time.
The latest cost estimates I have of alternative power supply options are all higher than the proposed Unit 3 project. Wind power is currently priced at about $65 / MWH. Solar power costs in excess of $100 / MWH. Geothermal power could be produced for as little as $75 / MWH, with pressure from political market conditions driving prices higher. Our latest proforma of the IPP 3 costs are $49 / MWH in 2013, when the plant could be on line.If we purchased 10 MW of Geothermal at $75 / MWH instead of IPP 3 at $49 / MWH it would increase our overall power supply costs by about $1.5 million or 6.2% of our annual power supply costs. If we purchased 20 MW of Geothermal it would increase our overall costs by about $3.5 million or 14%. I think this is too high a price to pay for a small utility.
During the 2000-2001 California Power Crisis we lost our system reserves. We had about $10 million in reserve and ended up $3.5 million in the red. We had total losses of about $13.5 million due to extreme market conditions. Firm power supply is a hedge against these types of problems.
Logan is also in the process of upgrading our local transmission system. We need to upgrade our existing 46 kV transmission system to a 138 kV system to meet our growing demand. Our current plans are to bond for the first phase of the conversion at a cost of about $6,000,000. This first phase would build the first phase of new 138 kV power lines and convert the first two substations to 138 kV. This would get us past a critical phase and we could then convert the other fours substations over time without additional bonding, if we have the funds available. Without this upgrade our system cannot meet our growing demand. If we spend all of our available funds pursuing green power we may need to bond for as much as $12,000,000 or more to complete the upgrade. This will add additional debt load that may not have been necessary.
Our current upgrade plan would allow us to continue to provide reliable system capacity while incurring affordable debt. The annual cost of opting for 10 MW of Geothermal versus IPP 3 is about the cost to convert one substation to 138 kV. I think it makes a lot more sense to move into renewable power options in smaller affordable increments.
We are a member of the Utah Association of Municipal Power Systems (UAMPS). UAMPS has 49 other public utility members in the region. UAMPS is buying 450 MW of the 900 MW IPP 3 project. Members sign up for the amount that meets their individual needs without taking on the entire risk. This provides economy of scale while allowing members to meet their individual needs. We are currently buying 2 MW of wind power with this type of arrangement. Early discussion with UAMPS about the proposed geothermal option indicates that UAMPS could take up to all of the output of the proposed geothermal project, depending on the other members desire and the viability of the project as it emerges. This approach reduces our risk of a yet to be determined project.
In my opinion 10 MW of IPP 3 balances the environmental issues with long term price stability, while 0 MW of IPP 3 leaves us too vulnerable to future market pricing conditions. With no additional base load power our current forecast shows that we will begin to have a shortfall of base load power supply beginning in about 2018 to 2019. This base load deficit will increase with time.
Although the council voted down our participation in IPP3 at last week’s meeting, we could still participate if that decision is changed. If you feel strongly about this issue, I urge you to contact council members Laraine Swenson, Joe Needham and Steven Taylor and ask them to place this resolution back on the council agenda at one of the two April meetings, and urge them to support the compromise position of a 10 MW participation level. Please let them know how increased power costs will impact your businesses. I don’t believe the council members received any input from our large power customers before this vote, and so perhaps your contact can make a difference.
posted by Ryan Yonk at 12:44 PM
2 Comments:
I was one of those individuals who commented at the Logan City Council meeting. I would say the most of the public input was articulate. There was no organized push by any environmental group. Logan citizens simply showed up to talk about something they care about.
The argument that swayed the City Council came down to the risk of buying into a coal-fire plant, when, the current political environment supports some sort of carbon tax. The numbers range from $8/ton CO2 to $40/ton. These taxes would make coal-fire electricity more expensive than the "green" or renewable energies. Thus, they made a very rational choice to take the 15 or 16 years before the power need really comes to invest in non-coal power production.
I would just have to say that although thier decision might not have been completely unjustified, it does seem risky. To put faith and trust into power sources that are new and not fully developed could produce hazardous results. The expense and uncertianty of not using the reliable, cheaper form of power from IPP3 just seems like people are taking too big a leap of faith that something will come along to provide what everyone needs. I do think that new technology is a must, and I hope that better and more effective forms of power become avaliable in the next 15 years, but I think it would have been a better idea to cover the bases just in case.
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