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Thursday, September 22, 2011

Zylstra: Holland Community Energy Plan Finalized

READ PART ONE OF DOUG'S PIECE HERE

Monday night was the formal presentation of the Community Energy Plan, proposed by consultant Peter Garforth working with local government, utility and business leaders, to the Holland Sustainability Committee.

In a previous post, I gave a short overview of the plan in its mid-stage. The final report didn't vary a whole lot from that preliminary report. It did, however, provide a recommended course of action, as well as financial implications of that action, and those of the other arranged scenarios.
In my overview, looking at the different pros and cons, I had posited Scenario B as the preferable as well as the more likely, scenario:
..it seems fairly evident that Scenario D, which is basically the CFB Coal option has substantially more drawbacks and much less in its favor than Scenario B, the more alternative, renewable energy heavy option. I think the strongest case against the CFB plant is just the amount of financial risk and negative incentives - for efficiency and conservation - that it introduces into the equation. Likewise the greatest argument for small scale renewables is the mirror opposite, that the investment scalability gives it a greater flexibility and involves overall less financial risk and greater incentives for conservation and positive environmental outcomes.
The final proposal by the Project Work Team comes to many of the same conclusions, and has the benefit of being able to put some economic analysis behind it. The more interesting of these was the discussion regarding what would be the preferred energy source for the city going forward, ie, Coal in the form of  a 70 Megawatt CFB option or Natural gas in the case of a 70 megawatt Combined Cycle option. Both would be sited at the current DeYoung Power plant location, in part in order to continue being able to supply the downtown snowmelt system but also because whichever option chosen would be the source of a “district heating” system that could include Hope College, Holland Hospital and the Holland Community Aquatic Center. As a side note, whichever scenario chosen would also include retrofitting homes in the city with energy-saving measures, such as insulation and newer windows, heating and cooling systems. Such projects could begin in the historic district, where 150 homes would be targeted for upgrades within two years. So the real difference here is to what the main source of electrical generation will be, that is, the CFB or CCGT option.

The following table shows the upfront capital costs of these two options, as well as some of the subsidiary generation options:

The initial capital costs for the CFB option are over 150% greater than those of the Combined Cycle option, and that $270M for the CFB is, as I understand, a one-time build, meaning that it's fairly upfront costs. The $105M is set to be spent over a number of years as demands warrants on additional turbines. This is obviously a tremendous point in favor of the CCGT option. 
This lower capital cost, in the case of the CCGT is offset, at least in part, by the cost of fuel  for each generating option. The following table combines the lifetime capital cost and merges with  the fuel cost over the same time to get at a comparable levelized cost:

The analysis gives three different costs, cost of electricity of each option, cost of electricity with a Greenhouse Gas Penalty regime in place and then the cost of district heating, were it chosen, for each option.  It also gives them at three points in time: 2016, 2030, and 2050. A quick comparison of each at the 2030 mark:
                             Cost MwH    Cost MwH w/ GHG Penalty    Cost MwH w/District Heating
70 MW CFB:         $101.2                       $180                                              $110.2
70 MW CCGT       $91.5                         $125.3                                           $105.3

Obviously, when we start looking at things 20 years out, it's really hard to be confident in a forecast, but what is really striking is what happens to the Coal vs. Natural gas options with a carbon tax in place. By 2016, when production is set to begin, I doubt we'll have one, but it's hard to believe that by 2030, when CO2 levels are set to rise by over 40%, that we won't have one. We almost had one a few years ago, and as the global ill effects of carbon emissions become more well accepted, it's almost a near certainty that we'll have one then. That future cost difference,  plus the financial flexibility that staging the new turbines offers, for me, puts the discussion very much in favor of the CCGT option.

A final point on Externalities:
The question of external costs for both Coal and Natural Gas extraction and combustion were brought up in both sessions as questions, but, outside of the calculation of the cost MWh w/ GHG Penalty, these costs were not part of the report.

Douglas Zylstra is a small business owner, Vice-Chair of the Ottawa County Democratic Party, and a contributor to West Michigan Politics. Connect with him on Facebook HERE 

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