Tuesday, August 30, 2011

Zylstra: The Holland Energy Plan - Coal vs. Renewables

This past June 20, Peter Garforth came to Holland to present the most recent version of the Holland Community Energy Plan that was commissioned the City's Sustainability Committee.  You can see the slide show here, and the video presentation here.

The plan consists of two basic propositions, one, creating a more energy efficient consumption future for the City, and two, seeking to find the right mix for energy generation and sourcing for the upcoming half-century. The Community Energy Plan (CEP) foresees that a certain level of energy efficiency will be pursued regardless of how the City sources its energy. Thus the real decision lies in the possible ways to power our future.

To that end, the CEP proposes four different scenarios, all with different sourcing options, levels of investment and greenhouse gas emission targets.

A brief overview:
Scenario A
1. Energy Efficiency renovations for both residential and commercial buildings throughout the city.
2. 20 MW of Combined Heat and Power for the Battery Cluster.
3. District heating for core city area.
4. Maintain current Solid Fuel capacity to 2050 (JDY, Cambell, Belle River)
5. Introduce 55 MW Combined Cycle Gas Turbine in three phases by 2026

Scenario B

CEP Scenario A plus
1. 24MW of Solar PV to eliminate summer peak –
start in 2012 complete by 2050
2. Add 20MW Biomass Generating Block after 2030
using bio-gasification
3. Blend bio-gas/natural gas starting in 2013 and
leveling off at 10% by 2023 for CHP and CCGT
4. Add 37 MW(nom) Wind by 2020

Scenario C

CEP Scenario B with
1. Add 70 MW Solid Fuel with 30% biomass by 2050
2. CCGT not implemented

Scenario D

CEP Scenario C without PV, Wind and Blended Bio-Gas
All of these scenarios come down to the simple question of how much energy should we be consuming versus how much we should be producing and from what sources.  We, as a city, can either decide to reduce energy consumption a lot and invest heavily in ways to do that,  as well as limit the amount of energy we plan to produce, and make that from as many renewable sources as possible. Or, we can try a little bit of energy efficiency and focus our investments on building up energy production from mainly carbon sources to both supply our own future energy needs but also, and just as importantly, those of outside communities as a future profit center for the city.

In picking through these scenarios,  Holland City Council will be answering the question of what energy consumption and distribution will look like here for the next half century. It will do so with a lot of decent rationales on either side and I'd like to take a look at them, using as base scenarios B and D, which I believe best exemplify the two poles of the equation.

Scenario D

Scenario D involves basic energy efficiency measures, Combined Heat and Power for Battery Clusters, coupled with the replacement of the current James de Young with a new Circulating Fuel Bed with a 78 MW capacity. This scenario easily covers currently forecast demand with additional to spare. It is permitted for a fuel source of biomass, traditional coal as well as more controversial Petroleum Coke.
1. Obviously, money. A 78MW CFB fueled in its majority by pet coke would produce relatively inexpensive electricity not only for its current customer base but also for outside customers via the grid.
2. Supply seems relatively assured, at least in the short term. The planned CFB is permitted to employ 50% of its fuel source from Pet Coke, which is capable of producing lower-cost electricity due to its low price as a refinery by-product.

3. PA295 - Holland BPW still has to meet PA 295 requirements, which stipulates that 10% of its power come from renewable sources. Currently the BPW projects that we can fulfill requirements without additional new capacity out to 2019. One of the stated advantages of the CFB is that it provides fuel diversity. It will be able to burn biomass, biosolids from the waste water treatment plant. Whether that will be enough to get to PA 295 compliance is unsure, but it would be a help.


1. Obviously, greenhouse gas-producing CO2, which is the result of burning coal and pet coke for both the city and downwind communities.

2. Although the BPW has been given its permit by the DEQ for the CFB, the Sierra Club has filed a lawsuit against the state in Ingham county to rescind it. Even if the lawsuit fails, groundbreaking will have to begin by (18 months from date).

3. Concern about expanding DeYoung — located on Holland’s Lake Macatawa shoreline — and its impeding future redevelopment of that shoreline from the historical industrial use to a more recreational, residential, or commercial use.

4. At over $300M, the initial investment is costly, and adds a level a risk to the BPW portfolio that other options don't because it's a one build, one time option instead of smaller builds over time. Also, if demand does not materialize, and energy efficiency proves more inexpensive, this could put the city in serious imbalance.

5. Allegan Wind Study - The results of the Allegan study should come in this summer. If they are positive, the project itself could produce 80 to 130 megawatts of power. That's obviously enough power and would obviate the need for the CFB and would obviously take care of the PA 295 requirement.

6. The EGO Analysis that the BPW is undertaking will give us a good indication It would be a more expensive source of power than the CFB.

7. CFB excess production - Part of the rationale behind the CFB is that the excess energy it produces could be sold back to the grid, creating a potential profit center for the city. But, unless energy demands rise substantially, both in Holland and elsewhere, grid prices will not be all that high, cutting into profitability. Add to the equation the fact that Wolverine Power also has a state permit to build a new coal plant, and they will also be putting excess capacity on the grid, which could exacerbate the price problem even more.

8. Combined Cycle vs CFB option - In the Original Black and Veatch study, the Combined Cycle Natural Gas option came in at a slightly lower cost than the CFB option. The CC option does have the advantage of being more scalable downwards, plus the advantage of producing drastically less greenhouse gas emissions. As stated above, CFB would be able burn biomass, biosolids from the waste water treatment plant, which CC would not.

9. Construction costs - Estimates of $300 million would make this a massive project for the city. Interest costs on estimate of $225M alone would be near $10 million. Currently, the BPW has some $80 million in expenses and slightly more than that in revenues. Add in interest costs  as well as other fixed costs, and the power plant will represent a serious financial risk. If fully successful, total city revenues would go from $160 million to approximately a quarter billion dollars and BPW will be responsible for more than $200 million of projected revenue. That's a big increase in BPW's influence within the community.

Assuming a construction cost of $300M, annual revenue of $50M, and a net income, pre-borrowing costs, of $5M, the coal plant would have a return on equity of 2%. That seems incredibly low, given the risk of fluctuation in fuel input costs.

Note - Revenues are based on estimated $.08 per kwh and 10% net margin per 2010 Annual report on electricity operations.
Scenario B
Scenario B likely involves more intense energy efficiency measures, Combined Heat and Power for Battery Clusters, coupled with Solar PV, Biomass Natural Gas Combined Cycle Gas Turbines and significant sourcing from wind.

1. The word 'renewable', says it all. Fossil fuels are perishable sources of energy whereas renewable energy sources are non-perishable and can be easily replenished. Being non-perishable energy sources, one doesn't have to worry about these energy reserves declining or getting exhausted in the future.

2. Most renewable energy sources do not involve the combustion or burning of fossil fuels or other substances, which otherwise result in the release of toxic chemicals or other harmful atmospheric byproducts. Therefore, renewable energy is a clean source of energy and one that offers numerous environmental benefits.

3. Scalable. The plan calls for a diverse portfolio of renewable options, envisioned in such a way that investments are made over time.

4. Most of these energy sources have low maintenance costs associated with them. Also, renewable energy sources such as solar energy, can be tapped very easily and conveniently for domestic use by individual home owners. In addition, Solar can be used as a peaking energy source during summer months.

5. Renewable energy sources are increasingly competitive with new carbon-based construction, in some cases already significantly so.
6.  Renewables, because they involve the creation of new technologies, have a greater potential for job creation in West Michigan than carbon based generation.
1. Reliability and consistency is a significant drawback with respect to renewable energy. Atmospheric conditions and geographical locations make a huge impact on the efficacy of these energy source. 
Going through the pros and cons of each 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.

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

Doug Zylstra

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