March 30, 2014 Updated: March 30, 2014 at 11:44 am
More than two decades ago, Colorado Springs Utilities knew tough new federal pollution mandates were coming for its coal power plants. So starting in 1996, it commissioned six studies during the next 13 years to look at the best pollution control technology for the downtown Drake Power Plant.
All six reports said the same thing: Use dry scrubbers, which dominate the industry.
One of the later studies in 2008 warned specifically against going with an inexperienced vendor promising the cheapest product.
But when Utilities picked a pollution control system for the plant in 2011, it did not choose a dry scrubber. Utilities picked what it thought was the cheapest option built by a local company that had never built a scrubber before: Neumann Systems Group.
The price of the NeuStream scrubber has since risen by tens of millions.
Utilities says it has confidence in NeuStream, saying its current cost is still tens of millions less than other options, will cost much less to operate, and is reliable because it went through "a rigorous multistaged testing process."
But interviews and documents obtained by The Gazette suggest the cost of the Neumann system is higher than Utilities says, that testing revealed reliability problems, and that the operating costs could be far higher than initial figures.
Utilities says the final cost for NeuStream will be $131 million, but it does not count $25 million spent on design and testing, for a total of $156 million.
Utilities says traditional dry scrubbers for the plant would cost $168 million, but that figure comes from 2008 and 2009 studies that overestimated the price of scrubbers for one of Utilities' other plants by about double. Utilities never took bids for dry scrubbers at Drake, so the cost is unknown, and could be much lower than $168 million.
"Utilities cherry-picked numbers to justify going with NeuStream and make other options look more expensive, and the truth is dry scrubbers will probably cost much less," said an engineer with direct knowledge of the scrubber and the plant and who asked to remain anonymous because of fear of retribution.
A scrubber system is required by federal pollution laws to remove sulfur dioxide (SO2) from the exhaust of the coal-burning Drake Power Plant starting in 2017. Without such a scrubber, Drake would have to shut down.
Utilities has repeatedly said another reason it went with NeuStream was space. There is not much room for scrubbers at Drake, and, officials have said, dry scrubbers won't fit.
But the six Utilities studies in 1996, 2000, 2004, 2007, 2008 and 2009 never mention space concerns. Some of them contain diagrams showing how dry scrubbers would fit.
When questioned about this, Bruce McCormick, Utilities' chief of energy operations, said while a dry scrubber would fit, the tight squeeze would raise costs considerably. "It's not that it couldn't be done, it's going to be more expensive," he said.
Asked how much dry scrubbers would cost, he said he did not want to speculate.
Technology barely used
NeuStream uses what is known as a dual alkali system to remove pollutants.
Dual alkali technology has not been used in the industry since the mid-1980s because of high operating costs. The technology constitutes less than 3 percent of scrubbers in the United States, according to the Environmental Protection Agency.
Utilities' first pollution control study for Drake, in 1996, ruled out dual alkali because it was too costly. The five Utilities studies that followed did not consider a dual alkali system.
Utilities says NeuStream's dual alkali system is different.
NeuStream is far more efficient than previous systems, Utilities says, so operating costs will be lower, giving it an advantage over dry scrubbers.
A comparison shows this may not be true.
Utilities estimates running NeuStream will cost about $4.2 million per year.
That operating cost is not very different from 2008 and 2009 Utilities estimates of costs for operating a dry scrubber at Drake: $4.2 million to $5.6 million.
In addition, the true operating cost of NeuStream is unclear, because the parameters that determine NeuStream's cost have shifted in recent years.
NeuStream's scrubbers are based on a precision nozzle developed for a laser system designed to achieve a high specific surface area using a flat jet of liquid.
A higher specific surface area in the spray means lower cost, because a smaller scrubber can be used.
But NeuStream's nozzle ran into problems, according to a scientist with direct knowledge of the project who did not want to be named for fear of retribution. The flawless flat jet spray could not be replicated with the dual alkali solution. This lowered the specific surface area.
Specific area is expressed in a ratio called the "A number." The higher the A number, the better it works, the lower the cost. In a 2010 presentation to potential buyers, Neumann Systems said it could achieve an A number between 10 and 20. In a presentation made in 2012, it said it could achieve an A number of only between three and 20.
"The real number is three, maybe four," the scientist said.
This means the scrubber will have to be larger, pushing up cost, he said.
Neumann's presentations to potential buyers and industry groups show similar shifts in the amount of material needed to absorb pollutants and the amount of power required to run the scrubber.
"Neumann sold the system on low cost, but I don't think he (inventor David Neumann) knew how to actually do it very well," the scientist said. And Utilities, he said, "really didn't ask any hard questions."
Neumann and Utilities dispute this.
George Luke, Utilities' general manager for energy supply, said changes in the A number represent fine-tuning of several factors to "optimize" the scrubber, and the changes will not affect how well the system works.
"We have continued to evaluate it to get the optimal performance," Luke added.
David Neumann said the system at Drake can't run as efficiently as his initial design because of other factors, including large fans installed by Utilities to prepare for further pollution control measures, and heat exchangers installed to make the exhaust coming out of the power plant less visible.
"We had to account for all these factors we did not anticipate," he said.
This pushed the amount of power the scrubbers will use at the plant from an initial estimate of 1.3 percent of power, published in 2012 Neumann sales presentations, to a current estimate of 2.6 percent given to The Gazette by David Neumann last week.
A 2003 study of the economics of dry scrubbers by engineering consultants Sargent & Lundy estimates dry scrubbers use about half as much energy.
The testing that Nuemann's data is based on is limited and raises questions about the reliability of the system, the scientist and the engineer said.
Both said most scrubber systems are tested for six to nine months across different seasons, but NeuStream's pilot system was tested for three or four months during the summer. The system kept having mechanical problems and was taken offline several times, they said.
Utilities said the system was tested for 12 months. And, though there were failures of some equipment, fixes were made and the final product will have backups that make it more reliable.
But David Neumann said even with changes, his system is still cheaper to operate than dry scrubbers.
Neumann Systems says in publications that its operating costs are 40 percent of standard dry scrubbers. On Thursday, David Neumann said of the operating cost at Drake, "I don't know what it is now. Seventy percent, I think."
Utilities didn't take bids
The cost of alternatives to NeuStream is hard to pin down because Utilities never took bids.
Studies in 2000 and 2004, based on estimates from major suppliers, said dry scrubbers would cost about $50 million.
From there, estimates for costs of installing dry scrubbers increased.
From 2007 to 2009, three Utilities studies pushed the estimated lowest-cost option for a dry scrubber to about $110 million - double what vendors said in 2004.
Utilities said the sharp increase was due to more detailed estimates. The estimates included a range of new equipment, including some that would allow Drake to sell a waste product called fly ash sometimes used in making concrete.
The engineer with direct knowledge of the plant said the estimates of increased cost for dry scrubbers came after Utilities partnered with Neumann to test his scrubbers in 2008, and did not represent the true cost.
"They started adding things that brought up the cost, like selling fly ash," he said.
"There were never any significant sales of fly ash before or since, but it pushed up the price and made Neumann look better."
The way Utilities communicated the estimated cost of dry scrubbers to the public and City Council, which acts as the Utilities board, pushed the perceived advantage of NeuStream even higher.
The studies Utilities used for cost estimates of dry scrubbers contained a range of scenarios from about $120 million to $158 million. But Utilities officials usually presented only the most expensive.
When stating the estimated cost of NeuStream, Utilities did not include $25 million spent from 2008 to 2010 on design and testing.
This made NeuStream sound like a bargain.
Utilities' 2008 study on pollution controls for Drake cautioned not to go with the lowest bidder and to "carefully consider the vendor's industrial experience and past performance."
In 2011, Utilities signed a $73 million contract with Neumann, which had never built a utility-scale scrubber.
Utilities said in a written response to questions from The Gazette: "The dual alkali chemical process is a proven method for controlling SO2 emissions. CSU (Colorado Springs Utilities) recommended the Utilities board accept this approach because it was proven to help us comply with federal mandates, was a lower cost option, and met the unique construction requirements of the Drake Plant."
Stop and reassess, critic says
Utilities said it has spent $100 million on NeuStream and will spend $56 million more to complete the process.
Former City Councilman Tim Leigh, a longtime critic of the NeuStream scrubber, said it is time to halt the installation and reassess.
He said it would be prudent to get bids from experienced scrubber manufacturers, whose products come with proven performance parameters, and may cost about the same as the remaining cost of NeuStream.
"You could stop Neumann now and actually get something guaranteed," he said. "Go pay the same amount and get something proven. Stop the insanity."
A bidding process would take about eight months, Utilities said.
But NeuStream, under construction and slated for completion in 2016, will go forward, McCormick said.
"We are this far along on the path, and we are committed to this technology," he said, adding that he has "full confidence" it will work.
In a statement to The Gazette, Utilities added: "It would be irresponsible to our rate payers to walk away from investments in a technology that will allow Drake to meet the strict federal regulation and allow us to continue providing cost-effective and reliable electric service to our customers."
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