Colorado Springs News, Sports & Business

Gazette Premium Content Weighing options for fate of Drake Power Plant

By Monica Mendoza Updated: May 18, 2014 at 5:06 pm
Colorado Springs Fire Chief Chris Riley and Colorado Springs Utilities CEO Jerry Forte speak at a news conference
Read more at http://gazette.com/martin-drake-power-plant-fire-determined-accidental/multimedia/video/3544194428001#FDVU5EmZc7HOAJUi.99

Video: Colorado Springs Fire Chief Chris Riley and Colorado Springs Utilities CEO Jerry Forte speak at a recent news conference. Video by Andrea Sinclair.

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Environmental activist Leslie Weise is amazed that the Colorado Springs City Council will not consider closing Martin Drake Power Plant in the next five years.

It was, after all, among 12 scenarios outlined in a half-million-dollar consultant's report for the council to consider in its deliberations over when to decommission the downtown coal-fired plant. It also was the scenario that had the best combined financial and environmental outcomes, she said.

This month's fire inside the Drake plant highlighted the risks of running an aging coal-fired plant in the middle of downtown, Weise said. Cheap power comes at the high price of health, safety and the environment, she said.

Weise, a Monument attorney whose clients have clean energy and sustainability missions, is seeking support in the Colorado Springs business community to pressure the council to reconsider a short-term life for the 52-year-old power plant.

About a dozen business leaders have joined the cause by signing a letter, which likely will be presented to the council, in its role as the Colorado Springs Utilities Board, at its meeting Wednesday.

"There is a large scope of people besides just environmentalists who question that plant," she said.

In March, a majority of the council indicated that closing Drake in the short term - meaning less than six years - is off the discussion table. It would not be enough time to plan for life post-Drake, which provides about one-third of the city's power. It would take longer to plan and build a replacement power source, the council members said. Instead, the council will consider a decommissioning date nine to 15 years out, or longer. The council said it would like to make a decision on Drake by the end of summer.

"I was surprised, personally, to see that everyone (on the council) was looking at mid- and long-term dates," council member Andy Pico said. "That is a function of cost associated with near-term closure and what it would cost to replace as well as the investment we already put into it."

This week, the council will be asked by the Utilities staff to decide how much weight it will put on the social and environmental costs when deciding Drake's fate. In a dozen options presented to the council, a consultant outlined the financial costs of closing Drake in three years on up to 30 years. It also attempted to outline the environmental, social and health costs for each option.

Weise said one of the options the council dismissed would close Drake by 2019 and would save an estimated $753 million in social and environmental costs.

"For them to look at the community with a straight face and say we will ignore the environmental, economic, health and social costs - well, they need to be straight and tell us that," said Weise, whose sister, Linda Weise, is executive director of the Colorado Springs Conservatory in downtown Colorado Springs.

But Sean Paige, a former City Council member who recently was a panelist for the El Pomar Foundation's forum on Drake, argues that Drake's decommissioning date should not be arbitrarily set.

Instead, the council should revisit the issue each year, checking on the power plant's performance, market prices and federal regulations, he said.

"We don't know the regulatory landscape in two years; we don't know the market conditions," Paige said. "There is no harm in planning and trying to set deadlines, but realistically, this is something that should be decided as we go along in light of changing circumstances."

Pico said there is a lesson to learn from the fire at Drake: that it costs twice as much to produce electricity from natural gas as from coal. Since the fire, Drake has been shut down and Utilities has relied on its natural gas-fired power plant and is buying natural gas on the market to produce electricity. It costs about $3 million more a month.

The City Council will be asked May 27 to increase electric rates by about 7 percent for Utilities customers - about $5 a month increase for a typical customer - to cover those costs.

"There is a daily cost that will hit everyone right now," Pico said. "That is the cost of generation of natural gas."

Drake's three boilers, Nos. 5, 6 and 7, were built in 1962, 1968 and 1974. Early reports are that only unit No. 5 was damaged in the fire, but Utilities officials are assessing the damage and costs to repair.

Meanwhile, cities across the country are shuttering coal plants. More than 30 coal-fired plants have closed in the wake of strict Environmental Protection Agency regulations, including emissions control.

Last year, the Utilities board set up the Drake Task Force to begin discussing when or if the power plant should be shut down. But it had signed contracts for scrubber technology to remove carbon dioxide, one of the pollutants targeted by federal rules.

According to the consultant's report, it would cost about $5.2 billion in capital costs, fixed operating costs, operations and maintenance costs and fuel costs to operate Drake until 2033. Those costs include the installation of scrubber technology.

Closing Drake by 2019, as Weise suggests, would mean shutting down the scrubber project, which is underway and has about 70 percent of the $131 million committed.

Those financial investments are among reasons council President Keith King wants to keep Drake open long term, he said.

"This plant might be very clean and very functional for a longer period once we get (scrubbers) up and running," he said.

The 12 options for Drake include the costs of building a replacement power source, adding renewable energy, offering demand side management incentives and adding to the Front Range natural gas plant. The best financial option is to keep Drake open for 30 years, according to the consultant's report. Then, Utilities would see a more than $200 million return on its investment, the report said.

When looking strictly at the financial return on investment, there is not much cost difference among the 12 options, said Cliff Kotnik, a member of the Southeastern Colorado Renewable Energy Society.

But an immediate closure of Drake has more social and environmental benefits including avoiding spending $753 million - the monetized value of the repercussions of greenhouse gas emission and other environmental and social costs.

Kotnik questions why the council would choose to make its decision using only the financial return on investment when the environmental and social return on investment is much higher, he said.

"I'm flabbergasted that the environmental impacts so well-documented and scientifically supported, how American population can think the scientific method doesn't work for climate change," Kotnik said.

Jerry Unruh, a retired chemist who has been a volunteer on the Utilities Electric Integrated Resource Plan committee, said he was disappointed that the consultant's report did not include the cost of the EPA's proposed carbon regulations - also known as the carbon tax. Even if costs cannot be calculated, it should be considered a risk, he said.

"The reality of climate change is that carbon regulations are coming," he said. "Not including that, it does not seem like responsible planning."

Pico said the environmental and social costs are difficult to quantify. He can only count on the real costs, he said.

"Greenhouse gases is, I adamantly think, completely bogus. I don't give that any weight," he said. "I look at the financial number. I look at the real numbers for which we have to write checks."

Weise said the council seems to overlook a key point in the consultant's report, which says that because of Drake's age, operating it for 20 to 30 years would not be practical or feasible.

"Drake's age and central urban location present continued high health, safety and financial risks from pollution emissions, fire, chemicals and other conditions inherent in such an industrial operation, and thus should be given the highest consideration in your decommissioning decision making process," Weise wrote in her letter to the council.

King said that during his campaign he heard from constituents that keeping Utilities rates low was important to them.

"My goal is to produce electrical energy at the lowest rate and with the air as clean as possible," King said. "If we continue to do that with Drake, I will continue to support a long-term view."

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DRAKE OPTIONS

Here are the options that consider financial return on investment compared to sustainable return on investment, starting with the base scenario.

Base case — 20-year Drake operation with Neumann Systems Group’s scrubber technology and considering potential new requirements on nitrogen oxides. It would cost about $5.2 billion in capital costs, fixed operating costs, operations and maintenance costs and fuel costs to operate Drake until 2033.

Early Drake retirement, by 2019, with new gas generation replacement would cost 
$242 million more than the base case. However, under sustainable considerations, Utilities would avoid spending $753 million, which is the monetized value of greenhouse gas emissions and other environmental and social costs.

15-year Drake operation with Neumann scrubber and potential new requirements on nitrogen oxides and no site remediation would cost 
$133 million more than base case. Under sustainable considerations, Utilities would avoid spending $148 million.

15-year Drake operation with Neumann scrubber technology and potential new requirements on nitrogen oxides with moderate site remediation would cost $135 million more than base case. Under sustainable considerations, Utilities avoids spending $149 million.

15-year Drake operation with Neumann scrubber technology and potential new requirements on nitrogen oxides with high site remediation would cost $138 million more than base case. Under sustainable considerations, Utilities avoids spending $151 million.

Nine-year Drake operation with Neumann scrubber would cost $190 million more than base case. Under sustainable considerations, Utilities avoids spending $483 million.

30-year Drake operation with Neumann scrubber technology and potential new requirements on nitrogen oxides has the best financial return on investment of $216 million, compared to the base case. Under sustainable considerations, it would cost $151 million more than base case.

Three-year Drake operation — shutdown upon emissions compliance date, would cost $224 million more than base case. Under sustainable considerations, Utilities would avoid spending $434 million.

Nine-year Drake operation with 150 megawatts of wind generation added upon retirement would cost $272 million more than base case. Under sustainable considerations, Utilities avoids spending 
$562 million.

20-year Drake operation and work to reduce electricity consumption by 4 percent would cost $324 million more than base case. Under sustainable considerations, it would cost $618 million more than base case.

Drake operating on coal until 2022 and on natural gas from 2023 through 2033 would cost $208 million more than base case. Under sustainable considerations, Utilities avoids spending $362 million.

Nine-year Drake operation and then replace with the engine generators on Drake site would cost $230 million more than base case. Under sustainable considerations, Utilities avoids spending $449 million.

SOURCE: HDR. To read the full report, go to draketaskforce.net/hdr_study.

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